Sri Lanka Energy Balance 2012

Transcription

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2 Sri Lanka Energy Balance 2012 An Analysis of Energy Sector Performance Sri Lanka Sustainable Energy Authority Block 5-1 st Floor, BMICH, Bauddhaloka Mawatha, Colombo 07, Sri Lanka.

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4 Getting closer is the theme for the Sri Lanka Energy Balance Getting closer could have many meanings, but this edition focuses only on two main aspects of it. The year 2012 is the middle link between the two years which ushered a new era in the local transport sector. On 27 th November 2011, Sri Lanka witnessed the opening of the first expressway, which reduced the travel time between Galle and Colombo from two and half hours to one hour. In 2013, the Colombo- Katunayake expressway is scheduled to be open to public, after a forty year saga. Our cover picture graphically presents how closer these once distant places will become, with better road connectivity. The dramatic reductions in travel times between major cities will not only save large volumes of transport fuel, but will also render the country a tightly linked society. This cover page illustrates how better road connectivity alters the travel time map of Sri Lanka. Our cover illustration shows that if similar proportions in reduced travel times are assumed for other major cities from Colombo, the country would be compacted to the size of few provinces. Getting closer can also have a meaning in a darker realm. It caught our imagination of a world constrained with petroleum fuels. The only way to stay on the right course in such a context is, to improve the efficiency of energy use and to embrace more renewable energy resources in satisfying all our energy needs. In other words, this requires Sri Lanka to proceed in the highway to a sustainable energy future. A developed economy, founded on a strong base of sustainable energy, affordable and efficient transport, coupled with the satisfied citizen freed from the burden of living far from home for livelihoods, will form a melting pot of economic activity in the country. Undoubtedly, Sri Lanka is Getting closer to the dream of becoming a country of low energy economic prosperity

5 Executive Summary The Energy Sector is a combination of the four energy forms, viz., energy resources, energy supply including conversion, production and distribution, energy demand and end use. Biomass, hydro, solar and wind are the indigenous sources available in Sri Lanka. The actual use of these sources is limited by technological, socio-economic and political reasons. Petroleum, among imported sources, provides substantially to the energy supply, while coal also significantly impacted the energy supply with the commencement of commercial operations of the first coal power plant in The commercially traded forms of energy used are limited to electricity, petroleum and coal. Thus, the energy market in the country facilitates the exchange of the two main energy commodities; electricity and petroleum between the supply sources and the end users. About 25% of biomass used in the country is also traded. In the absence of a fully fledged energy regulator in the country, the demand supply balance was continued to be managed by the Government and energy sector constituent organisations, with varying degrees of assumed responsibilities. The state owned Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC) are the two pivotal organisations in the energy market with the CEB spearheading the electricity supply industry while the petroleum market is dominated by the CPC. Participation of the private sector as major energy sector players remained static, due to heavy investments by the state sector. Biomass is still the largest energy supply source, satisfying a greater portion of the cooking energy requirements of the domestic sector. While hydropower has already been extensively developed for electricity generation, studies have indicated that there is a large potential for wind and solar power development. Full exploitation of these resources is delayed, in view of the severe constraints imposed by the demand profile of the country. Studies are presently underway to establish the availability of offshore petroleum resources. At present, the larger share of the total primary energy supply is met with biomass at 46.4% and petroleum at 43.0%. Coal accounts for 3.8%, followed by 5.4% of hydro power and 1.5% of New Renewable Energy (NRE). Electricity remains the main secondary energy source. The total amount of electricity generated during 2012 was 11,878.8 GWh out of which 70.9% was from thermal power plants (both oil and coal), while 23.0% was from major hydro and the balance 6.2% was from NRE. By the end of year 2012, grid electrification was 94.0%. In addition, off grid community and household installations were also supplying electricity to remote households, thus reducing the share of unelectrified households to very low levels in comparison with other countries in the region. Solar net metering schemes attracted the attention of electricity users in 2012, resulting in several net metered installations with typical capacities of 2 5 kw. The petroleum distribution remained stable with the two suppliers; CPC and Lanka Indian Oil Company (LIOC) operating a widespread distribution network around the country. Further, a considerable expansion of aviation bunkering services is expected with the commissioning of the petroleum storage facility in the new international airport in Mattala, Hambantota. Distribution of LPG was also successful in getting the penetration of LPG increased, displacing a portion of the biomass use in the domestic sector for cooking. In general, the use of biomass, which accounts for the largest share of energy supply in the country, is expected to regain a part of lost share in future, due to increased use by industries in thermal applications. Similar to previous years, the largest energy consuming sector in 2012 was the household, commercial and other sector, using a share of 50.0% of the country s total energy demand. Transport sector share of energy consumption, which was mainly met through liquid petroleum, accounted for a share of 27.0%, while the industrial sector accounted for 23.0%. The CEB recorded yet another year of financial losses, reporting a loss equivalent to 7.2% of its asset value, while the LECO also recorded a profit of 11.0%. There were no electricity tariff revisions in The CPC too recorded a large loss of LKR 89.7 billion, whereas the LIOC reported a profit of LKR 2.1 billion. The price of petroleum in the world market increased in 2012, resulting in a net petroleum import bill increasing to USD 5,256 million. With the demand for petroleum increasing rapidly over the last two years, the oil prices increased to historic heights and the expenditure on oil imports surpassed 50%. Petroleum imports recorded an all-time high of 51.5% of the country s non petroleum export earnings, which is the worst strain on foreign reserves in history, surpassing the share in 1982, when the world experienced the second oil shock. The Grid Emission Factors calculated for 2012 gives the Simple Operating Margin as t-co 2 /MWh, the Build Margin as t-co 2 /MWh and the Combined Margin as t-co 2 /MWh. IV ı Sri Lanka Sutainable Energy Authority

