NATIONAL POLICY FOR OFF-GRID HYDRO POWER GENERATION

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1 NATIONAL POLICY FOR OFF-GRID HYDRO POWER GENERATION PUBLIC UTILITIES COMMISSION OF SRI LANKA November 2011

2 Summary Small and mini hydel potential can provide a solution for the energy problems in remote and hilly areas where extension of grid system is comparatively uneconomical.in these areas annual rain fall is appreciably high and plenty of uncapped waterfalls and water streams are available andalso canal systems are having sufficient drops. Off-grid mini hydro power plants are therefore erected in these rural villages and managed by Electricity Consumer s Societies (ECS)/Electricity Consumer s Welfare Societies. Recent inspections carried out by the Public Utilities Commission envisaged that there are plenty of issues on operational and maintenance activities. Therefore, it is necessary to develop a suitable policy to identify such areas and invest on off-grid hydro generation and also to support and look after the existing off-grid hydro power generation.

3 Contents 1.0 Introduction National Energy Policy for off-grid hydro power generation Off-grid Hydro Energy in Sri Lanka Economics of Off-grid hydro power generation Funding for Off-grid hydro power generation Investment Arrangement Guidelines for National Policy for off-grid hydro power generation Hydro Potential The constraints affected for off-grid hydro development The Objective of the Policy policy Instruments Funding Technical Basin-wise Development of Hydro Potential Survey and Investigations Renovation, Modernization and Upgrading Promoting mini and micro hydro power projects Payment of loans Revenue Collection Promoting Off-grid mini hydro projects with Joint Ventures Govt. Support for Land Acquisition and Catchment Area Development 6

4 NATIONAL POLICY FOR OFF-GRID HYDRO POWER GENERATION 1.0 Introduction Extension of national grid to distinct communities in hilly areas is a technical challenge and not feasible economically. Even, economically feasible lighting projects would cost well above LKR 6 million to provide electricity of about 200 households. Most villages are isolated and far from the Medium Voltage Distribution Network (MVDN). Long extension of the MVDN system and Low Voltage (LV) distribution system is therefore required at extremely high cost with negligible revenue to the Licensee. All most all of these communities are geographically situated in wet areas where annual rain fall is appreciably high and plenty of uncapped waterfalls and water streams are available. Therefore, the Ministry of Power and Energy should develop a suitable policy to identify such areas and invest on offgrid hydro generation and also to support and look after the existing off-grid hydro power generation. Investment support for off-grid hydro power generation should come from the Treasury through the AGAs/Provincial Councils. At present the management of the operation and maintenance of most of these off-grid hydro power generations are done by Electricity Consumer s Societies (ECS)/Electricity Consumer s Welfare Societies (ECWS) formed within the village and some of them are linked with the ViduliParibogikaSamithiSammelanaya, 10/5, 1/1, Avery Hene Road, Kirulapana, Colombo 5. A sample survey was carried out by the Public Utilities Commission of Sri Lanka (PUCSL) on selected number of off-grid hydro power plants in various parts of the Country. Based on the findings of the survey, thenational Policy for Off-Grid Hydro Power Generation was formulated. 2.0 National Energy Policy for off-grid hydro power generation National energy policy envisages providing basic electricity needs of the rural population where national grid supply is not accessible, promoting and utilizing indigenous resources fulfilling the stipulated electrical safety standards. It was expected to light 6% of the households by off-grid electricity systems mainly by off-grid hydro power generation by the year The grid and off grid energy systems are planned to ensure the access to electricity to 98% of the households by In this context, runner of river type off-grid hydro power generation provides the advantage of achieving ecological efficiencies as minimizing pollution and providing clean environment friendly energy at affordable cost to the villages where national grid power is very expensive. 3.0 Off- grid Hydro Energy in Sri Lanka Due to the geographical configuration; a moderate rain fallwill experience throughout the year in central hill zone mainly in Ratnapura, NuwaraElliya, Kandy, Matale, Badulla, Matara and Kalutara districts.hence, these areas are blessed with many natural water resources and a considerable potential is there for off-grid power generation.there are about 200(?)identified off-grid hydro power plants with

