Managing conflicting expectations from the electricity utility industry: Sri Lanka’s case Tilak Siyambalapitiya 27 Sep 2021
The National Grid is 70 years old
Gains must be consolidated and enhanced, not reversed
High-level attributes of a “good” utility industry
• • • •
Technical quality Commercial quality Economic operations Safety
What are the expectations of an electricity industry, direct and indirect ? • • • • • • • •
Cover the whole country ✓ Reduce losses ✓ Improve reliability Reduce prices, provide subsidies ✓ Increase renewables, reduce fossil fuel use Provide employment ✓ ✓ Follow government policies ✓ Connect my solar rooftop ! I want a zero bill. ✓ Attend to my power outage ! I cannot wait !
Give me an electricity conenction ! 25
100%
Population (million)
20
80% 70%
15
60% 50%
10
40% 30%
5
20% Population
0 1970
1980
1990
Electrification
2000
Source: Sri Lanka Energy Balance 2018, data for 2019-2020 estimated
2010
10% 0% 2020
Household electrification rate
90%
8%
But look at this: 6.6% of households are closed !
Households with zero energy use
7% 6% 5% 4% 3% 2% 1% 0%
Jan-2002 Jun-2005 Nov-2006 Jan-2010 Jul-2014 June 2014 July 2017 Feb 2020
Source: CEB data, reflecting CEB customers. CEB supplies about 90% of all customers in the country
Reduce losses ! How are we doing ?
Loss as a share of Net Generation
14%
10.27%
12%
9.03% 8.95%
10%
8.84%
9.45%
8% 6% 4% 2% 0% 2016
Loss of 1% is worth about Rs 2000 million Per year
2017
2018 2019 Year Transmission Loss Target Distribution Loss Target
2020
Sri Lanka actual T&D loss Source: Calculated using data published by CEB and LECO Note: Graph reflects losses in the national transmission and distribution network
So how can losses be reduced? What can be the targets for 2025 ? • Invest on upgrades: but where is the money? • Replace assets • Diligent monitoring of the network • Regular energy balancing at distribution level
Is the electricity supply getting more reliable ?
Reliability is declining: Reaching 100 trippings per year, over 100 hours without power supply every year 2014 SAIDI (hours per customer) SAIFI (outages per customer) SAIDI (hours per customer) LECO SAIFI (outages per customer)
2015
2016
CEB
59.4 102
50.6 91
97.2 125
Sources: CEB annual reports, CEB and LECO Statistical digests Notes:
CEB transmission and distribution losses include losses to serve LECO. SAIDI: system average interruption duration index SAIFI: system average interruption frequency index CEB and LECO define SAIDI and SAIFI for outages of 1 minute or longer
2017 2018 77.3 80.2 32 37 69.9 70.5 109 105
2019 110.1 72 111.4 117
Unreliability seen here is in distribution: this is not instability of the grid • Invest on upgrades • Distribution SCADA and automation • Efficient management of outages • Underground distribution: the next phase of distribution development, but where is the money to do that? • Urban planning, utility corridors ?
Do not raise prices, give me free electricity !!!
Average Selling Price to household customers using 90 kWh/month (UScts/kWh)
16 14
Manitoba, Canada
Philippines
Singapore
12
Thailand Assam, India
10 Hong Kong 8
Madhya Pradesh, India
China
2
Bangladesh Kerala, India Bhutan
Vietnam
Nepal
6 4
Maharashtra, India
Pakistan Malaysia
Tamil Nadu, India
Oman
Sri Lanka South Korea
Households
0 Source: Calculated using data published by country electricity suppliers Updated: September 2020
16
Maharashtra, India
Industries
Average Selling Price to industrial customers using 65,000 kWh/month (UScts/kWh)
Hong Kong 14 12 10 8
Assam, India China Bangladesh
Philippines Tamil Nadu, Kerala, India India
Singapore
Pakistan Madhya Pradesh, Malaysia India
Manitoba, Canada
Nepal
Sri Lanka South Korea
6 4
Bhutan
Thailand
Oman
2
Industry 0
Source: Calculated using data published by country electricity suppliers Updated: September 2020
Vietnam
Commercial customers: Offices, supermarkets, etc.