6 Key Energy Statistics Primary Energy (PJ) Total Demand (PJ) Biomass Biomass Petroleum Petroleum Coal Coal Major hydro Electricity New Renewable Energy Total Total Demand by Sector (PJ) Imports (kt) Industry Crude Oil 1, ,626.1 Transport Coal Household & Commercial Finished Products 2, ,470.1 Agriculture LPG Total Petrol Avtur Industry Demand (PJ) Auto Diesel 1, ,652.2 Biomass Fuel Oil Petroleum Avgas Coal Bitumen Electricity Mineral Gas Oil - - Total Refined Products (kt) Transport Demand (PJ) Crude Input 2, ,596.1 Petroleum Naphtha Coal Petrol Total Avtur Kerosene HH, Comm, Other (PJ) Diesel Biomass Furnace Oil Petroleum Solvents Electricity Bitumen Total Total Output 1, ,480.7 Electricity Demand (GWh) Grid Capacity (MW) Domestic 3, ,064.7 Major Hydro 1, ,357.5 Religious Thermal Power 1, ,695.3 Industrial 3, ,528.0 CEB Wind Commercial 2, ,614.1 New Renewable Energy Streetlighting Total 3, ,368.0 Total 9, ,409.2 Gross Generation (GWh) Grid Emission Factors Major Hydro 4, ,726.7 (t-co 2 /MWh) Thermal (Oil) 5, ,012.7 Operating Margin Thermal (Coal) 1, ,403.7 Build Margin CEB Wind Combined Margin New Renewable Energy Total 11, ,878.8 GDP at 1982 factor cost prices (million LKR) 382, ,558 Average electricity price Commercial Energy (LKR/kWh) Intensity(TJ/LKR million) Net oil imports as % of non petroleum exports Electricity Sold (kwh/person) Sri Lanka Sutainable Energy Authority ı V

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8 Acknowledgement Sri Lanka Sustainable Energy Authority wishes to express its sincere thanks to the following institutions for their valuable cooperation in the compilation of the Sri Lanka Energy Balance 2012 and the Analysis of Energy Sector Performance. Ministry of Environment and Renewable Energy Ministry of Power and Energy Ministry of Petroleum Industries Ceylon Electricity Board Lanka Electricity Company Ceylon Petroleum Corporation Lanka Indian Oil Company Railway Department Department of Census and Statistics Central Bank of Sri Lanka State Timber Corporation All institutions, which responded positively to our request to provide relevant data Sri Lanka Energy Balance 2012 was compiled by the Sri Lanka Sustainable Energy Authority Sri Lanka Sutainable Energy Authority ı VII

9 List of Abbreviations C&F CEB CHP CPC ECF ESCO ESD Project FOB GCal GDP GEF GWh IPCC IPP kcal kg kj kva LA LECO LIOC LKR LPG MW NERD Centre NRE NREL oe PJ RERED Project SEA SPP t toe TJ UNFCC USAID Cost and Freight Ceylon Electricity Board Combined Heat and Power Ceylon Petroleum Corporation Energy Conservation Fund Energy Service Company Energy Services Delivery Project Free On Board Giga calorie Gross Domestic Product Grid Emission Factor Giga Watt hour Intergovernmental Panel on Climate Change Independent Power Producer kilo calorie kilo gram kilo Joule kilo Volt Ampere Local Authority Lanka Electricity Company Lanka Indian Oil Company Sri Lankan Rupees Liquid Petroleum Gas Mega Watt National Engineering Research and Development Centre New Renewable Energy National Renewable Energy Laboratory of United States Oil Equivalent Peta Joule Renewable Energy for Rural Economic Development Project Sri Lanka Sustainable Energy Authority Small Power Producer Tonne Tonnes of Oil Equivalent Tera Joule United Nations Framework Convention on Climate Change United States Agency for International Development VIII ı Sri Lanka Sutainable Energy Authority

