GENERATION OPTIONS FOR A RELIABLE AND AN ECONOMIC POWER SUPPLY

The Institution of Engineers Sri Lanka

GENERATION OPTIONS FOR A RELIABLE AND AN ECONOMIC POWER SUPPLY 20th June 2016

Seminar Proceedings

Produced by Power and Energy Committee The Institution of Engineers Sri Lanka Page 1

GENERATION OPTIONS FOR A RELIABLE AN ECONOMIC POWER SUPPLY Type of Session

: Technical session followed by plenary session

Date-Time

: June 20, 2016 - 0830 : 1300 Hrs.

Venue

AND

: Wimalasurendra Auditorium, 120/15, Wijerama Mawatha, Colombo – 7

Facilitator

: Eng. Shavindranath Fernando, Chairman-Power and Energy Committee, Institution of Engineers, Sri Lanka

Speakers (Name, Organization): - Eng. Kamani Jayasekara, Ceylon Electricity Board.

- Eng. Janaka Aluthge, Ceylon Electricity Board.

- Eng. Buddhika Samarasekara, Ceylon Electricity Board.

- Eng. (Dr.) Tilak Siyambalapitiya, Resource Management Associates (Pvt.) Ltd. - Eng. Preeni Withanage, Petroleum Resources Development Secretariat.

Panel Members: - Eng. Bandula Tilakasena (Moderator).

- Eng. Jayantha Ranatunga.

- Eng. Upali Daranagama.

- Eng. Kamani Jayasekara, Ceylon Electricity Board.

- Eng. Janaka Aluthge, Ceylon Electricity Board.

- Eng. Buddhika Samarasekara, Ceylon Electricity Board.

- Eng. (Dr.) Tilak Siyambalapitiya, Resource Management Associates (Pvt.) Ltd. - Eng. Preeni Withanage, Petroleum Resources Development Secretariat.

Rapporteurs: - Eng. Amila Wickramasinghe, Resource Management Associates (Pvt.) Ltd. - Eng. Randika Wijekoon, Ceylon Electricity Board.

Session Objective: To provide an opportunity for the policy makers, decision makers and the general public to appreciate options available and agree on strategies to pursue to ensure a reliable and an economic power supply for Sri Lanka.

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Agenda 0830 – 0900 Registration 0900 – 0905 Welcome Address by Eng. Wimalasena Gamage, President - IESL 0905 – 0915 Eng. Shavindranath Fernando - Introduction 0915 – 0935 Eng. Kamani Jayasekara - Long term generation planning process based on least economic cost principles 0935 – 0955 Eng. Janaka Aluthge - System operation and economic dispatch of power plants in the operation of the power system 0955 – 1015 Eng. Buddhika Samarasekara - Economic and environmental impacts of coal and NG (LNG) as a fuel 1015 – 1035 Eng. Dr. Tilak Siyambalapitiya - Economic impact of delaying decisions on generation options 1035 – 1055 Eng. Preeni Withanage - Prospects and use of NG in Sri Lanka as a fuel for power generation and other uses 1055 – 1125

Tea

1130 – 1300

Plenary

1300

Lunch

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Contents Introduction.................................................................................................................................. 4 Welcome Address by President, IESL.........................................................................................4 Introductory Speech by Chairman - Power & Energy Committee, IESL.......................................5 Presentation Session...................................................................................................................6 Long Term Generation Planning Process based on Least Economic Cost Principles..............6 System Operation and Economic Dispatch of Power Plants in the Operation of the Power System..................................................................................................................................... 6 Economic and Environmental Impacts of Coal and NG (LNG) as a Fuel..................................7 Economic Impact of Delaying Decisions on Generation Options..............................................8 Prospecting and Use of NG in Sri Lanka as a Fuel for Power Generation and Other Uses......9 Plenary Session......................................................................................................................... 10 Panel of Experts..................................................................................................................... 10 Questions and Answers..........................................................................................................10 Concluding Remarks by the Panellists...................................................................................15 Annex I: Slides used in the Presentation by Eng. Kamani Jayasekara......................................17 Annex II: Slides used in the Presentation by Eng. Janaka Aluthge............................................38 Annex III: Slides used in the Presentation by Eng. Buddhika Samarasekara.............................52 Annex IV: Slides used in the Presentation by Eng. (Dr.) Tilak Siyambalapitiya..........................60 Annex IV: Slides used in the Presentation by Eng. Preeni Withanage.......................................81

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Introduction It is well understood that the development of any economy is directly linked to the availability, accessibility and affordability of the supply of Power. Further, the cost and reliability of the supply of power among other things greatly influence the type and pace of development in any country. As an example, reliability instil in the investors a sense of confidence of availability of power. The cost on the other hand dictates the type of investments that can be attracted to the country.