Average Selling Price to commercial customers using 58,000 kWh/month (UScts/kWh)
25
20
Hong Kong 15
10
5
Commercial
Maharashtra, India
Tamil Nadu, India
Assam, India Bangladesh Kerala, India
PakistanSingapore
Malaysia Philippines
China Nepal Manitoba, Canada Madhya Pradesh, Oman India
South Korea
Bhutan 0
Source: Calculated using data published by country electricity suppliers Updated: September 2020
Sri Lanka
Thailand Vietnam
How do customers use electricity: the case of households receiving subsidies
Do customers say: I am willing to pay
Share of household electricity customers 100% 90% 80% 600+ 181-600
70% 60%
121-180 91-120 61-90
50% 40% 30%
31-60 1-30
20% 10% 0% June 2014
July 2017
Feb 2020
Source: CEB Customers using up to 180 kWh/month receive a subsidy
Share of household electricity consumption 100%
Do customers say: I am willing to pay
90% 80%
600+
70%
181-600
60%
121-180
50%
91-120
40%
61-90
30%
31-60 1-30
20%
0
10% 0% June 2014
July 2017
Feb 2020
Source: CEB Customers using up to 180 kWh/month receive a subsidy
Almost all customers are subsidized now. In 2011 it was not so 2011
Customer Group
2019 - 2H
Cost Revenue Subsidy (% Cost (LKR/kWh) (LKR/kWh) of cost) (LKR/kWh)
Revenue Subsidy (% of (LKR/kWh) cost)
Households Other LV customers
18.99 14.04
10.42 16.56
45% -18%
25.35 22.81
15.09 19.61
40% 14%
LV Bulk customers MV Bulk customers Sri Lanka
12.11 10.32 14.90
16.72 13.44 13.68
-38% -30% 8%
19.32 18.10 22.02
18.35 15.18 16.82
5% 16% 24%
Increase renewables, reduce use of fossil fuels
How much of renewable energy do we use ?
Primary Energy Supply in 2018 Coal 10%
Petroleum 40%
Major hydro 10%
Non-conv. Renewable Energy 4%
Biomass 36%
Total Primary energy supply = 12.1 million tonne of oil equivalent Source: Sri Lanka Energh Balance 2018. www.energy.gov.lk
21
Read the Energy Balance for more information. Published annually. www.energy.gov.lk
Electricity provides only 12% of Final Energy needs of the country. How ?
Final Energy Supply in 2018 Coal 1%
Electricity 12% Petroleum Products 41%
Biomass 46%
So, what share of the electricity is produced from renewable sources?
Total Final energy supply = 9.9 million tonne of oil equivalent
18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Thermal
Renewable
Electricity Generation : energy share
Electricity Generation (GWh)
What Energy share of Electricity is produced from renewables ?: 2013: 60% (good hydro); 2020: 37% (weak hydro)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year Thermal Renewable 25
Renewable Energy Share: How much from smaller power plants? Electricity Generation: Energy share
100% 90% 80% 70% 60% 50%
National Energy Policy Target: 10% by 2015 achieved, New target: 20% by 2020 not met
40% 30% 20% 10% 0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year Renewables: Small hydro, wind, solar etc. Renewable: Larger hydro Thermal 26
Capacity Share and Energy Share in Electricity Production Sri Lanka consistently reports energy share, not capacity share
Share of all renewable energy in the grid
100%
End of major hydropower development
90% 80% 70% 60% 50% 40% 30% 20%
Energy Share: all renewables
10%
Capacity Share: all renewables
0% 1970
1980
1990
2000
2010
2020
Why did the renewable energy share drop in the 1990s? •
End of major hydropower development
•
Other hydropower projects (eg: Kukule, Upper Kotmale, Broadlands delayed for decades)
•
Other forms of renewable energy eitehr too expensive or technology still being developed
•
Rapid growth in electrification: Sri Lanka reached 100% electrification in 2016 •
In 1990, only 29% of households had electricity
A Private-sector led renewable energy development program commenced in 1996 •The Small Power Producer (SPP) Program • Introduced Standardised, non-negotiable agreement and tariffs in 1996 • Tariffs moved from “avoided costs” to “cost-reflective” for new contracts from 2007 • About 250 such SPPs in operation, 635 MW, provided about 10% of energy in 2019 • Outlook: New small hydro, biomass and waste to energy projects in progress, but very slow. Wind and solar PV now moving on competitive bidding.