5 total installed capacity of (?) kw in operation serving about 10,250 households with total population of 51,000.In addition to these micro hydro schemes, there are many more houses electrified by Pico hydro schemes that tap the waters passing by the side of the homes. There are many more unidentified off-grid hydro power plants serve the rural population. Off-grid hydro power generation is one of the major generation systems used in small scale renewable energy power generation. All the off-grid hydro power plants are run of river type and therefore, the generation of electricity during day time and off peak times cannot be utilized. This excess or underutilized electrical energy could be used for cottage industries in rural areas. Off grid- hydro generation brings many advantages over the other options. It provides basic energy needs of the rural population and enhances the standard of living at an affordable cost and creates few employments. These schemes are community based and therefore, the satisfaction gained by the communities is something that is very hard to quantify and also, helps to develop indigenous knowledge, technology and capacity. In this context, off-grid electrification is unavoidable and should be promoted to reduce the social disparities between those who are accessible and not accessible to the national grid. 4.0 Economics of Off- grid hydro power generation The costs of production of electricity by large power plants are obviously attractive than small scale offgrid hydro plants. However, use of off-grid hydro power is suitable to sparsely populated areas where cost of extending of the grid is cost prohibitive and plenty of water falls and water streams are available. 5.0 Funding for Off- grid hydro power generation Implementation of off- grid hydro power generation has been facilitated through dedicated credit facilities extended by local banks and external lending agencies. Provincial Councilsand local Authorities also provide some financial assistance. Balance if any will be collected from the membership of the ECS/ ECWS. Labor is mostly obtained from the membership. Renewable Energy for Rural Economic Development (RERED) Project was launched in 2002 to provide electricity access to rural households through the deployment of off-grid hydro power generation. The credit support made available under this Project plays a pivotal role in nurturing the off-grid hydro power plants. 6.0 Institutional Arrangement Sri Lanka Sustainable Energy Authority (SLSEA) for renewable energy development and energy efficiency and Sri Lanka Sustainable Energy Fund (SLSEF) for the Energy Development Fund have been established by the government. The SLSEF provides additional support by way of Government funds.

6 7.0 Guidelines fornational Energy Policy for off-grid hydro power generation Hydro power is a renewable economic, non-polluting and environmentally benign source of energy and therefore, the construction of off-grid hydro power plants will provide a solution for the energy problems in remote and hilly areas where extension of grid system is comparatively uneconomical and also along the canal systems having sufficient drops. The off-grid hydro potential could be developed economically by simple design of turbines, generators and the civil works. And also, off-grid power generation will help in opening of avenues for development of remote and backward areas. 7.1 Hydro Potential Ratnapura, NuwaraElliya, Kandy, Matale, Badulla, Matara and Kalutara districts areendowed with enormous economically exploitable and viable hydro potential assessed to be few MWs at 60% load factor Mini and micro power plants are simple run-of-the-river schemes that do not involve any major storage or consumptive uses Most of the mini and micro power plants could be used as pumped storage schemes A very little amount of hydroelectric potential has been harnessed in remote areas where national grid is not accessible. 7.2 The constraints affected for off-grid hydro development Inadequate knowledge and experience on technical matters in connection with the selection of equipment and transporting same to the power house where there are no approach roads Construction of the distribution system in hilly and jungle areas where there are no approach roads except foot paths to scattered houses Financial (deficiencies in obtaining soft loans), collection of revenue, and managerial weaknesses among the officers of the controlling societies Inaccessibility of the area and problems due to delay in coordinating residents of the villages Lack of knowledge and experience on technical and managerial issues encountered with safety of the operational& maintenance activities of the power plant and distribution network Consumers are not financially capable enough to do and maintain the electrical installations of their houses to stipulated safety standards Delay in the restoration of supply during a breakdown as there is no in-house maintenance staff and difficulty in reaching the distribution system; especially during night Financial difficulties in maintaining equipment and keeping some stock of spares Extension of national grid to certain parts of the distribution network already fed by off-grid supply.