Sri Lanka, until recently, was able to boast of a reliable supply of power accessible in many parts of the country that spurred development of the economy mainly based on service sector.

However the power prices were still not competitive enough to bring in heavy industries that most certainly add greater value to the economy.

The three most recent major power failures brought into sharp focus the vulnerability of the power sector and many are questioning the reliability and system stability aspects too. Hence there are so much of different views expressed, development strategies promoted, and plans presented by various stakeholders.

The Institution of Engineers Sri Lanka (IESL), the premier Engineering Institution, have in its fold many experienced engineers who are knowledgeable in analyzing options for generation expansion and economic implications of alternative strategies for expansion. The IESL therefore organized this half-day seminar to discuss what the country must pursue to ensure a reliable and an economical power system. The seminar focuses on generation options taking into consideration the economic impacts of alternative scenarios. This seminar is expected to give an opportunity to policy makers, decision makers and other interested parties to view all possible strategies available and agree on what the country must pursue to ensure a reliable and an economic power supply.

Welcome Address by President, IESL Eng. Wimalasena Gamage On behalf of the Institution of Engineers, Sri Lanka, it is my great pleasure to welcome all of you to this august gathering for the seminar on Generation Options for a Reliable and an Economical Power Supply, which is considered a timely and an appropriate theme.

As the professional body for Engineers, it is the prime duty and the objective of the IESL to contribute to and involve itself in the development activities of our country in a sustainable manner. Please allow me to warmly welcome our guest speakers of this seminar, Eng. Kamani Jayasekara, Eng. Buddhika Samarasekara, Eng. Dr. Tilak Siyambalapitiya, and Eng. Preeni Withanage, all of whom are our members and also the Chair of the panel Eng. Bandula Tilakasena and the members of the panel, Eng. D BJ Ranatunga and Eng. Upali Daranagama.

This year, we have held a number of seminars related to energy and this is yet another seminar of that series. During the recent past, the island-wide power failure brought our Engineers to the focal point among the general public, reminding us of our responsibilities to society as professionals.

The Institution of Engineers of Sri Lanka, as the premier engineering institution, have in its fold many experienced engineers who are knowledgeable in analyzing options for generation expansion and economic implication of alternative strategies for expansion. Therefore, the IESL organized this seminar which is open for professionals and the general public to discuss what Page 5

the country must pursue to ensure a reliable and an economical power system in a sustainable manner.

I do not want to take too much of your valuable time and no doubt this seminar would give an opportunity to our own engineers, policy and decision makers and other interested parties, specially including foreign development agencies, who want to invest funds on country’s development, to open their eyes to view all possible strategies available and agree on what the country must pursue to ensure a reliable and economical power supply.

Introductory Speech by Chairman - Power & Energy Committee, IESL Eng. Shavindranath Fernando Accessibility, Availability and Affordability are the 3 A's needed in any power system for growth of an economy. Sri Lanka could boast of a highly accessible and a reliable supply of electricity during the past decade or so where we had a very good coverage and 24x7 Power supply - the best in South Asia and much better than most countries in Asia. However we were complaining of very high cost of electricity, thanks to the decision makers and other pressure groups who never allowed CEB to implement economical power plants. And that is history today.

It is a fact that with all the media hype that get into gear every time we have some trouble at Norochcholai, we have to acknowledge that it is the Norochcholai plant that brought stability to the system by arresting the vagaries of power price fluctuations that were swinging with the rain and the oil prices in the world market. It is ironic that the very same people who blocked a much cheaper, much more technically superior power plant at Norochcholai with Japanese funding now shout from the roof tops that we have a substandard power plant. I once again pose the question - if not for Norochcholai, what will be the cost of power today - you can ask this question from the speakers.

The reliability of power supply, we know, will greatly influence the investors to come to Sri Lanka. But the cost of electricity determines the type of investment. We can now boast of being a middle income country. Just imagine if we had the Norochcholai Power Plant as planned in the year 2004, we would definitely be in the upper bracket of that group. Why? Because the power prices would have been brought down good eight to ten years ago to encourage investments not only in the service sector, but in the much needed industrial sector as well.

It is unfortunate that during the last 10 months, we had three of the most irritant island-wide power failures. Now this has shaken the very foundation of the utility to such an extent that everyone and anyone other than the CEB engineers know how to run the CEB and they all try to influence the decision makers today, not because they want a reliable and an economic system but because they want to cash in on the situation and want to fish in the troubled waters.