Net metered Connection of renewable energy-based generation commenced in 2008 •Net metered renewable energy at customer premises allowed from 2008 •Buy-back prices introduced from 2016 •about 375 MW already in operation (solar roof tops), provided 8% of capacity, but 2% of energy in 2020. •Economics and role of rooftop solar PV widely misunderstood
Year
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
Electricity Generation: Energy share
Private Small Power Producer (SPP) Program since 1996: Results 14%
12%
10%
8%
6%
4%
2%
0%
Challenges with Existing Renewable Energy Power Plants Engineering challenges
Renewable-based Generation has: • Linkages to other users of the resource: Hydropower • Seasonality and interannual variations: wind and hydropower • Intermittency: solar power and wind power • Supply-chain uncertainty: Biomass • Limited contributition to power system stability • • •
Biomass; Good contribution Hydropower: Smaller contribution Wind, solar PV: zero contribution
Hydropower linked to Irrigation and drinking water: eg Mahaweli Basin
Share of all renewable energy in the grid
100% 90% 80%
Inter-annual 70% Capacity Share variations and Energy 60% Share in Electricity Production
50% 40%
Blackouts
30% 20%
Energy Share: all renewables
10% 0% 1970
1980
1990
2000
2010
2020
Intermittency: Solar power 700
Power Output (kW)
600
Output of the 740 kW Hambantota solar park, on a “good’ day
500 400 300 200 100 0 6:00
8:00
10:00
12:00
14:00
16:00
18:00
2,000
1,500
500
0
6:27:00 AM 6:57:00 AM 7:27:00 AM 7:57:00 AM 8:27:00 AM 8:57:00 AM 9:27:00 AM 9:57:00 AM 10:27:00 AM 10:57:00 AM 11:27:00 AM 11:57:00 AM 12:27:00 PM 12:57:00 PM 1:27:00 PM 1:57:00 PM 2:27:00 PM 2:57:00 PM 3:27:00 PM 3:57:00 PM 4:27:00 PM 4:57:00 PM 5:27:00 PM 5:57:00 PM 6:27:00 PM
A 5 kW household solar PV system: Colombo Output Power (Watt)
6:18:00 AM 6:48:00 AM 7:18:00 AM 7:48:00 AM 8:18:00 AM 8:48:00 AM 9:20:00 AM 9:50:00 AM 10:20:00 AM 10:50:00 AM 11:20:00 AM 11:50:00 AM 12:20:00 PM 12:50:00 PM 1:20:00 PM 1:50:00 PM 2:20:00 PM 2:50:00 PM 3:20:00 PM 3:50:00 PM 4:20:00 PM 4:50:00 PM
Output Power (Watt)
Intermittency: Solar power
3,500
3,000
2,500
A 4 kW household solar PV system: Colombo
1,000
3,500
3,000
2,500
2,000
1,500
1,000 500 0
120
Intermittency of Wind Power (10 MW wind power plant)
Sustained Duration (minutes)
100 80 60
40 20 0
-10,000 -8,000
-6,000
-4,000 -2,000 0 2,000 4,000 Sustained Change in Power Output (kW)
6,000
8,000
10,000
An electric power system should be resilient What is resilience?
ürobustness and flexibility üredundancy to allow for continuity of supply üSmartness: its intrinsic adaptability, controllability and in-built capacity for recovery üFast recovery: ease of system repair and preparedness 39
A power system has to be in dynamic equilibrium all the times. Power generation should match the customer demand plus losses, at all times. “Exactly” or “approximately” match? G
Transmission
Distribution
Customer demand
PG = 𝑃! + 𝑙𝑜𝑠𝑠𝑒𝑠 eg: 2600 MW of generation= 2530 MW of demand + 70 MW of losses [an exact match]
40
Sri Lanka’s Power System in Weak ! Hence it is not SMART • Even minor disturbances cause frequency excursions and load shedding. The traditional approach to strengthen is to raise inertia (larger, faster generators) and more spinning reserve • On this front Sri Lanka missed the bus ! • Rest of the world was building larger, stronger, faster generators …. • Sri Lanka stuck to hydropower development (for all the good reasons), ended up with a weaker power system 41
Challenges with Existing Renewable Energy Power Plant Financial challenges
Approved Cost of Generation: 2019 Power plant
Average Purchase price (LKR/kWh)
Energy (GWh)
Hydro
4,294.3
0.00
Thermal (oil) Coal SPPs (minihydro, wind, solar) Rooftop solar PV Self generation Total
4,663.8 5,159.4 2,117.8 109.9 119.2 16,464
24.15 9.89 19.24 22.00 36.00 12.82
Total purchase cost (LKR) 112,621 51,051 40,753 2,417 4,291 211,134
Renewable Energy is Expensive in Sri Lanka !