7 7.3 TheObjectives of the Policy Promoting off-grid mini and micro hydro power generation Exploiting mini and micro hydro potential in remote and hilly areas and water streams having sufficient drops Developing simple design of turbines, generators and civil works Educating rural population on the benefits of off-grid hydro power generation Involvement of Public Sector, LocalAuthorities and the Ceylon Electricity Board (CEB) to continue and to be enlarged Rehabilitation of the existing mini and micro hydro power plants Utilization of extra electricity especially during day time & off peak time by the way of introducing cottage industries Encouraging the private sector to develop, existing power plants and export extra power to the national grid wherever possible Encouraging Non-Governmental Organizations (NGOs) to provide financial assistance to construct new plants and to uplift the existing plants Transforming existing Societies into Limited Companies. 7.4 Policy Instruments Funding CEB may provide some financial assistance to construct/ rehabilitate the distribution network and train some members of the ECS/ECWS to operate & maintain the distribution network. Tax concessions for purchasing of equipment and spares. Remove government levies. Organize supplementary funding for projects where more than 50 per cent of the works has been completed and discontinued since long due to paucity of funds. Organize supplementary funding for plants that are site specific, having plant load factor varies from 40 to 60% Technical CEB can undertake schemes to build and transfer the plants & distribution network after training local membersof the ECS/ECWS for operation and maintenance. Recognizing problems in operation & maintenance in initial stages. Monitoring the operation & maintenance of the power plant and distribution network by the CEB after handing over Basin-wise Development of Hydro Potential Development of other uses of water like irrigation, drinking water etc. Optimal harnessing of hydro potentials in each waterfalls and water streams.

8 7.4.4 Survey and Investigations Support the members of the ECS/ECWS for obtaining clearances and pre construction activities Renovation, Modernization and Uprating Priority for renovation, modernization and uprating of old and handicapped off-grid power plants Faster and cheaper way of capacity addition and extending the distribution network. Identify new schemes through Local Authorities Promoting mini and micro hydro power projects Identify matters related mini and micro hydro power projects. Incentives for these projects. Incentives for better operation. Incentives during execution of the project in the form of capital/interest subsidy. Special incentives for the execution of small hydro projects in rural and isolated areas. Financial support for renovation, modernization and uprating of old and handicapped off-grid hydro power plants. Renovation, modernization& uprating of old and handicapped off-grid hydro power plants is being accorded priority as it is a faster and cheaper way of capacity addition than installing new capacity for rural and isolated areas. Encourage the CEB/Sri Lanka Sustainable Energy Authority (SLSEA) to take up a cluster of small/mini off-grid hydel schemes on Build, Operate and Transfer basis, and other suitable arrangements. Government support for land acquisition, rehabilitation and catchment area development Payment of loans To fix a rate reasonable to the ECS/ECWS, whose loans were obtained to ensure adequate internal resources to repay the loan and also provide a reasonable rate of return on investment Revenue Collection Recognize financial problems encountered in operation and maintenance and help to fix a rate which will be reasonable to the

9 consumer, to ensure adequate internal resources to repay the loan and also to maintain some stock of critical spares Promoting Off-grid mini hydro projects with Joint Ventures Emphasis to take up schemes through the joint ventures with other Social Organizations functioning in the Village. The joint venture company will be an independent legal entity to be registered under the Companies Act and would act as an independent developer. The joint venture agreement between the partners will bring clearly the extent of participation by each partner and sharing of risks relating to implementation and operation of the project. It will also provide for arrangement in some cases where the joint venture partner would not be associated with the operation and maintenance of the project. Selection of a joint venture partner would be in accordance with the policy of the ECS/ ECWS Govt. Support for Land Acquisition and Catchment Area Development The acquisition/allocation of requisite Government, forest and private land.