IESL organized this seminar to allow those who know the subject to share with an educated audience the intricacies of planning and operation of a healthy power system and very importantly the economic impact of not taking the correct decisions and in time. I wish we will have a very healthy discussion to follow where we can all have a consensus on where we should go from here. I thank Hon. Deputy Minister of Power & Renewable Energy for taking time off to be with us and all those who accepted our invitation.

Presentation Session Compered by Eng. Swetha Perera Page 6

Long Term Generation Planning Process based on Least Economic Cost Principles Eng. Kamani Jayasekara, Deputy General Manager, CEB Eng. Kamani Jayasekara commenced the technical session explaining the least cost planning principles adopted for long term generation expansion planning work. Ceylon Electricity Board’s statutory duty to develop and maintain an efficient, coordinated and economical system of electricity supply adhering to policies, guidelines and planning codes, was then highlighted. She explained the basic dimensions of power system planning and the scope of transmission and generation planning to the audience. Adding to that, she stated that large power projects being highly capital intensive, having long lead time and economic life time, require careful planning to achieve the adequate reliability at least cost.

The speaker explained the planning process, starting from the preparation of national electricity demand forecast, assessing the capability of existing hydro and thermal generation system and screening the future generation options for economic optimization. Cost minimization is the main objective of the optimization process for preparing the expansion plan. She presented an expansion plan from the Long Term Generation Expansion Plan (LTGEP 2015-2034) to the audience and further highlighted the importance of carrying out sensitivity analysis to test the robustness of the plan against the variations in demand and fuel prices. Scenario analysis is conducted to identify the economic and environmental impacts of various development alternatives.

Finally the speaker presented the audience an outlook on the energy share in 2030 for three key expansion scenarios from LTGEP 2015-2034; namely, Base Scenario, Demand Side Management Scenario and Natural Gas Scenario.

Eng. Jayasekara wrapped up the presentation by giving the audience the understanding on the importance of least cost expansion planning principles and the role of planners in providing necessary information for decision makers and policy makers to make the right decision for the country’s development.

Presentation made by Eng. Kamani Jayasekara is attached as Annex I.

System Operation and Economic Dispatch of Power Plants in the Operation of the Power System Eng. Janaka Aluthge, Deputy General Manager, CEB System Operations is a challenging task and affects the supply availability and affordability.

Eng. Janaka Aluthge took the audience quickly through the Sri Lankan power system operation process, highlighting the unique challenges faced by the operator. Starting with the concept of balancing the load and supply in real time operation, he explained the main functions of the System Control Centre. Major function is the dispatching of power plants to meet the load.

Second function is the controlling of the network with voltage monitoring and transmission line configuration. He emphasized that all these operations are subject to predetermined set of priorities; safety of persons, safety of equipment, availability of supply and the quality of supply and in that order. He elaborated further on how the system operator have dealt with the set priorities in the past using several examples.

Eng. Aluthge explained the operational aspects of base load power plants, intermediate plants and peaking power plants. Later he explained the process of managing the hydro resources for power generation which is challenging due to the presence of many stakeholders. In practice, predetermined set of priorities have been established for the utilization of hydro resources. First priority is the drinking water and drainage requirement followed by environment requirements Page 7

and irrigation requirements as second and third. Power generation is the fourth priority, which makes hydro electricity generation more challenging. This operational complexity again increases when certain inherent characteristics of a cascade hydro plant complex come into the picture.

Speaker then explained how thermal power plants are dispatched in the merit order scheme and factors that determine the merit order ranking. Then he emphasised the fact that intermittency of non-conventional renewable energy generation is not seen by the control centre in real time and how it brings greater challenges under certain operating conditions.

Finally, Eng. Aluthge confronted several allegations made on CEB engineers. First being the point that CEB has not been able to serve the demand of 2,300 MW even with an installed capacity of 3,900 MW. In his clarification to this, Eng. Aluthge explained to the audience that the actual capacity that was available on a particular day when the demand was not met was only 2,290 MW due to unavailability of hydro power, distinguishing between dispatchable and nondispatchable power plants. This highlighted the very point that adequate firm generation capacity is a crucial requirement for a reliable power system operation. He then clarified another allegation on hydro resource management in 2016 that CEB engineers have drawn down the reservoirs indiscriminately. The real facts were clearly illustrated and explained using drawdown patterns of past few years in a comparison. Eng. Aluthge then wrapped up his presentation giving the audience a clear understanding of challenges faced in operating a complex power system and providing clarifying on some popular misconceptions.

Presentation done by Eng. Aluthge is attached as Annex II.

