Tuesday, 16 July 2013 00:59
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By Cassandra Mascarenhas
A country’s energy sector is the foundation of the modern economy and the dialogue on the energy sector in Sri Lanka centres heavily around waste, inefficiency, corruption and saving energy. The sixth session of the Sri Lanka Economic Summit 2013 held last week focused on the country’s heavily discussed energy sector.
Sri Lanka as an importer of fuel, amounting to 25% of its total import bill, has been experiencing many issues ranging from pricing fuel and electricity, lack of timely investments in the oil and electricity sectors, implication of rising costs on industries and the households to implications at a macroeconomic level on the fiscal performance and balance of payments. The session discussed strategies to manage the energy supply and demand in a more efficient manner for the future.
Meeting the energy needs of tomorrow
Energy Forum Director Dr. Anil Cabraal delivered a presentation on the options and possibilities of meeting future energy needs, based on the energy situation in Sri Lanka and trends and sectors that require careful attention.
“We are faced with the high cost of electricity and fuel and this has had a detrimental effect on opportunities for growth, a negative impact on economy and we are faced with increasing drain on foreign reserves. It has been compounded and exacerbated by sanctions on Iran, and non-payment of petroleum bills by State institutions and large customers has not helped either,” he observed.
When the energy productivity of Sri Lanka is compared with Thailand, Vietnam and several other Asian countries, Sri Lanka’s GDP per kilogram of oil at $ 3.4 per kilogram is better than almost all comparator countries, Cabraal pointed out. As the country has been faced with higher energy prices, it has moved into less energy consuming activity. However, there is room for significant improvement as more advanced countries in the region such as Japan and Singapore have superior energy productivity.
The country’s transport sector is the dominant user of liquid fuels with 70% of oil used in 2011. Cabraal noted that this percentage will only increase as the vehicle fleet increases, almost at rate of GDP increase even as oil used for power generation declines.
The transportation sector is a major and inefficient user of petroleum, mostly due to congestion. Sri Lanka uses 21% of its total energy for transport, compared to 7% in India and 16% in Thailand and 19% in Malaysia. Inefficiencies arise from congestion, inadequate attention to mass transit, combustion inefficiencies of the vehicles and poor use of railway assets, he added.
“Petroleum imports, though essential, pose major macro-economic and balance of payment risks. These imports do not add to Sri Lanka’s GDP, except for domestic value added in refining, storage and distribution. Petroleum imports are expected to grow steadily and will require $ 4 billion by 2020,” he revealed. “It is essential that Sri Lanka continues to improve energy productivity.”
Currently, energy biomass supplies 44% of total energy and oil provides 43%. Oil is also used to produce half the electricity but this pattern will change with the above normal rainfall and coal power plants that are coming up. He stated that by 2020, over 50% of generation is expected to be by coal and by 2025, 70%. Oil share will drop to 7% by 2020 and hardly anything by 2025.
Cabraal recommended having a mix of non-conventional renewable energy (NCRE) with coal and other generators for a power supply that has lower cost, more reliable, less affected by internationally traded fuel price uncertainties and rises, and support domestic industry and communities.
Pumped storage, where water is pumped up into a reservoir when there is excess low cost power available and then released to generate low cost electricity when demand is peaking, was another recommendation he made as it offers a way of better integrating coal and intermittent NCRE generation.
He added that 2,000 megawatts of coal will be needed to meet the demand being placed on the electricity supply. “There is risk and uncertainty when depending on a few sources of generation. Coal is expected to reach $ 280 a ton by 2020. Taking into account the depreciation of the Sri Lankan rupee, over the last 20 years, coal prices have increased by 11% a year. Coal imports will also have an impact on the balance of trade. Another billion dollars will have to go into the amount of coal that Sri Lanka hopes to import by 2020.”
“For Sri Lanka to really tackle the energy situation, it needs to focus on three sectors – transport, electricity supply and demand, and petroleum supply. The most efficient form of transport is least used in Sri Lanka – railways. Why not benefit from shifting more goods and passenger transport to rail? Open access policies to allow others to access railways with a fee. Increase mobility of efficiency in road transport. On electricity demand side, interventions on electricity are extremely important,” Cabraal stated.
Pix by Upul Abayasekara