Approved Cost Structure and Income: 2019 Basis: Approved costs with forecast sales
Source: Bulk Supply Tariffs issued by PUCSL, 2019
Generation capacity cost Generation energy cost Transmission cost Distribution cost Cost of Supply Actual average price of electricity
47,037 211,134 12,545 56,191
Rs per forecast kWh sold 3.14 14.10 0.84 3.75
326,907
21.84
Rs million
17.03 43
Average costs for 2019
Cost of sales (SLRs/kWh sold)
40 35
Generation capacity
Transmission capacity
Distribution capacity
Generation energy
Average selling price
30 25 20 15 10 5 Larger hydro
Coal-fired
Oil-fired
Other renewables
Source: Approved cost and prices for July-Dec 2019, PUCSL
Total
44
The commercial reality: what is a fair price? Actual average purchase price (Rs/kWh) Minihydro 15.81 Ground mounted solar PV 22.85 Dendro 22.68 Biomass 10.96 Wind 19.52 All Small Power Producers 17.43 Rooftop solar PV 22.00 Average of all renewables 18.00 Add fixed costs of the system 7.67 Cost of delivered renewable energy 25.67 National average selling price 17.02 Loss by selling renewable energy 8.65 Type of renewable energy Actual 2019
45
Prices Paid and Actual Costs of Rooftop Solar PV Feed-in tariff of 2016 in the 2021 context
Capacity 10 kW (dc) 50 kW (dc) 500 kW (dc) 1 MW (dc)
Implemented Feed-in- Interest at market Tariff (LKR/kWh) rates
At concessionary interest rate (8%)
Simple payback period (years)
Simple payback period (years)
Up to 7th 8th to 20th Equity Year Year IRR
22.00 22.00 22.00 22.00
15.50 15.50 15.50 15.50
31% 35% 65% 72%
3.8 3.7 2.7 2.6
Equity IRR
Very high Very high Very high Very high
36% 3.8 Very high 40% 3.7 Very high Concessionary rate not available
Prices Paid and Actual Costs of Rooftop Solar PV Interest at market rates Simple Up to 7th 8th to 20th Equity payback Year Year IRR period (years) 15.00 11.00 11% 5.7 15.00 11.00 13% 5.4 11.00 7.00 13% 5.5 11.00 7.00 16% 5.2 Fair feed-in tariff for 2021 (LKR/kWh)
Installed Capacity 10 kW (dc) 50 kW (dc) 500 kW (dc) 1 MW (dc)
Good Good Good Good
At concessionary interest rate (4%) Simple Equity payback IRR period (years) 16% 5.7 High 19% 5.4 High Concessionary rate not available
Structure of the Sector Approved Costs Cost Component
Electricity Cost of Supply (LKR per kWh Sold) 2014
2015
2016
2017
2018
2019
Capacity
2.77
3.30
4.05
3.76
3.09
3.12
Fuel including renewable energy
10.29
10.53
8.62
12.74
13.19
13.92
Transmission
0.75
0.79
1.10
0.83
0.80
0.83
Distribution
2.72
2.78
3.70
3.47
3.56
3.72
Short-term Debt repayment
0.32
1.49
0.79
0.67
n/a
n/a
16.84
18.89
18.27
21.47
20.64
21.59
Generation
Total cost
Source: PUCSL tariff decisions for each respective year www.pucsl.gov.lk
48
The result of ten-years of utility regulation 2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
PUC- approved cost of supply (LKR/kWh)
16.91
14.95
21.32
22.12
16.84
18.89
18.27
21.47
20.64
21.59
PUC-approved price of electricity (LKR/kWh)
13.15
13.91
13.91
19.71
18.94
16.29
16.63
16.71
16.77
16.88
14,683
15,093
56.8
71.1
294.5
365.6
PUC-approved sales forecast (GWh)
9,121
9,666
10,427
10,949
10,949
11,271
12,049
13,360
Resultant annual financial loss to electricity sector (LKR billion)
34.3
10.1
77.3
26.4
(23.0)
29.3
19.8
63.6
Cumulative cash shortfall (LKR billion)
34.3
44.4
121.7
148.1
125.1
154.4
174.1