Economic and Environmental Impacts of Coal and NG (LNG) as a Fuel Eng. Buddhika Samarasekara, Chief Engineer, CEB Eng. Buddhika Samarasekara, starting his presentation, introduced the timely topic of "Economic and Environmental Impacts of Coal and LNG as a fuel" to the audience. He went through a brief history of coal power development in Sri Lanka and studies completed on LNG based power generation as a future option. CEB identified the first coal fired power plant as a prospective generation option in the year 1982, aiming to diversify the fuel with hydro, bringing economic benefits to the country. He elaborated that the implementation of the first coal fired power plant was delayed due to various unfavourable circumstances prevailed until its final implementation in the year 2011.

As a result of an MOU signed between the Ministry of Power and Energy and the Japan Bank for International Cooperation (JBIC) in 2007, the first study on LNG was initiated under the title "Feasibility study for introduction of LNG operated power generation option in Sri Lanka�. This study was conducted in two phases in 2010 and 2014. In addition to that, the long term generation expansion plan 2015-2034 has presented number of scenarios, highlighting the impact of natural gas penetration levels, restricting coal power plant development, possibility of international coal price escalations and consideration of social damage cost. Eng. Samarasekara, moving on with his presentation, gave a clear comparison on the nature of the investment required for both coal and LNG power plants and related infrastructure. The speaker then illustrated the computed levelised cost of electricity for both coal and LNG projects. It clearly indicated the cost benefit of coal fired generation over LNG. He highlighted the fact that replacing coal power plants with LNG fired combined cycle power plants would increase the cost significantly as these function as a base load power plants instead of intermediate load operation. Historical variation of global fossil fuel prices were illustrated, showing the volatility of gas and oil prices compared with coal prices. It was shown that even leading international agencies have not been able to make accurate price forecasts due to the high uncertainty.

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Next, the presenter highlighted his key points on the importance of developing the next coal power plant at Sampur in Trincomalee. Trincomalee site has been identified as the best location for coal power development in the county. The proposed power plant includes high efficient technology which reduces CO2 emissions and state of the art emission control systems to reduce NOx, SOx and particulate matter to substantially low levels. Through an analysis, he showed that the negative financial impact of converting a 500 MW coal power plant into an LNG is in the order of 10 billion rupees per annum. Presentation was concluded with several key recommendations; a) the proposed 1,200MW coal fired power plant development at Sampur should be implemented as planned, b) it is not prudent to convert 2x250MW and 4x300 MW coal units into LNG and c) to take decisions on future generation options solely focusing on the temporary price drop in the world market, ignoring historical trends of global fuel price variations.

Presentation by Eng. Buddhika Samarasekara is attached as Annex III.

Economic Impact of Delaying Decisions on Generation Options Eng. (Dr.) Tilak Siyambalapitiya, Managing Director, RMA Eng. (Dr.) Tilak Siyambalapitiya presented the importance of taking timely decisions on future generation options considering the economic impact of any delays. He started the presentation highlighting the legality related to procuring power generation, explaining the role and responsibility of the Public Utilities Commission of Sri Lanka (PUCSL) and of different licensees, acts and codes. Importance of adhering to the proper legal process for the establishment of a policy was also brought to the attention. Moving on, Dr. Siyambalapitiya pointed out the current status of 500 MW coal fired power plant to be built in Sampur, recent 20 MW wind development in the Northern Province and activities on solar power development. He stressed the point that development of a coal power plant of 500 MW magnitude requires enormous effort and resources, demanding careful thought before terminating such a project. He reminded the audience of the series of events that took place during the period of 1987 to 2005 with regard to changing the location decision of country’s first coal fired power plant until finally constructing it in Puttalam area. Consequent delay resulted in severe power shortages and created adverse effects on the country’s economy. He added that, if the same process is about to be repeated for the next proposed coal fired power plant, the country would face the same burden as it did in the past.

The speaker then presented facts on the widely discussed topic of introducing gas fired power plants for generation. He specified several key factors which one should consider to justify the introduction of LNG. Flexibility of system operation, possibility of converting existing plants to gas, environmental benefits, possibility of other applications such as transport and heavy industry, fuel diversity and world market prices. He then went on to explain the outcome of various committees appointed in the past to make decisions on the power sector. Adding to that, he stated that, based on the past experience, appointment of committees is not the correct strategy to drive the sector forward. Presentation included statistics which reveals that the market structure of electricity is undergoing changes such as increased share of electricity consumption in industrial and commercial sectors. Moreover the Peak electricity demand has started to show an increased growth rate recently. Such factors could increase the severity of any power crisis in the future.

Finally, Dr. Siyambalapitiya warned that the electricity prices could increase if the right decisions are not taken without any delay. He emphasised that a shortage in generation capacity is expected due to the delay in implementing Sampur Coal Power Project and it is not practically possible to build an LNG plant with terminal by 2020, given the scale of the development.

