Renewable energy future in limbo amid policy uncertainty and grid challenges

• Stakeholders demand urgent reforms, including policy consistency, tariff transparency, grid upgrades, independent regulation
• Opine without immediate action, Sri Lanka risks falling behind in the global shift to renewable energy
• Sector faces setbacks due to policy reversals, grid inefficiencies, bureaucratic delays
• Asserts Solar energy, now 12% of the energy mix, remains underutilised despite being cheapest after hydropower
• Opines heavy reliance on fossil fuels drives up costs and increases import dependency
• States abolition of Net++ scheme and tariff cuts have reduced investor confidence, stalled large-scale solar projects
• Says local banks invested Rs. 100 b in renewables, but policy uncertainty threatens repayments and future funding
• Claims Govt. retroactively cut tariffs and demanded refunds, damaging investor trust
• Notes CEB owes payments to renewable suppliers despite its high revenue, further straining the sector
• Charges grid inefficiencies and lack of modernisation hinder renewable energy integration and risk future blackouts
• Sri Lanka spends $ 5 b annually on fossil fuel imports, which could be reduced by scaling renewables
• Cites World Bank report on SL risks losing $ 1.2 b in climate financing if it backtracks on renewable commitments

The renewable energy sector is at a crossroads, with industry stakeholders yesterday voicing frustration over bureaucratic roadblocks, inconsistent policies and grid-related inefficiencies that continue to stifle progress.

Addressing the media, key players in the sector including National Chamber of Commerce of Sri Lanka (NCCSL) Vice Chairman Dr. Lakmal Fernando, Renewable Energy Specialist Dr. Vidura Ralapanawa, Renewable Energy Council Member Eng. Prabhath Wickramasinghe and Renewable Energy Council Member Eng. Parakrama Jayasinghe shed light on the pressing issues that have hindered the country’s transition to a more sustainable energy future. 

Stakeholders called for urgent reforms including restoring policy consistency by reintroducing the Net++ scheme, ensuring tariff transparency and stopping retroactive tariff changes; fast-tracking grid modernisation with BESS deployment and regulated curtailment protocols; rejecting political interference in tariff setting, allowing independent regulators to oversee energy pricing and re-establishing the National Electricity Advisory Council to ensure transparency, accountability and public consultation for future energy policy changes.

 “If we don’t fix these issues now, we will be locked into an energy crisis for years to come,” Dr. Ralapanawa cautioned. 

In addition, Dr. Ralapanawa said the move to scrap the variable tariff mechanism in 2025 has left investors vulnerable to currency fluctuations and interest rate risks, making renewable energy projects significantly less-attractive. 

Adding to the uncertainty, solar and mini-hydro plants have been subjected to ad-hoc curtailments, forcing operators to reduce output through informal notices — a practice that further worsen the financial viability of these projects.

Calling the CEB Mafia, they alleged that entrenched interests within the State-run utility have deliberately slowed down the renewable energy integration to protect fossil fuel-based generation. 

“This inefficiency was highlighted during the 9 February 2025 blackout, which was initially blamed on renewable energy — particularly solar. However, it was later revealed to have been caused by incorrect transmission protection setting and operational errors at the Victoria power plant,” Dr. Ralapanawa said. 

He also noted that the lack of Battery Energy Storage System (BEES) has hindered grid stability, despite the fact that Sri Lanka’s Long-Term Generation Expansion Plan (LTGEP) 2023-2042 mandated 300 Mw/1,170+MWh of battery storage by the end of this year – a target that has seen no significant progress.

“By including false proposals in the long-term generation plan, the CEB creates an artificial vacuum in existing supply which then they attempt to fill through emergency power purchases. Thanks to the growing contribution of renewable energy, many of these costly power purchases have been prevented,” he opined.

The lack of a clear regulatory framework and continued policy reversals have already had severe economic repercussions, which include, fossil fuel imports surged by 12% in 2024, widening Sri Lanka’s trade deficit, over $ 300 million in foreign direct investment (FDI) is now at risk with at least five large-scale solar and wind projects salted, the solar sector alone faces the loss of 60,000+ jobs in installation and manufacturing and the country saves over $ 500 million annually through avoided fossil fuel costs via rooftop solar, but recent policy reversals could diminish these savings.

