Adani wind project: Is it a controversy created?

Do these migratory birds pick which project to hit or not hit, in this case they only hit the Adani wind project, is it? 

The economic benefits of the Mannar project are substantial. It is expected to create 1,000 plus jobs, boosting the local economy. As are many infrastructural and developing projects of this nature developers are committed to working with local communities, addressing their concerns, and minimising disruption to their lives. Can Sri Lanka afford to lose this investment? 

I read with interest Rohan Pethiyogada’s article “Adani controversy: Why the cheerleaders are wrong” (https://www.ft.lk/columns/Adani-controversy-Why-the-cheerleaders-are-wrong/4-764104#:~:text=The%20issue%20is%20that%20the,will%20fix%20that%20fundamental%20defect.).

The proposed 250 MW Mannar wind project (Mannar II), has recently been the subject of intense flurry of critics in the media which criticises development projects that have tried to come into Sri Lanka. This project is a landmark case study for sustainable energy development in Sri Lanka, offering significant benefits, that has interestingly brought forward a new revolution – against Renewable Energy projects and Foreign Direct Investments.

It is important to assess what these objections are and how the tones of these objections are articulated and when counter facts get diverse tones of replies.

 Transparency and the use of the term “Unsolicited”

 Sri Lanka faces significant vulnerability to climate change, impacting crucial sectors like agriculture, tourism, and industry, as highlighted in a recent Asian Development Bank (ADB) study which was out on 8 July 2024. The study illustrates challenges such as resource mobilisation issues, and limited investment in adaptation amid a focus on mitigation. To combat these challenges, the ADB recommends policy solutions, infrastructure investments, and enhanced climate financing. The proposed Adani wind energy project in Sri Lanka presents an opportunity to address these recommendations effectively, fostering sustainable development and private sector engagement while mitigating climate risks.

Understanding the Government to Government process is important. And the Adani project complies with the Sri Lanka’s Electricity Act. The steps which are normally followed by investors and G-2-G procurement comprise of the following: The Government issued a Request for Proposal (RFP) to which Adani responded. Following procurement guidelines, the proposal is vetted through evaluation by the Project Committee of the Ceylon Electricity Board (CEB). Next step in a transparent process is the tariff negotiations were conducted by the Cabinet Appointed Negotiation Committee (CANC). 

And finally from the approval by the Public Utilities Commission of Sri Lanka (PUCSL), who had recently requested information on the project. In September 2019, the Government issued a notification disallowing the Swiss Auction procedure for projects due to procedural issues and the time involved. This decision means that even if Adani were to propose a lower tariff after the finalisation of a competitor’s tariff, it cannot be considered. This policy has been uniformly applied to all recent developers, including the Oddamawadi 100 MW Solar, Siyambalanduwa 100 MW Solar, and Poonakary 700 MW Solar+Battery projects. These information are all readily available and concerned citizens including the media need to be more aware of these to create a “transparency” led approach.

 Scientific research and environmental safeguards

 Given the fact of owing to the size of the project, the planning of the Mannar II wind project, as in every renewable energy project, involves comprehensive research and consideration. The bigger the project scope is the bigger and more in depth research and study output is required as we know. The media reports that, the Sri Lanka Sustainable Energy Authority (SLSEA) conducted an Environmental Impact Assessment (EIA), led by Prof. Devaka Weerakoon, a respected professional from the University of Colombo. This assessment included year-long studies and data from reputable sources such as The Ceylon Bird Club (CBC), The Field Ornithology Group of Sri Lanka (FOGSL), and Ramsar data sheets. Data over the last two decades were considered while filing the report. The 484MW projects in Mannar and Pooneryn project’s Environmental Impact Assessment (EIA) and an independent environmentalist group’s report confirm it poses no such risk which is available publicly. 

The project location was chosen to avoid critical migratory pathways and sensitive habitats, addressing one of the primary concerns raised by environmental activists. The EIA outlined several steps to mitigate environmental impacts, which the project developers will have to commit to follow. The Mannar II project will run parallel to CEB’s existing 100MW project (Mannar I). The question to ask is if the CEB project is environmentally safe, then why isn’t the proposed one? 