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Dr. Siyambalapitiya’s Presentation is attached as Annex IV.

Prospecting and Use of NG in Sri Lanka as a Fuel for Power Generation and Other Uses Eng. Preeni Withanage, Director, Petroleum Resource Development Secretariat Eng. Preeni Withanage who is actively engaged in petroleum resource development activities presented the progress and the present status in oil and gas exploration work in the country.

She stated that the exploration activities have made two discoveries of hydrocarbon deposits in the Mannar basin. The two reservoirs; namely Dorado and Barracuda, are estimated to have 300 bcf and 1.8 tcf of hydrocarbon volumes respectively. Currently, exploration activities are carried out in two offshore blocks off the east coast and preparations are underway to further explore and develop the discovered gas resources in M2 block in Mannar Basin and also to award two blocks in the Cauvery Basin. She further explained the benefits of exploration activities and discoveries for all the stakeholders in the country. She also spoke about the main queries and concerns raised by various stakeholders including general public on gas exploration activities and continued her presentation providing answers to them. Resource exploration, resource appraisal, resource commercialisation and development can be identified as the key phases in gas exploration.

She moved on explaining the commercial challenges faced in this entire process. Difficulties in attracting investors due to the absence of a natural gas policy was highlighted. Similarly, once the gas discoveries are tapped, it is essential to ensure a continuous off-take. Evaluation of gas export potential, infrastructure development for local market, preparation of flexible contracts and project execution in ecologically sensitive areas are some of the other challenges faced.

Petroleum Resources Development Secretariat (PRDS) has prepared four scenarios of gas penetration for initial projections. She highlighted that further research could support the demand side analysis for gas utilization. She elaborated on a prospective gas pricing mechanism giving consideration to main stakeholders in operation.

Finally, Eng. Preeni presented the following key issues relevant for successful commercialisation of petroleum resource; a) need for more exploration to increase volumes, b) importance of conducting more research on introducing gas as a fuel to the transport sector, c) analysing costs and benefits of gas as an alternative fuel for various sub sectors to increase local participation and d) benefit of formulating a flexible natural gas and a fiscal policy to improve investor attraction.

Presentation by Eng. Withanage is attached as Annex V.

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Plenary Session Chaired by Eng. Bandula Tilakasena, Former Additional General Manager of Ceylon Electricity Board

Panel of Experts 1. Eng. Preeni Withanage – Director (National Benefits), Petroleum Resources Development Secretariat 2. Eng. Upali Daranagama – Former Additional Secretary of Ministry of Power and Renewable Energy 3. Eng. Dr. Jayantha Ranatunga – Chairman, Consumer Consultative Committee of Public Utilities Commission of Sri Lanka 4. Eng. Dr. Tilak Siyambalapitiya – Independent Energy Consultant 5. Eng. Kamani Jayasekara – Deputy General Manager, Generation Planning, Ceylon Electricity Board 6. Eng. Janaka Aluthge – Deputy Director General, System Control, Ceylon Electricity Board 7. Eng. Buddhika Samarasekara – Chief Engineer, Generation Planning, Ceylon Electricity Board

Questions and Answers 1) Question/comment by Prof. Sam Karunaratne All presenters did a fantastic job and I’m happy that except for one, all the presenters have been students of mine.

I propose the use of the term ‘complementary energy’ instead of ‘alternative energy’ as most renewable energy forms cannot be compared against technologies such as coal and can only play a minor role in the system. Especially when decisions are made based on words and qualitative thinking, such misleading terminology needs to be avoided.

2) Question/comment by Mr. Asela Karunaratne, Organisation of Professional Associations CEB has the responsibility of meeting the electricity demand by planning and implementing necessary projects. From the presentations here, it is apparent that CEB had these plans all along, and had these plans been implemented, most of the present and future power generation problems could have been avoided. However, CEB is part of the government and the plans of the CEB should be government plans. So why is the CEB isolated and its plans not implemented? How can external committees ask CEB to do certain things out of their plans?

Answer/clarification by Dr. Tilak Siyambalapitiya What I said was what I see. Actually, CEB is not a part of the government. According to the Electricity Act, CEB has to operate according to the license issued by the Public Utilities Commission of Sri Lanka (PUCSL). The government is the owner of CEB and as the owner, the only thing government should be doing is asking the CEB Chairman how much of a profit the CEB is making.

On the other hand, the Act clearly says that the policy has to be defined by the government and communicated to the CEB and the PUCSL. However the policy has not been adequately discussed and communicated, and it is largely the commercial pressures which are driving the energy sector decisions and indecision, rather than professional analysis.