The World Bank’s 2024 report issued stark warning that Sri Lanka risks losing $ 1.2 billion climate financing if it continues to backtrack on renewable energy commitments. Meanwhile local developers have accused the CEB of ‘policy sabotage’ and violating contracts creating an environment where renewable energy investments are no longer bankable.

Dr. Fernando said solar energy has emerged as the fastest-growing renewable energy source in the country, now accounting 12% of the country’s energy mix, yet remains underutilised despite being the cheapest option after major hydropower. 

“The country’s energy landscape still relies heavily on fossil fuels with coal and oil making up 53% of the total supply driving up costs and increasing dependency on imported fuel,” he said. 

Despite Sri Lanka’s earlier target of achieving 70% renewable energy by 2030, Dr. Fernando said the recent policy reversals have put this goal at risk. 

He also criticised the Government’s stance, calling it a complete u-turn from election manifesto of NPP-Government. 

Dr. Fernando cited the abrupt abolition of the ‘Net++’ scheme, as a key setback, which had encouraged large-scale rooftop solar installation by allowing commercial and industrial producers to export surplus power to the grid. 

“Under the new rule, businesses can no longer install systems beyond their contracted demand, significantly crippling the return on investment (RoI) for solar investors and discouraging future expansion,” he explained. 

He also pointed out that the local banks have invested over Rs. 100 billion to these projects by way of loans and investors are now struggling to meet their loan and interest payments. 

Eng. Wickramasinghe criticised the CEB for failing to pay renewable energy suppliers, despite having a higher annual revenue than the country’s largest apparel exporting company. 

He pointed to a major concern of the inconsistency in Government policies, particularly tariff and the lack of investor safeguards. “In 2023-2024, the Feed-in-Tariff (FIT) for solar was slashed from Rs. 42 per kWh to Rs. 27 kWh — a drastic 35% reduction,” he said. 

Eng. Wickramasinghe noted that the tariff assumptions remain unclear, with the Ceylon Electricity Board (CEB) citing ‘grid stability’ publicly sharing any supporting data. 

Dr. Ralapanawa highlighted that at a recent Asian Development Bank (ADB) forum, officials openly stated that the Government is failing to meet its own renewable energy targets — shocking the donor agency. 

Further worsening investor confidence, he said in October 2024, the Government retroactively recalculated tariffs for Q1-Q3 last year, demanding refunds from developers for so-called ‘overpayments.’ 

“This move has not only damaged investor confidence, but against the Government,” he warned.

Eng. Jayasinghe asserted that Sri Lanka’s existing 2,000 MW of non-traditional energy sources save up to about $ 620 million foreign exchange. 

One of the most contentious issued discussed was the inefficiency in the national grid, which has struggled to accommodate new renewable energy projects. 

“We cannot talk about national security without a well-designed, stable grid system. The national grid must be upgraded with new technologies, redundancy and automation to prevent future cascading failures in the future like we experienced in February,” he said. 

Eng. Jayasinghe further noted that Sri Lanka spends over $ 5 billion annually on fossil fuels imports for transportation alone.

“We can reverse this trend, by adopting renewable energy. The Middle East became wealthy by selling fossil fuel, but today the world is shifting to green energy. Sri Lanka must seize this opportunity to expand its renewable energy mix and reduce dependence on fossil fuels,” he added. 

Dr. Ralapanawa called for a balance in the generation supply to address power fluctuations, noting that the CEB needs a proper Transmission Protection Unit. 

He pointed to the 9 February countrywide blackout, stating that CEB officials have attempted to cover up their failures. 

“At no point have responsible parties were held accountable for the multiple blackouts the country has experienced in the recent years,” he claimed, insisting on the Government to take immediate corrective measures. 

Despite the hurdles, industry leaders expressed cautious optimism that with the right policies and leadership, Sri Lanka could still achieve its renewable energy targets. However, they warned that without immediate action, the country risks falling further behind in the global energy transition.