237.7
Source: PUCSL tariff decisions for each respective year www.pucsl.gov.lk
49
Emerging Challenges
Some of the Technical Challenges at distribution level
-500
-1000 Time
51
18:26:00
18:25:00
18:24:00
18:23:00
18:22:00
18:21:00
18:20:00
18:19:00
18:18:00
18:17:00
18:16:00
18:15:00
18:14:00
18:13:00
18:12:00
18:11:00
Power (kW)
Varying Customer Loads • Load variation of a single quay crane is shown below
1500
1000
500
0
3500
3000
2500
2000
1500
1000 220
500 215
0 210
Measured Voltage (V)
AC power
5000 260
4500 255
4000 250
6:13:00 AM 6:48:00 AM 7:23:00 AM 7:58:00 AM 8:33:00 AM 9:08:00 AM 9:43:00 AM 10:18:00 AM 10:53:00 AM 11:28:00 AM 12:03:00 PM 12:38:00 PM 1:13:00 PM 1:48:00 PM 2:23:00 PM 2:58:00 PM 3:33:00 PM 4:08:00 PM 4:43:00 PM 5:18:00 PM 5:53:00 PM
6:13:00 AM 6:48:00 AM 7:23:00 AM 7:58:00 AM 8:33:00 AM 9:08:00 AM 9:43:00 AM 10:18:00 AM 10:53:00 AM 11:28:00 AM 12:03:00 PM 12:38:00 PM 1:13:00 PM 1:48:00 PM 2:23:00 PM 2:58:00 PM 3:33:00 PM 4:08:00 PM 4:43:00 PM 5:18:00 PM 5:53:00 PM
Power output (W)
Performance of a Rooftop Solar PV System in 2017: Line voltages are already well above 230+6% = 243 V
Blame all around and forget it, or find solutions to it ? AC voltage
245
240
235
230
225
52
Solutions to technical constraints require research, standards and investments • Strengthening LV networks • Smart inverters • Battery storage (at customer level or along distribution lines) • Tap changing transformers
Solutions to Financial Constraints Require Political Will (to overcome commercial and policy lobbies) • Correct pricing of rooftop solar PV • Competitive bidding for wind power and solar investments outside rooftops
Example: How a 1 MW rooftop Solar PV is priced CEB or LECO network
Fair price: Rs 11.00 Buying price: 22.00
Sell all at a premium price
Buy all at a subsidised price
Cost: Rs 18.00 Tariff: 11.00
Industrial customer Source: Cost and Tariffs from PUCSL, 2019; Fair price calculation: author Note: All costs and prices are in Rs/kWh
Fixed Price Vs Competitive Bidding • In 2015, fixed price (called feed-in-tariff) was discontinued (for new agreements). Competitive bidding commenced. • Results are encouraging Type of Power Plant
Competitively Bid Price (Rs/kWh)
Commenced operations in
Feed-in- Commenced tariff operations in (Rs/kWh)
Wind 10 MW
12.50
2020
23.44
2015
Solar PV (ground mounted)
17.95
2019
23.10
2017
Financial barriers are as Strong as the Technical barriers
Instead of solving the techncial barriers and financial barriers, the debate is whether the target should be 50%, 70% or 80% by such-and-such-a-year.
Provide employment, another objective of the electricity industry
Sri Lanka is needsto sort-out issues, think and work strategically, with a clear focus on utility management No need to build big power plants; small is beautiful. Refineries are not required because future transport will be electric
Renewable energy is cheap
More subsidies must be given: free electricity, free solar panels
Potential saving: USD 1000 million per year Sri Lanka has no experience in gas imports and handling
There are two monsters that eat-up all our manufacturing and tea export income
CEB and CPC are service organizations. No need for profits. Electricity can be produced from sea waves (the country is surrounded by sea) 60