Even though their per capita consumption is much lower than first-world nations, developing countries consume more than half of the world’s energy today. Their share of the world’s energy demand has steadily risen and doubled over the past 15 years. It is expected to increase by another 30% over the next 15 years. That is if no sustainable and renewable energy sources are available.
In more than two decades starting from 1991, the energy supply from fossil fuel imports in Sri Lanka increased from 25% to 50% in 2014. The government is committed to sourcing 70% of its domestic electricity from renewable energy sources by 2030 to comply with its nationally determined contributions, amended in 2021. The longer-term objective is to achieve a 100% renewable electricity supply by 2050.
On July 11, the Asian Development Bank (ADB) granted a $100 million policy-based loan to promote reforms for improving the financial sustainability of Sri Lanka’s power industry. This initiative aligns with the country’s broader goals of promoting sustainable and renewable energy, as well as achieving economic resilience.
The Power Sector Reforms and Financial Sustainability Program aims to strengthen the electrical industry’s financial standing in Sri Lanka. With this, there will be independent and financially sustainable unbundled electricity utilities. There will also be cost-reflective tariffs and competitive and efficient renewable energy development for generating electricity by the participation of the private sectors.
This program intends to shift Sri Lanka to a cleaner energy mix.
According to ADB Principal Energy Specialist Jaimes Kolanthara, developing cost-competitive renewable energy is crucial for Sri Lanka. Ensuring a consistent and affordable energy supply within a transparent and independent regulatory framework will address the power sector’s challenges. This approach will help Sri Lanka tackle the current financial and economic crisis while promoting economic growth.
“This program will support reforms in the power sector introduced under the Electricity Act, including institutional and regulatory reforms, and improve operational sustainability of the electricity sector. The program will also support the development of renewable energy to accelerate the country’s transition to clean energy as envisaged under Sri Lanka’s nationally determined contributions,” he added.
The goal of the program is to assist the Sri Lankan government in integrating reforms under the Electricity Act 2009. It is by dividing the Ceylon Electricity Board into fully owned corporate entities for the production, distribution, and transmission of electricity. Additionally, the program aims to apply cost-reflective rates and encourage the development of competitive renewable energy through private sector involvement.
The initiative places significant emphasis on advancing renewable energy into the national grid. It supports the periodic revision of feed-in prices for rooftop solar users and small power plants. This program, contingent on the International Monetary Fund’s Extended Fund Facility, will also support the growth of renewable energy. Additionally, it aims to modernize electricity grids and encourage private investment.
ADB will allot an additional $1 million from its Technical Assistance Special Fund to support program implementation through technical assistance grants.