NewsPower Cuts again: Planners’ worry now is about 2016

October 4, 2013

It was a bright sunny day in early 1993. Two engineers of the Ceylon Electricity Board (CEB) had a brief: accompany a visiting delegation from the Japan Bank for International Cooperation (JBIC), and show them four optional sites, three in Puttalam District and one in Gampaha District, to locate a coal-fired power plant. JBIC had indicated willingness to finance a feasibility study, followed by financing the project itself. All in the team knew that coal power was a controversial subject. The late Engineer Carlo Fernando, the visionary and campaigner for coal power, had already identified the prospective sites on the western coastal belt.

although many environmental NGOs claimed that they were the ones who cancelled the project. Professor Alawaththagoda Premadasa of the Ruhuna University of leftist leanings had been able to convince President R. Premadasa that no coal power plant should be built in the south for it will cause the south to be a desert. Nevertheless, CEB management was determined to build a coal-fired power plant, to cushion the electricity prices and to stabilise the supply. Out of the four sites visited in Narakkalli, Marawila (all locations in Puttalam district), and Dungalpitiya in Gampaha district, it was obvious that Narakkalli was the choice, simply because there was adequate coastal land, most of it Govt-owned. One possible site in Marawila had a hotel built on the site already, and the other site was thickly populated. The Japanese officials too were happy about the site at Narakkalli. Official requests went from the Sri Lanka Government to Japan, and the feasibility study commenced in 1995. The site was further moved southwards; Norochcholai is the nearby town to the north where many protests were held, but the real site is at Narakkalli.

Ball games
The problems began in 1997, when the site and the study became gradually politicised and the Roman Catholic Bishop of Chilaw identified himself to be against the project. The Bishop had led a campaign against the Iranawila radio station in the 1990s, but the station was finally built. Similarly, Catholic clergy joined the protests against the Kandalama hotel in the 1990s, which too was finally built. To cut a long story short, Norochcholai was also finally built, but unlike Kandalama and Iranawila, the economic cost of the delay in Norochcholai power plant runs into billions of dollars, as it will be explained later in this article. Between 1997 and 2004, the project would have been approved by the Cabinet of Ministers several times, and also would have been “cancelled” or “suspended” several times by the same Cabinet, typically when elections were approaching. Over 90% of Ministers in the Cabinet who played ball games with the project are still in the Cabinet, but have since become ardent supporters of the project. And there were many elections over 1997-2004. In general, the party that campaigned strongly against the project, lost each election. Each party thought that people, especially those living along the western coastal belt, would come in their millions and vote for the party that shows the strongest opposition to the project. The people were smarter, and ousted each Government that mishandled the power sector. The Bishop acted the school master, issuing statements at opportune moments during all election campaigns, to ensure all politicians were held in suspense.

Oil power
While the campaign was going on, with CEB campaigning for the project, and almost everybody else including a small minority within CEB too, working against the project, 10 oil-fired power plants were built between 1997-2004, eight of them by the private sector. Sri Lanka got the entire issue of power generation mixed up and got entangled in a cobweb of issues, unable to come to terms and clearly identify the pros and cons of coal-fired power generation and the role of the private sector in generating electricity. In the 1990s, in many countries of the world, privatisation or private sector participation in infrastructure development were the key phrases, or the buzz words if you like, and Sri Lanka’s key decision-makers thought that the private sector would bring a solution to issues that the Government did not have the courage to resolve.

And solutions they brought, but their own solutions, heaping burden on the people of this country, for the past 15 years, and another 15 years to come.

Mentioning names would be very unpleasant, but in Sri Lanka, there was a Board of Investment (BOI) chief, a Finance Ministry Secretary, a President, a leader of the opposition and a Bishop, who were at the forefront of delaying the coal-fired power plant and indirectly assisting to replace it with oil-fired power plants. Other point of view players, such as the environmental and local NGOs, and the arguments that smugglers were preventing the power plant being built, were all secondary to the issue.

The private sector built the power plants they could afford to build, but not what the country wanted. The chambers were interested (and they still are) in securing private power plant contracts for a handful of their members, while their larger membershp who are electricity customers in their industries and businesses, were forgotten, and were left to pay the ever increasing bills. With the cost of oil as a pass-through item and with guarantees of payment for capacity availability, undoubtedly the private power contracts were very good businesses for their investors, but not for Sri Lanka and its electricity customer.
Thus, Sri Lanka became the only non-oil producing country in the world with a national grid, producing 60% of her electricity needs with oil. Off and on the readers may have heard private investors competing with each other to the effect their oil-fired power plant is cheaper than other plants, at times citing projects being done after King Dutugemunu, but at the end of it, all are oil-fired power plants, draining the nation’s economy and the customers’ financial resources.

What changed the course of action was the appointment of an Energy Minister in 2004 who would clear the path for change, a change in the Presidency in 2005, an opposition thrown out of balance, another Minister who would work with professionals and provide leadership, and an Energy Secretary who has a clear vision of where the energy sector should be heading to. The Bishop retired. With the clear statement of intent by the Government and the head of state visiting the site no less than three times, other protestors and protests faded away.

The Institution of Engineers supported the project all the way, and more actively since about 2000, and the belated support by the CEB Engineers’ Union, and some support from the other CEB Unions also counted.

Calculate the costs
As the media reported, on March 22, the power plant will begin producing electricity. It will produce 315 megawatt of capacity, and after deducting about 30 megawatt for internal consumption, would deliver 285 megawatt to the national grid. Within 24 hours, the power plant would have delivered 6.84 million units of electricity to the grid. The cost of coal currently being used has been reported in the press to be $106 per tonne, which is in the correct range, given the world prices in January 2011. The fuel cost of each unit of electricity will be about Rs 5.