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If the fuel of Sampur power plant is to be changed, then a proper system analysis has to be done, identifying cost implications and the decision has to be based on the results of these analyses.

Answer/clarification by the Chair The government, as the owner of CEB, should not only necessarily be asking for profit as it has a responsibility towards the public to make electricity affordable. So, the government can even forego its profits to reduce the cost of electricity to the general public.

3) Question/comment by Prof. K K Y W Perera Unless the cost to the environment is considered, the analysis done based on minimum cost (least cost) is meaningless.

Answer/clarification by Eng. Buddhika Samarasekara In the generation planning process, first, the government policy is considered. That is, even if not the least cost, generation options required to meet government policy targets such as 20% renewables by 2020 are selected. Then, all the technological options are considered with their respective environmental impacts simulated.

If certain options violate the standards, those will not be selected. Even when environmental impacts are within acceptable levels; their costs (essentially based on the location, which results in change in the environmental cost due to population density) are included as additional costs in the evaluation. So the least cost plan is effectively the least total cost considering all factors.

Answer/clarification by the Chair Coming up with a least cost plan which already is based on policy is not how it is specified by the law. According to the law, the transmission licensee has to develop the least cost plan and then consider options needed to comply with the policy and indicate the additional costs incurred by the system in meeting the policy (i.e. policy costs).

Answer/clarification by Dr. Tilak Siyambalapitiya The baseline plan should be the least cost plan and the alternative plans which comply with the policy has to be presented by the transmission licensee for the government to take a decision on that, being conscious of its cost implications, if any. But as cost implications are brushed aside by Governments to give way to commercial pressures and imaginary environmental and social impacts, what finally happens is the most expensive and more environmentally damaging solution are often implemented.

4) Question/comment by Eng. Kithsiri Wijesundara We as consumers are entitled to and expect the electricity to be available (i.e. without any more power cuts), at an affordable price. According to the presentations today, there is an imminent power crisis unless the existing plans are implemented. So, if there are other options available, let them be done subsequently, as any of those options, including that of using own gas resources (which is not going to be available till 2022) would not result in the power plant necessary to meet the demand in 2018-2020. As the professional body who is in the best position to make recommendations on this situation, I urge the IESL to request the government, through the Deputy Minister present here, to implement the existing plans without any deviations.

5) Question/comment by Eng. Shavindranath Fernando Page 12

It has always been an agony to get the plans of CEB implemented over the years.

Sometimes even to secure funding through the treasury had been a challenge. As you saw from today’s presentations, CEB is not passionate about any particular technology. If LNG is what is needed, let that be done. If renewables is what is needed, let that be done. Only thing, whatever we are going to do, those have to stand the test of economics, stand the test of environment and stand the test of social justice. I urge everybody to come up with proper analyses before proposing alternatives.

6) Question/comment by Eng. Parakrama Jayasinghe As this is an IESL event, the views presented should be broader than just CEB’s. IESL has a vision and a mission and anything done by the IESL shall comply with these. IESL vision includes promoting sustainable use of resources which is not what is happening today. CEB says that their plans are not allowed to be implemented and the reason may be because there is not enough independent review of their plans to be properly accepted. Not only the PUCSL, maybe outside parties should also be able to check and comment on these plans.

However, coal does not improve the welfare of people. Even the statement that coal is the cheapest is contested, and it is definitely not sustainable. That is because Sri Lanka does not have coal resources. So, CEB has to consider ‘what if coal is not available’ scenario.

Indigenous resources should fuel the GDP growth. Also, I have to say that the numbers presented here are not accurate. For example, the fuel price showed as Rs. 12 per kWh for renewables is wrong, as hydro is the dominant renewable source we have and there is no fuel cost for hydro. According to the US energy secretary, as reported in the Forbes Magazine, coal is more expensive than LNG based generation. I agree that this changing of decisions should not have happened, but that is only because there is not enough independent assessment of CEB plans.

Answer/clarification by the Chair Should clarify that this is not a CEB forum and there are enough independent experts present here to express their views.

Answer/clarification by Eng. Jayantha Ranatunga Up to now, nobody has come up with proper numbers and analysis to prove that renewables are a better solution than coal. We can’t make decisions on unproven solutions. And what finally will happen is more diesel power plants will come.

7) Question/comment by Eng. Hasala Dharmawardena 1. Why is the power supply for 2016 considered now? Planning horizon is 5 years ahead.

So, now we should be discussing about the power supply in 2021 to 2034.