10 Contents 1 Introduction to the Energy Sector Highlights of Sector Governance and Organisations Energy Sector Governance Public Sector Institutions Private Sector Organisations... 3 Energy Resources... 4 Energy Supply... 5 Transmission/Distribution... 6 Demand Energy Resources Indigenous Energy Resources Biomass Hydro Solar Wind Oil/Gas Exploration Indigenous Resources in Sri Lanka Global Energy Resources Energy Supply Supply from Primary Energy Sources Evolution of Energy Supply Energy Supply from Petroleum Energy Supply from Coal Supply from Major Hydro Supply from New Renewable Energy Petroleum Refinery Operations Refinery Product Output Export of Surplus Products Energy Conversion Grid Electricity Production Grid Connected Power Plants Major Hydro Thermal Power CEB Wind Power New Renewable Energy Gross Generation of Grid Connected Power Plants Different Technologies used by Power Plants in the National Grid Fuel Usage and Conversion Efficiency in Thermal Power Generation Off-Grid Electricity Generation Total Generation...41 Sri Lanka Sutainable Energy Authority ı IX

11 5 Energy Distribution and Pricing Electricity Distribution and prices Transmission and Distribution Networks Electricity Transmission Network Electricity Distribution Network Electrification Electricity prices Electricity Tariff Petroleum Distribution and Prices Distribution Structure Petroleum Prices Prices of Crude Oil and Imported Finished Products Petroleum Product Prices in the Local Market Coal Imports and Prices Biomass Distribution and Prices Energy Demand Electricity Demand The System Demand Petroleum Demand Demand for Different Petroleum Products Demand for Petroleum by District Coal Biomass Sectoral Demand Electricity Demand by Different End Use Categories Petroleum Demand in Different Sectors Transport Sector Petroleum Usage in Other Sectors Bunkering and Aviation Sales Coal Demand in Different Sectors Coal Demand in Transport Coal Demand in Industries Coal Demand in Power Generation Biomass Demand in Different Sectors Biomass Demand in Industries Biomass Demand in Household, Commercial and Other Sector Total Energy Demand Total Industrial Energy Demand Total Transport Energy Demand Total Energy Demand in Household, Commercial and Other Sectors Total Energy Demand by Sector Energy Balance...81 X ı Sri Lanka Sutainable Energy Authority

12 8 Energy and Economy Electricity Sector Financial Performance Financial Performance of the Petroleum Sector Impact on Macro Economy Petroleum Sector Financial Performance Energy-Economy Indicators Environmental Impacts Emissions Grid Emission Factor Operating Margin Build Margin Combined Margin Energy Sector Performance and Future Outlook Electricity New Renewable Energy Development Petroleum Oil/Gas Exploration Annex I Independent Power Producers List of Small Power Producers Annex II Conversion to Uniform Energy Units Sri Lanka Sutainable Energy Authority ı XI

13 List of Tables Table Indigenous Primary Sources of Energy in Sri Lanka 13 Table Use of Global Energy Resources in Sri Lanka 14 Table Primary Energy Supply by Source 15 Table Biomass Conversions 17 Table Importation of Petroleum Products 18 Table Importation of Coal 18 Table Types of Crude Oil Refined at Sapugaskanda Refinery 21 Table Refined Products from the Refinery 22 Table Surplus Exports of Petroleum Products 23 Table Total Installed Capacity 26 Table Storage Capacities and Generation of Major Hydro Power Stations 28 Table Installed Capacities and Generation of Thermal Power Plants 29 Table Installed Capacity and Generation of CEB Wind Power Plant 30 Table Installed Capacities and Generation of NRE Power Plants by end Table Gross Generation to the CEB Grid 31 Table Grid Connected Power Plant Capacities (MW) by Technology Type 34 Table Fuel Usage and Generation by Technology Type 35 Table Total Petroleum Fuels used in Power Generation 36 Table Thermal Power Plant Efficiencies 38 Table Gross Generation and Fuel Usage of Self-Generation and Off-Grid Industrial Generation 40 Table Generation from Non-Industrial Sources 41 Table Total Gross Generation in Sri Lanka 42 Table Electricity Consumers Served by the Grid 45 Table Electricity Consumers in the Grid, CEB and LECO 46 Table Average Electricity Sales, Selling Prices and Revenue of CEB and LECO 47 Table National Average Selling Price of Electricity 47 Table Electricity Prices in Year Table Costs of Crude Oil Imports 53 Table Finished Product Import Price Variation 53 Table Price Variation of Locally Sold Petroleum Products (Colombo Spot) 54 Table Coal Imports and Prices 56 Table The Growth in System Capacity and Demand 58 Table Demand for Different Petroleum Products 60 Table Demand for Petroleum by District 61 Table Demand for Coal 63 XII ı Sri Lanka Sutainable Energy Authority