According to the developer as reported in the media including Daily Financial Times, they are committed to implement advanced technology to mitigate environmental impact. They say that the wind mills will be equipped with AI-based radar systems, which will detect incoming flocks of birds, automatically shutting down turbines during high-risk periods. Additionally, the blades will feature acoustic and visual deterrents, such as painted blade tips, to prevent bird collisions.

The design of the turbines includes taller structures with slower blade rotation speeds, significantly reducing the risk of bird collisions. These measures ensure that the Mannar II project adheres to the highest environmental standards. 

Also, the turbines will be of much higher capacity, 5.2MW, which is amongst the highest available in the market, reducing the land footprint. This will be the first time such turbines will be installed in Sri Lanka according to media reports recently and according to my experience.

Are we aware that the proposed 50MW which is said to be less than 5 US dollar cents and the current 100MW Thambapavani is also in the same stretch of Mannar? The same question arises as I stated in my original thoughts (https://www.ft.lk/columns/Will-environmentalists-stall-new-50MW-Mannar-wind-power-project/4-763942), do these migratory birds pick which project to hit or not hit, in this case they only hit the Adani wind project, is it? Probably because it is from India. It is evident the project is being targeted. FDI is being targeted and the citizens’ right to benefit with a lower tariff is being targeted.

 The fixed USD 8.26 cents vs USD 4.6 cents

 Citizens and media should not be confused with 4.6 US dollar cents as the electricity tariff.

The 4.6 US dollar cents is not the electricity tariff instead it is the externality cost benefit attributed to the Adani Wind power project on account of savings of GreenHouse Gas (GHG) emissions. This 4.6 US dollar cents is the basis of the PUCSL report on “externality” costs for 4 thermal power plants. It is basically the GHG emissions costs associated with thermal power plants, which in the wind power plant case, being renewable energy, is a benefit as part of socio-economic cost benefit analysis.

Externality costs refer to the indirect economic impacts of an activity on third parties. In power generation, these include environmental and health damages not reflected in the electricity price. For thermal plants, this means costs from GHG emissions, air pollution, and related health issues. In contrast, renewable energy projects like wind power have lower or even positive externality costs due to their reduced environmental impact. The 4.6 US dollar cents per kw/h figure represents the estimated cost savings from the Adani Wind Power Project’s reduction in negative externalities, emphasising the socio-economic benefits of renewable energy. USD 8.26 cents remains a fixed tariff for 20 years according to many recent reports which nullifies increasing tariffs, fluctuations and burdening of the citizens. 

If some consider USD 8.26 cents high, then comparatively, power cost from CEB’s thermal oil-based plant is USC 26.99/kWh, from its thermal plant is USC 12.52/kWh, and its Mannar wind plant is USC 9.67/kWh. CEB also purchases power at even LKR 150/kWh. Important to note that Adani will be paid in Lanka Rupees, versus the fossil fuel-based power plants who will use precious Foreign Exchange (FOREX) to import fuel. The wind project aims to save the country annually $260 million in FOREX by displacing fossil fuel. Comparing the tariff with other Renewable Energy projects, the Poonakary 700 MW Solar and Battery projects has offered a tariff of USC 15.62, the 100 MW Oddamavadi Solar project has got it’s tariff approved at USC 8.75 and while the 100 MW Siyambalanduwa solar project approved tariff is USC 8, actually it is USC 9.894 and the difference in tariffs is approved as higher project cost.

About the 50MW project and my thoughts were shared on the previous story by the Daily Financial Times accessible through https://www.ft.lk/columns/Will-environmentalists-stall-new-50MW-Mannar-wind-power-project/4-763942

 Larger projects and geographies with abundant green energy resources, infrastructure and policy support comparisons

 In discussing the comparisons between larger economies with well-established policies and smaller economies, the narrative can be quite surprising. It is crucial for readers to understand the broader global perspectives in the energy sector. 