On the previous day, CEB would have used two power plants to supply the power, which would now be produced at Norochcholai. Each power plant uses diesel, which costs about Rs 75 per litre (also in January 2011 prices), and produce at best, five units of electricity with a litre. So the fuel costs will be Rs 15 per unit of electricity. Note that both coal and diesel prices have since increased, but let us look at the comparative costs as of January 1, 2011.

So the cost saving in one day will be 6.84 x (15-5) = Rs 68 million. On this day, there will be about 30 million units of electricity sold in Sri Lanka, and each such unit of electricity sold will see a cost reduction of Rs 2.25.

Of course, the loan for Norochcholai has to be re-paid. If Norochcholai was not built, some other oil power plant would have been built, and that too requires to be financed. Thus, what is important is to get the correct fuel.

Economic cost of indecision
On March 31,1999, the then President refused to sign the request to Japan for financing of the power plant. In the confusion where some unofficial advisors and friends would say private power is cheaper, and that they can provide it for four rupees a unit, frequent elections in hand and a Bishop breathing fire on her, and another lobby saying that natural gas and wind/solar power would do the trick, the President threw away the professional advise and decided against the project. Most importantly, the then Presidency held the position that CEB professionals were lying that coal power was the solution, and that her friends had the solution, and was obviously not inclined to sign the request. The power plant was to produce electricity from 2004, which became a non-event.

Seven years later, a new President signed the same request, not to Japan who by then wanted CEB to be divided into six companies (which they erroneously thought was the main problem with Sri Lanka’s electricity industry) but with China. The project produces electricity from 2011, almost exactly seven years behind schedule.

The economic cost of the damage done by the people who played ball games with the power plant for seven long years, is a colossal Rs 152 billion if we value the loss at fuel prices of 2004, and Rs 420 billion at today’s fuel prices. The estimate includes the balance 600 megawatt of the power plant, now being built.

No I have not added any zeros, and emphasise that the loss is in billions and not in millions. The cost of the full 900 megawatt power plant is Rs 146 billion. Therefore, the power plant investment would repay itself in three years. Yes, in three years, but not in two years, as some over-enthusiastic people would say.

Never again, never
People with great ideas are many. Natural gas along with minihydro, wind, solar and biomass, and of late nuclear power, are promoted as cheap sources of electricity generation. Many Sri Lankans believe that the rest of the world uses solar and wind powerbut nothing else, which is not true. Rhetoric makes people believe that Sri Lanka is the odd one out, doing the most dangerous thing, and the naughty boy of this world: naughty for doing what ? Building a coal-fired power plant. No we are not the “bad guy”. From January 2011 we will join the league of nations with USA, Japan, India, China and Australia, in the forefront, and with Hong Kong, Malaysia and Thailand, all using coal to produce electricity.

While the economics of nuclear power in Sri Lanka are yet to be assessed in a feasibility study, all other methods that are being promoted by those shouting from rooftops, have higher costs than coal-fired power generation. Therefore, make no mistake: anybody promoting natural gas, solar, wind, biomass, etc. means higher bills to you in the future. Sri Lanka is high in the league of countries using renewable energy for electricity, and we have to retain that position, but not to the extent of ruining our economy and making electricity customers poorer when compared with other countries in the region.

Ah!, but when fossil fuels run out, what do we do ? It is important to be aware and plan for it, but fossil fuels have not run out yet. Sri Lanka cannot act and behave as if fossil fuels will be over next year or in five years, cry wolf ! wolf !, and heap burdens on customers with excessive natural gas, wind or solar power, or give false hopes that wave power and geothermal will be the answer. We will face the end of the era of fossil fuels along with the rest of the world, systematically, step-by-step. Tell the truth to the people, at all stages of the transition.

Never, never again should this country be subjected to such indecision on projects that have massive impacts on her economy and the people. Our people deserve a better deal, a professional and truthful management of the sector, and a political leadership that propagates openness, truth about costs of production and a genuine desire to do better.

Project officials
The CEB project team at Norochcholai has done a tremendous job, steering the single largest power sector investment in Sri Lanka. There are five officials who led the project at close quarters at various stages, whose names must be mentioned, for they will be forgotten when the project is formally inaugurated shortly. They have gone significantly out of their way to make this power plant a reality, while others were waiting with folded arms to laugh at them if they fail. Their names will not be seen on many plaques that dot the coastline at Norochcholai.

Engineers Shavindranath Fernando and Jayantha Saram gave leadership during the feasibility study, approval process and responding to the massive public debate, frequently facing humiliation in the hands of many protestors, Government officials and politicians. Engineer Tissa Herat did a tremendous job in leading the negotiating team for agreements with the Chinese Government, over a very short time. Engineer WDN Xavier with his team of dedicated engineers managed the construction of this enormous project. And above all, Secretary M.M.C. Ferdinando, that vital link between technocrats and the political hierarchy provided the leadership, instilled courage in the minds of engineers and ensured that the project was kept on track, and funds were available to proceed.

And, what about the first two CEB engineers who went to Norochcholai in 1993 looking for a site ? One survived the debate for Norochcholai to write this article from outside the CEB, while the other survived within CEB, silently leading many a planning fnction.

Our plea to all, including the political hierarchy now giving various conflicting signals again and half-truths on this power plant itself and on coal power in general: please allow engineers to manage engineering functions, for they and not you, are responsible to provide a continuous, lower cost electricity supply. Ensure they work within the law, environmental laws and safety regulations included. For the engineers too love this country and her people as much as you do.