14 Table Demand for Biomass 63 Table Electricity Sales by End Use Category 64 Table Transport Fuel Demand by Type 65 Table Auto Diesel Demand in Road and Rail Transport 66 Table Demand for LPG by Sector 68 Table Demand for Kerosene by Sector 69 Table Bunkering and Aviation Sales 70 Table Demand for Coal by Sector 71 Table Coal Consumption in Rail Transport 71 Table Coal Demand in Industries 71 Table Biomass Demand in Industries 72 Table Demand for Firewood in Household, Commercial and Other Sector 72 Table Total Energy Demand by Energy Source 73 Table Total Energy Demand of Industries by Energy Source 75 Table Total Transport Energy Demand by Energy Source 76 Table Total Energy Demand in Household, Commercial and Other Sectors by Energy Source 77 Table Total Energy Demand by Sector 78 Table Sri Lanka Energy Balance: 2012 (in original units) 82 Table Sri Lanka Energy Balance: 2012 (in thousand toe) 84 Table Sri Lanka Energy Balance: 2012 (in Tera Joules) 86 Table Financial Performance of CEB and LECO 89 Table Petroleum Import Costs and its Impact on the Macro Economy 90 Table CPC and LIOC Financial Performance 91 Table Sri Lanka Energy Indices 93 Table Operating Margin 95 Table Build Margin 96 Table Combined Margin 96 Sri Lanka Sutainable Energy Authority ı XIII

15 List of Figures Figure Cumulative Capacity Additions of SPP Hydro (2012) 8 Figure Power and Cumulative Energy of the Solar Power Plant in Hambantota 9 Figure Erection of Wind Mast in Nadukuda 10 Figure Wind Power Density at 50 m height - Mannar Region (W/m 2 of swept area) 11 Figure Evolution of Energy Supply Forms 16 Figure Percentage Share of Primary Energy Supply 16 Figure Importation of Petroleum Products 19 Figure Sapugaskanda Refinery Process Flow Diagram 21 Figure Refined Product Output 23 Figure Total Installed Capacity by Type of Power Plant 27 Figure Cumulative Capacity Additions and Number of SPPs 31 Figure Gross Generation to CEB Grid 32 Figure Evolution of Generation Mix 32 Figure Gross Generation of New Renewable Energy Power Plants 33 Figure Fuel Consumption in Thermal Power Generation by Type 37 Figure Percentages of Fuel Mix in Thermal Power Generation 37 Figure Electricity Transmission Network (2012) 44 Figure Household Electrification % 46 Figure National Average Selling Price of Electricity 48 Figure Cost of Electricity Supply Diagram 51 Figure Historical Price Variations of Petroleum Products 55 Figure System Demand Profile on May 20, Figure Development of System Load Factor, Reserve Margin and Peak Demand 58 Figure The Growth in System Peak Demand 59 Figure Evolution in the Demand for Different Petroleum Products 60 Figure Districtwise Demand for Petroleum (PJ) 62 Figure Electricity Sales by Consumer Category 64 Figure Transport Demand by Fuel Type 65 Figure Growth Pattern of Road Vehicle Fleet 66 Figure Active Vehicle Fleet 67 Figure LPG Demand by Sector 68 Figure Demand for Kerosene by Sector 69 Figure Total Energy Demand by Energy Source 74 XIV ı Sri Lanka Sutainable Energy Authority

16 Figure Evolution of Energy Demand by Energy Source 74 Figure Total Energy Demand of Industries by Energy Source 75 Figure Total Energy Demand of Transport by Energy Source 76 Figure Total Energy Demand of Household, Commercial and Other Sector by Energy Source 77 Figure Total Energy Demand by Sector 79 Figure Evolution of Total Energy Demand by Sector 79 Figure Energy Balance 2012 (in PJ) 81 Figure Energy Flow Diagram (ktoe) 88 Figure Crude Oil Price Variation and Net Oil Imports as a Percentage of Exports 90 Figure Profit/Loss of CPC and LIOC 92 Figure Commercial Energy Intensity 93 Figure Emissions from Power Plants by Fuel Type 97 Sri Lanka Sutainable Energy Authority ı XV

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18 1 Introduction to the Energy Sector 1.1 Highlights of 2012 Sri Lanka entered the realm of access controlled expressways with the opening of the Southern Expressway (E02) in end-2011, symbolising the first step towards efficiency improvement in transport energy. The theme of this issue of Sri Lanka Energy Balance reflects this important transition, as the transport sector is the dominant user of fossil fuel in the country. Sri Lanka s energy sector experienced a severe strain owing to the increasing international oil prices and droughts in Reduced rainfall exerted more demand on petroleum imports with severe economic impact on the industry. As a result, the country had to depend on expensive oil-based thermal generation to meet the rising energy demand. The international oil prices increased owing to the geopolitical disturbances in crude oil producing countries, Euro zone debt crisis and the slow phase of global economic recovery. As a result of this unstable environment, the Ceylon Petroleum Corporation incurred a loss of LKR 89.7 billion, the highest in Corporation s history. The country spent 51.5% of its export earnings on petroleum importation, emphasising the fact that exploration for indigenous petroleum resources is vital to survive the crisis as well as to enhance the energy security in the country. Fossil fuel exploration in the Mannar Basin continued, sending positive signals to the country on enhanced energy security. It is anticipated that the discoveries made, may reach commercialisation within few years from now. Year 2012 marked the commissioning of the last major hydro power scheme. The first coal power plant in the country, with a capacity of 300 MW, entered the commercial operation phase, accounting for 11.8% of the total generation in 2012, and the significant impact of coal in power generation was hence apparent. However, the year 2012 also witnessed the retirement of four Independent Power Producers from the grid. The New Renewable Energy industry witnessed more capacity additions in But the prolonged droughts that continued from 2011, lowered hydro power generation. Year 2012 also marked the retirement of the first Small Power Producing power plant, Dick Oya hydro, with the lapse of its Standardised Power Purchase Agreement. Eventhough these power plants carry a considerable post contract operational life, the CEB is cautiously dealing with these parties on future possibilities. However, there was no finality of negotiations with these parties on future of these contracts. 1.2 Sector Governance and Organisations Energy Sector Governance The power sector and petroleum sector are separately supervised by two different ministers. Biomass sector operates independently and informally, with very little interaction with the energy sector governing structure. In addition to the involvement of the government, private organisations and the general public are also stakeholders of the energy sector. Public Utilities Commission of Sri Lanka (PUCSL) is responsible for regulatory oversight of sector operations, presently with powers to monitor and regulate electricity Sri Lanka Sutainable Energy Authority ı 1