2. Why is the fuel price the CEB gets from the CPC used for planning as there is an economic price distortion?

3. For dispatch decisions, are you using fuel prices offered by the CPC or is it the economic price of fuel?

4. Instead of scaling down from the values used in developed economies, I think it is better to use a bottom up approach to value environmental impacts to the economy such as by SOx and NOx. 5. In the comparison between Coal and LNG, I think you have not considered the reliability of the transmission line used to take power from these power plants.

Answer/clarification by Eng. Kamani Jayasekara CEB updates the generation plan every two years and if you take 2010 plan, the Trincomalee coal plant appeared even in that, expecting the plant to be available by 2013.

But there have been delays. All our power plants have been constructed with delays. So, when a plant is not implemented according to the planned schedule, it would result in a Page 13

power crisis and we have to look for short term solutions. So, in the past, there were many challenges to implement the least cost plan and we don’t want that to happen again.

About fuel prices, in planning, we take economic prices and not the prices offered by the CPC. Answer/clarification by Eng. Janaka Aluthge We operate a system which is already there. So, the dispatches are done based on the cost CEB is going to incur in running it. I.e. the economic dispatch is actually based on financial fuel prices (i.e. prices offered by the CPC to CEB).

8) Question/comment by Dr. Janaka Ratnasiri Environmental Impact Assessment (EIA) of Norochcholai Coal Power Plant specifies emission monitoring during operation of the power plant.

1. Are stack emissions measured at Norochcholai?

2. The power plant produces a large amount of coal ash and what is done to this?

3. Is the content of mercury and other metals in coal ash more than what is specified?

Answer/clarification by Eng. Palitha Hendahewa - Project Director, Norochcholai Power Plant 1. CEB has stack emission monitoring facilities at Norochcholai power plant and according to the measurements, the emissions are well below the limits specified.

2. The fly ash is used for cement production and trucks collect fly ash from the power plant on a daily basis.

3. Mercury in ash has been tested both by the NERD Centre and the NBRO and found to be acceptable for making building material etc.

9) Question/comment by Eng. Arjuna Manamperi Over the years, we have heard of many different options and facts about the power sector and solutions to power generation requirements, but unfortunately, these are contradicting to each other. So, I propose the following; 1. When considering generation options, please consider all the options and views expressed by the others, as there are many who have studied these subjects and knowledgeable.

2. We should take this problem to the public and get their consent, as all these belong to the people. So, all the experts should present their cases and this debate has to be done publicly so that the general public could understand what is correct.

3. However, if this power crisis is imminent, there is no option but to develop this coal power plant first and then decide on the other options.

10) Question/comment by Eng. Piyasena Ekanayake 1. There has been talk of petroleum resources depleting and not being available after 40 years or so. However, we have to be mindful that these suggestions are based on statistics (British Petroleum) published 40 years back based on the resources known to at that time and the petroleum demand of that period. However, since then, demand has increased, but above that, new petroleum resources have been found. This will keep on happening in the future as well, as it is likely for petroleum resources to be available for many more years to come, as I believe a lot more resources are there, yet to be discovered in this world.

2. The environmental issues brought up against coal is interesting, as we are here discussing about 2,000-3,000 MW of coal power generation. But there are countries with large power systems and meeting 60% - 70% of their demand through coal power. So if Page 14

coal power is so damaging to the environment, there couldn’t be anyone living in these countries by now.

3. I need to raise a similar issue in the petroleum sector as what is faced by the power sector, which is the issue of delaying projects over and over causing colossal losses to the sector and the economy. For example, if the refinery expansion project was done timely, 400 million dollars could have been saved every year.

11) Question/comment by Mr. Sunanda Gunasekara, Sri Lanka Institute of Nano Technology Supply of reliable power at affordable price should be a priority of decision makers. The generation options discussed here is likely to be a very small fraction of the GDP, but the impact to development is very high. So it is necessary to treat this issue as a high priority and resolve it, as otherwise solving it would get even more difficult in the future and the consequences to the economy will be very high.

12) Question/comment by Mr. Lakdas If a large number of people are allowed to produce solar power under net metering, then there will be no requirement to build any of these large power plants. For this, the government can provide subsidies.

Answer/clarification by Eng. Jayantha Ranatunga Yes, solar can be a solution, as the price of solar has come down in recent years that a unit of solar power can be generated at less than 10 Rs./kWh. But it cannot be implemented as you propose. That is because of the intermittency of the resource. Even with net metering, since solar is available only during day time, CEB will have to store this energy to use during night. However, now, batteries are available and their costs are getting lower with a lot of development in the automobile industry. In time to come, the grid power could even be a standby option while the generation will be from solar panels at homes with batteries for energy storage.

13) Question/comment by Eng. Tissa De Silva From where does this 20% complementary energy by 2020 is coming? How can such numbers be declared as policies?