Recently, the Saudi Power Procurement Company entered into agreements with Japan’s Marubeni Corporation to purchase wind power at an exceptionally low rate of 1.566 US cents per kWh. This rate sets a new global benchmark for cost efficiency in wind energy procurement. This difference can be attributed to various factors, including the relationships the two countries have in terms of FDI agreements, project scale, financing terms, and regional conditions. Saudi Arabia benefits from favourable wind conditions, economies of scale, and substantial government support, enabling it to secure such a competitive rate.

Globally, the weighted average for wind power costs has been steadily decreasing. Figures from 2022 indicate a range between 3.5 to 3.3 US cents per kWh, with markets like India achieving a levelised tariff as low as 3.8 US cents per kWh. Favourable wind conditions in India contribute to higher energy yields and lower costs per kWh. Favourable wind conditions in India contribute to higher energy yields and lower costs per kWh. 

India’s lower tariffs can be attributed to economies of scale, more mature infrastructure, and favourable government policies that encourage renewable energy investment. In contrast, Sri Lanka faces unique challenges, such as higher initial investment costs, less developed infrastructure, and differing regulatory environments, all of which contribute to higher energy prices. 

The significant differences in wind energy tariffs between countries such as India and Sri Lanka can be attributed to several key factors. India benefits from large-scale projects and a well-established renewable energy sector, which reduces per-unit costs through economies of scale. Financing terms also play a crucial role; India has access to favourable financing terms, including lower interest rates and better credit facilities, whereas Sri Lanka faces higher financing costs. Additionally, India’s more mature infrastructure and developed supply chain lower initial setup and operational costs, while Sri Lanka’s developing infrastructure leads to higher expenses, which is import driven. The regulatory environment in India is more mature and stable, providing confidence to local manufacturers and reducing risks in the energy sector while Sri Lanka relies completely on imports of equipment, etc.

As Sri Lanka’s renewable energy sector matures, projects like that instil confidence in investors will serve as catalysts for achieving more competitiveness as well as increase appetite to invest in energy projects in Sri Lanka. Whereas this will be a case study of how investor unfriendly Sri Lanka is. I am sure this is not what we want at this time?

 Strategic importance and economic benefits

 While Sri Lanka’s regulatory environment is less predictable, increasing perceived risks and costs and continuous opposition for FDIs for a nation which is grappling with economic and power and energy spending on fossil fuel, which ‘lest we forget’ the cause of many disruptions four years ago. 

According to many news reports, the Mannar II wind project is part of a broader initiative to invest in renewable energy in Sri Lanka, which also includes a 234 MW project in Pooneryn, proposed by the same developer. These projects represent a cumulative investment of approximately $ 750 million and are strategically important for Sri Lanka’s energy security. Another $ 250+ million is earmarked for creating the required transmission infrastructure for power evacuation according to the Government of Sri Lanka. 

Upon completion, the Mannar and Pooneryn projects will generate 1,498 GWh of clean, renewable energy annually, reducing the nation’s reliance on fossil fuels and decreasing CO2 emissions by 1.06 million tons per year. This aligns with Sri Lanka’s goal of achieving 100% renewable energy by 2050. Back of envelope calculations show yearly fossil fuel import saving to the tune of $ 270 million. 

Are the local Renewable Energy developers missing an opportunity to work together to further their investment projects?

Positive economic and community impact

 The economic benefits of the Mannar project are substantial. It is expected to create 1,000 plus jobs, boosting the local economy. As are many infrastructural and developing projects of this nature developers are committed to working with local communities, addressing their concerns, and minimising disruption to their lives. 

Can Sri Lanka afford to lose this investment? If so, who will bring in the losing investments? 

As the famous song goes, 

The answer my friend is blowing in the Wind, 

The answer is blowing in the Wind…

 

(The writer is an engineer specialising in renewable energy engineering. With a robust background in mechanical and power and energy sector, he has dedicated his career to pioneering sustainable energy solutions spanning over 40 years across UAE, Saudi Arabia, Sri Lanka and Australia. He can be reached on [email protected].)