19 industry operations. The first tariff filing by six electricity sector licensees was completed in late 2010, for (i) transmission and distribution tariffs for the period , and (ii) for generation and bulk supply for the period January to June Customer tariffs were approved under the new tariff methodology for the first time in The Public Utilities Commission of Sri Lanka (PUCSL) which regulates purchase prices and sale prices of electricity reviewed the tariffs payable to New Renewable Energy (NRE) power projects in At a subsequent public hearing, PUCSL moved forward to revise the tariffs payable in response to developer grievances on parameters used in tariff setting. The Ceylon Electricity Board (CEB), which did not agree to the enhanced tariff, refused to sign new Standard Power Purchase Agreements (SPPA), which affected the NRE industry unprecedentedly. The matter remained unresolved by end Public and private sector organisations participate in both supply and demand sides of the sector, while the domestic sector involvement is quite prominent in the biomass sector Public Sector Institutions Ministry of Power and Energy The Ministry of Power and Energy is the main body responsible for the management of the power sector. The Ministry comprises of several divisions discharging its functions in planning, and in the supervision of sub-sectoral state institutions. From time to time, the subject of Energy has been combined with others such as Irrigation and Lands, in the establishment of the Ministry. The following state-owned energy institutions presently operate under the supervision of the Ministry of Power and Energy. Ceylon Electricity Board (CEB) Established in 1969, the CEB is empowered to generate, transmit, distribute and supply electricity in the country. The Electricity Act of 2009 caused CEB s businesses of (i) generation, (ii) transmission and bulk supply operations and (iii) distribution and supply to be separately licensed. The entire 220 kv, 132 kv and 33 kv network is owned and operated by the CEB. CEB directly serves about 90% of gird connected electricity consumers in the country. Lanka Electricity Company (Pvt) Ltd (LECO) LECO was established in 1983 to distribute electricity in areas previously served by Local Authorities (Municipal Councils etc.). LECO receives electricity from CEB at 11 kv and distributes in LECO franchise areas. LECO serves about 10% of the electricity customers in the country. LECO s franchise area steadily expanded from 1983 to 1990, and the company implemented a major rehabilitation program in the newly acquired distribution networks, which has reduced the losses progressively across the years. Sri Lanka Sustainable Energy Authority (SEA) Sri Lanka Sustainable Energy Authority (SEA) was established on 1 st October 2007, enacting the Sri Lanka Sustainable Energy Authority Act. No.35 of 2007, continued to consolidate gains realised in the sustainable energy sector, in both renewable energy and energy efficiency spheres in Ministry of Petroleum and Petroleum Resources Development 2 ı Sri Lanka Sutainable Energy Authority

20 The following Departments and Statutory Institutions are presently operational under the supervision of the Ministry of Petroleum and Petroleum Resources Development. Ceylon Petroleum Corporation Petroleum Resources Development Company Ceylon Petroleum Storage Terminal Ltd. Petroleum Resources Development Secretariat While the role of Ceylon Petroleum Corporation is quite significant in the present context, the other three institutions perform facilitative roles to the petroleum supply and exploration ventures recently initiated by the government. Ceylon Petroleum Corporation (CPC) Established in 1961, the CPC imports, refines and distributes petroleum products in the country. CPC owns and operates the only refinery in Sri Lanka, with a daily throughput of 50,000 barrels. The demand for petroleum products has significantly increased, with the sale of all petroleum products for all sectors recording an increase from 1,466,280 t in year 1993 to 4,406,218 t in Fuel oil demand has increased over the recent years owing to new power plants, while the demand for auto diesel and gasoline has also increased rapidly with the expanding transport sector Private Sector Organisations There are numerous private sector organisations participating in the supply, distribution and sale of electricity and petroleum, and biomass. The private sector organisations in the electricity sector include Independent Power Producers (IPPs) supplying electricity to the CEB for resale and Small Power Producers (SPPs) producing power using renewable technologies. Annex I provides a list of all IPPs and SPPs operational by end In the petroleum sector, in addition to the CPC, several private companies distribute and sell petroleum products and LP gas. Details of these companies are also given in Annex I. Sri Lanka Sutainable Energy Authority ı 3