14) Question/comment by Eng. Tissa Wijesinghe According to our system of governance, CEB has to produce the plans and that is what CEB is doing. So, it is not fair to accuse CEB of having a different agenda. If someone is not agreeable to the plan or the basis CEB has come up with the plan, they can raise these through the PUCSL or the proper channels. And the PUCSL and the Minister should ensure that there are opportunities for the others to present their cases challenging CEBs plans.

Considering that there is a short term problem and a long term problem, they should be addressed separately. For the short term, it is apparent that the coal power plant has to be built. For the long term, sustainable solutions should be looked at.

15) Question/comment by Mr. Chamil Silva, Bio Energy Association of Sri Lanka 1. The emission levels quoted by Eng. Buddhika Samarasekara as what they consider in their studies appear to be conservative as the national standard for power plants above 50 MW is 150 mg/m3.

2. In the 2013 amendment to the Electricity Act, an exception is given for the least cost plan. Can Dr. Siyambalapitiya elaborate on this?

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3. In calculating the levelised tariff quoted in the presentations, was the tiered tariff structure considered, where only in the first few years a high tariff is offered for renewable energy, and in subsequent years, the tariff is lowered.

Answer/clarification by Dr. Tilak Siyambalapitiya If there is a government to government project, the competitive bidding requirement is exempted. On the other hand, if the project has secured an energy permit from the Sri Lanka Sustainable Energy Authority (SLSEA) and there is a cabinet approved power purchase agreement, again the competitive bidding requirement is exempted.

Answer/clarification by the Chair Even the government to government projects are exempted only from competitive bidding.

The Act specifies these projects to be selected only from the least cost plan.

Concluding Remarks by the Panellists Eng. Preeni Withanage: What I presented is the fact that we have found the resource. But there is a huge challenge in making the gas commercially available.

Eng. Upali Daranagama: Similar to a patient seeking advice from the specialist doctors and the medical practitioners, we should consult the sector experts in finding solutions for the ailments in the power sector. Unfortunately, it seems it is not happening and I earnestly request to allow the sector experts, majority of whom are in the CEB, to drive the sector in the correct direction.

Eng. Jayantha Ranatunga: We have a short term problem and a long term problem and the short term problem could rise even within a year. But we shall look only for proven solutions as we can’t afford to rely on unproven technologies which will end up leading back to diesel power.

Dr. Tilak Siyambalapitiya: Just to clarify a few questions raised earlier, the costs of renewables shown in the presentation are the pool average prices paid for renewable generation. Secondly, we cannot allow any more wind and solar projects to come on negotiated terms or on feed-in tariffs as the equipment prices of these have gone down significantly during the recent years and we have gained access to better wind sites in the north. As such, their costs should be much lower and the true cost can be discovered only through competition.

As the proper course of action to the imminent crisis, I suggest we first make firm decisions on the solutions to the longer term problem. Once these solutions are on track, we can find the solutions for short term problems. Doing this the other way around, we end up making the short term solution to be our long term solution as well.

Eng. Kamani Jayasekara: As planners, we consider all options and all costs. However, we are responsible for the power system, so are cautious in absorbing intermittent resources to this small system. We conduct masterplan studies time to time and also detailed studies of individual technologies using international expertise. We were late to introduce coal to this country and I appeal to IESL and the people, not to delay coal anymore.

Eng. Janaka Aluthge: Though we are not against renewables, there are so many issues with them when operating a power system. So I don’t think we can operate a power system with 100% renewables.

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Eng. Buddhika Samarasekara: I recommend for the Sampur Coal Power Plant to go ahead without any delay and assure that we will absorb the optimum amount of renewables to the system.

In conclusion, Eng. Shavindranath Fernando thanked all those who participated, raised questions and made remarks at the seminar and the presenters and the panellists for their well-prepared presentations. He also thanked the Hon. Deputy Minister of Power and Renewable Energy and Mr. Gamini Wanasekera, Vice Chairman - CEB who were supportive of this initiative right from the start and being present throughout the seminar. He also thanked the Chairman of CEB Eng. Anura Wijayapala for sponsoring the seminar and the General Manager of CEB for releasing the senior engineers to make the presentations.

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Annex I: Slides used in the Presentation by Eng. Kamani Jayasekara

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Annex II: Slides used in the Presentation by Eng. Janaka Aluthge

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Annex III: Slides used in the Presentation by Eng. Buddhika Samarasekara

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Annex IV: Slides used in the Presentation by Eng. (Dr.) Tilak Siyambalapitiya

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Annex IV: Slides used in the Presentation by Eng. Preeni Withanage

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