21 Stages in Energy Flow Energy used in a country is found in different forms at different stages of its flow from the raw form found in nature to the actual end use form. Broadly, these stages can be categorised as; Energy Resources Energy Supply including conversion/production and distribution Energy Demand End Use Energy sector is the combination of all the above stages of different energy forms which are interrelated, as illustrated below. Energy Sector Composition Resources Supply Market Demand End Use The above flow diagram explains that, owing to various end uses of energy, a demand exists in the market, which is fulfilled by the energy supply using the available resources. This follows the basic demand supply economic model valid for any scarce resource. Energy Resources A natural resource is considered an energy resource, if it can be converted to a usable form of energy. There are numerous forms of energy sources in the world and different countries use different resources, primarily selected on economic principles. However, environmental and political reasons also influence the selection of a country s energy portfolio. Availability, either local or global, is not necessarily the only factor considered for using a particular resource as an energy supply source. More importantly, the use must be economical compared with other available sources. Hence, the technology available for converting the resource to a more usable form is important in the selection of an energy resource for energy supply. Change of technology and availability of resource over time can change the economics of using the resource for energy supply. Therefore, the resources used by a country for energy requirements also change with time.

22 Indigenous Resources Attributed to geo-climatic settings, Sri Lanka is blessed with several types of renewable energy resources. Some of them are widely used and developed to supply the energy requirements of the country. Others have the potential for development when the technologies become mature and economically feasible for use. Following are the main renewable resources available in Sri Lanka. Biomass Hydro Power Solar Wind In addition to the above indigenous renewable resources, the availability of petroleum within Sri Lankan territory is being investigated. Global Resources In the international market, many forms of energy sources are available for Sri Lanka to import and use for its energy needs. However, up to now, Sri Lanka has been largely using only petroleum fuels for this purpose. Increasing petroleum prices have prompted Sri Lanka to examine the feasibility of using other sources such as coal and Liquefied Natural Gas (LNG) to replace liquid petroleum in certain applications. Following are the most common energy sources globally available for energy supply on a commercial scale. Petroleum Coal Natural Gas Nuclear Energy More recently, new energy supply technologies such as biofuels and energy carriers such as hydrogen have emerged as alternatives to the above conventional technologies and transfer options. However, use of these technologies for energy supply purposes is still limited in Sri Lanka. Energy Supply To understand the status of the energy sector of a country, what is more important is not the availability of different energy resources, but the extent of use of these resources. As explained earlier, mere availability of a resource within a country does not enable its utilisation. Therefore, it is more important to analyse the resources which are actually being used to meet the energy demand of the country. Following are the four main energy supply forms in Sri Lanka. Biomass Petroleum Coal Electricity

23 Energy supply is essentially the conversion of energy resources from one form to a more usable form. However, this conversion can vary from producing electricity from the potential energy in a hydro reservoir to refining crude oil into gasoline or diesel. Transmission/Distribution For each energy supply source, there must be a distribution mechanism through which it can be served to the points of end use. From the production or storage facilities of the energy supply system, the distribution system transports energy to the end user. The biomass distribution network is quite simple, and in the case of most users, a formal network does not exist. The majority use of biomass is in households, where the source and the point of use, both are within the same home garden. Even in industrial use, distribution is a one-to-one arrangement, which links the source to the user through a direct biomass transport. In the case of petroleum, distribution is from the petroleum storage facilities up to end user points such as vehicles, power plants and industries, channelled through regional storage facilities and filling stations. For electricity, distribution starts from the generating station (power plant) and ends at consumer points such as households and industries. The high voltage transmission network, medium voltage regional networks and low voltage local distribution networks are collectively considered as the energy distribution system of electricity. Demand For the energy sector, demand drives the market. Demand arises owing to energy needs of households, industries, commercial buildings, etc. According to the needs of the user, the supply of energy has to take different forms. For example, the energy demand for cooking is in the form of biomass in rural areas, while it is in the form of either LP gas or electricity in urban areas. Therefore, not only the quantity of energy, even the quality and the form it is delivered, is determined by the demand. In this report, the demand is categorised in terms of end-use sectors and is not based on the actual usage or the application of energy at appliance level.

24 2 Energy Resources 2.1 Indigenous Energy Resources Biomass Large quantities of firewood and other biomass resources are used for cooking in rural households and to a lesser extent, in urban households. Eventhough a large portion of energy needs of the rural population is fulfilled by firewood, there are possibilities to further increase the use of biomass for energy in the country, especially for thermal energy supply in the industrial sector. With the reduction of subsidies given to fuel oil 800sec from LKR 52.20/l to LKR 92.20/l on February 12, 2012, and fuel oil 1500sec and fuel oil 3500sec from LKR 50.00/l to LKR 90.00/l respectively, on February 12, 2012, a business case for converting several large industrial thermal systems to biomass emerged. It is estimated that a new daily demand of approximately 500 tonnes/day for biomass was created in Eventhough this is favourable for the renewable energy sector, key issues related to biomass such as sustainability, traceability and fairness remained unresolved, even after strengthening the supply chains Hydro Hydro power is a key energy source used for electricity generation in Sri Lanka. A large share of the major hydro potential has already been developed and delivers valuable low cost electricity to the country. Currently, hydro power stations are operated to supply both peaking and base electricity generation requirements. A substantial number of small hydro power plants which operate under the Standardised Power Purchase Agreement (SPPA) and many more are expected to join the fleet during the next few years. Figure 2.1 indicates SPP hydro cumulative capacities by district in Sri Lanka Sutainable Energy Authority ı 7

25 Jaffna Kilinochchi N Mullaittivu Mannar Vavuniya Trincomalee Anuradhapura Puttalam Polonnaruwa Batticaloa Kurunegala Matale 10.0 MW Gampaha Colombo Kegalla 45.9 MW Kandy 36.5 MW Nuwara Eliya 45.2 MW Badulla 19.9 MW Moneragala Ampara < 1 MW 1-10 MW Kalutara Ratnapura 83.9 MW 10-25MW MW > 50 MW Galle 1.65 MW Matara 0.75 MW Hambantota km km Figure 2.1 Cumulative Capacity Additions of SPP Hydro (2012) 8 ı Sri Lanka Sutainable Energy Authority

26 2.1.3 Solar The pilot solar projects operating in Hambantota completed a full weather cycle in 2012, deriving annual plant factors of 16.02% and 17.49% for the 500 kw plant and the 737 kw plants, respectively. In spite of these advancements, commercial development of grid scale solar projects passed another uneventful year, with applicants and developers with resource rights failing to make any headway in actual project work. Resource mapping activities continued to produce high resolution solar resource maps and a comprehensive resource atlas is expected by early Solar resource mapping received a further boost with the establishment of a Secondary Standard Measuring Station in Kilinochchi, which can supply an array of data to validate the ongoing satellite based mapping process. Figure 2.2 Secondary Standard Solar Station in Kilinochchi Solar net metering schemes gained much attention of the public in 2012 and created a dynamic industry. By end 2012 several net metering installations with typical capacities of 2 5 kw operated in the grid under the net metering scheme. Generation statistics could be estimated based on average energy yields expected in Typical Meteorological Year (TMY) once the total connected installations and their locations are known. Sri Lanka Sutainable Energy Authority ı 9

27 2.1.4 Wind Wind energy development passed another eventful year with the commissioning of 40 MW of new capacity in the western coastal resource area. These projects lay idle for several months due to the inability of the utility to grant an interruption to connect the wind power plants. This was due to the heavy dependence on the sole coal power plant operating in the same node of the transmission network, in a generation system severely constrained by a low hydro condition. Wind mapping also reported significant progress with the preparation of the high resolution Mannar region wind map in The mapped region is the area of interest for the 100 MW wind farm concept developed by the SEA in A donor funded programme was initiated to prepare a sound business model and to acquire ground based wind data. The Asian Development Bank (ADB) contracted a private party to conduct wind and solar resource assessments in the Mannar Island and Jaffna region respectively. Under this assignment, a wind mast of the height of 80 m was commissioned in Nadukuda on May 30, 2012, which stands as the tallest wind mast in the country (Figure 2.3). Further, the study completed the review of available upper-air, surface wind data and preliminary wind field modelling. On completion of the assignment, the country would be in possession of a reliable long term database on wind and solar resources in Mannar and Jaffna areas respectively (Figure 2.4). Figure 2.3 Erection of Wind Mast in Nadukuda 10 ı Sri Lanka Sutainable Energy Authority

28 N W E S T aliamannar Pesalai Erukkalampiddy Thoddaveli Savatkaddu Veddayarmurrippu Vankalai Puthukamam Major Roads Rasamadhu Figure 2.4 Wind Power Density at 50 m height - Mannar Region (W/m 2 of swept area) Sri Lanka Sutainable Energy Authority ı 11

29 2.1.5 Oil/Gas Exploration Geophysical studies have shown the Cauvery, Mannar and Southern Offshore Basins in Sri Lanka have a higher petroleum potential. The discovery of natural gas in the Mannar region could signal the dawn of an era of many possibilities. This discovery could result in a new lease of life to the ceramic and glass industry, if the prices are maintained at attractive levels. To make such a large scale fuel switching initiative happen, such industries will have to be clustered in a spatial context. Similarly, densely populated townships can benefit from a town gas supply, if the distribution densities are proved to be economically feasible. Another market possibility exists in the transport sector, where sufficiently large number of vehicles can provide a case for conversion to natural gas. The first offshore exploration licensing round in Sri Lanka was held in 2007, offering an exploration block of the Mannar Basin to Cairn Lanka Private Limited (CLPL), the local subsidiary of Cairn India Private Limited. A Petroleum Resources Agreement (PRA) was signed between the Government and CLPL in July Subsequently, CLPL acquired 1,750 sq km three dimensional (3D) seismic data at selected locations in the block during the first quarter of Based on the interpretations of the 3D seismic data, CLPL launched an exploratory drilling programme in The well penetrated a hydrocarbon column in sandstone between the 3,044 3,069 m depth, and this discovery was predominantly gas bearing with some additional liquid hydrocarbon potential. However, further drilling would be required to appraise the commercial viability of new discoveries, which would depend on several factors including the extent of deposit, prevailing gas prices and exploration, appraisal, development and production costs. However, new hydrocarbon discoveries have confirmed the occurrence of necessary geological conditions required to produce oil and natural gas deposits in the Mannar Basin. Accordingly, CLPL has notified GoSL of their intent to enter into the second exploration phase. However, it may yet take a few years more to have a firm understanding of the exact nature of the resource availability. Until such time, imported petroleum, which currently accounts for about 40% of primary energy supply, will continue to play a major role in Sri Lanka s economy. As a result of the high share of thermal energy in electricity generation, the demand for diesel oil and fuel oil has increased substantially, adding to the existing imbalance between the demand pattern and refinery production. Ceylon Petroleum Corporation (CPC) and Lanka Indian Oil Company (LIOC) are responsible for the total supply of petroleum to the country with the exception of LPG and marine bunkering. LPG supply is carried out by Litro Gas Lanka Limited (formed in 2010, successor to Shell Gas Lanka) and Lanka Auto Gas Filling Stations (LAUGFS) Pvt. Ltd. After liberalisation of the bunkering market in 2001, a number of private operators entered the market under license issued by the Minister in charge of the subject of the petroleum industry. 12 ı Sri Lanka Sutainable Energy Authority

30 2.1.6 Indigenous Resources in Sri Lanka Table Indigenous Primary Sources of Energy in Sri Lanka Indigenous Energy Source Typical User Groups Typical Applications Scale of Use by End 2012 Household Cooking Widespread Commercial Hotels, Bakeries Widespread Biomass Industry Tea drying, Brick and tile Widespread Private power plant Electricity utility owned large multipurpose systems For sale to utility Own consumption For retail to customers 02 power plants Several villages and factories Major power plants Hydro Power Commercial grid-connected For sale to utility 106 power plants Village-level off-grid electricity Household use 262 power plants Industrial off-grid electricity Tea industry 32 power plants Industrial mechanical drives Tea Industry Negligible, one or two remaining Solar photovoltaic Household lighting About 120,000 units Grid connected PV For sale to utility 4 power plants Solar Power Solar Thermal Hot water systems in commercial and Widespread domestic sectors Informal use Household and agricultural use Widespread Grid Connected Wind For retail to customers 9 power plants Wind Power Off-grid power plants For residential use A few dozens Water pumping Agriculture A few dozens Sri Lanka Sutainable Energy Authority ı 13

31 2.2 Global Energy Resources As explained previously, petroleum, coal, natural gas and nuclear energy are the four main energy sources used in other countries. However, in Sri Lanka, only petroleum is imported in large scale to the country as a source of energy while the use of other sources is still being studied. The use of refined petroleum products and coal is described in Table 2.2. Table 2.2 Use of Global Energy Resources in Sri Lanka Imported Energy Source Typical User Groups Typical Applications Scale of use at Present Household Lighting, cooking Widespread Crude Oil and refined products including LPG Commercial Hotels, bakeries Widespread Industry Furnaces, kilns, boilers Widespread Transport Rail, road, air and sea Widespread Railways Rail Negligible Coal Industry Kilns Cement industry and foundries Boiler One unit Power Generation Boiler 1 power plant 300 MW 14 ı Sri Lanka Sutainable Energy Authority

32 3 Energy Supply Energy needs of the country are fulfilled either directly by primary energy sources such as biomass and petroleum, or by secondary sources such as electricity produced using petroleum, biomass and hydro power. 3.1 Supply from Primary Energy Sources Evolution of Energy Supply The primary energy supply of Sri Lanka consists of biomass, petroleum, coal, major hydro and new renewable energy. Table 3.1 summarises the contribution of supply energy forms by source, while Figure 3.1 illustrates the evolution of energy supply forms over time. Table 3.1 Primary Energy Supply by Source ktoe Biomass 4, , , , , ,014.0 Petroleum 3, , , , , ,219.6 Coal Major hydro , New Renewable Energy Total 8, , , , , ,524.6 PJ Biomass Petroleum Coal Major hydro New Renewable Energy Total % Biomass Petroleum Coal Major hydro New Renewable Energy Sri Lanka Sutainable Energy Authority ı 15

33 Peta Joules NRE Major hydro Coal Petroleum Biomass Figure 3.1 Evolution of Energy Supply Forms In 1976, the year at which the earliest comprehensive energy accounts are available, the primary energy supply was dominated by biomass and petroleum, with a 6% share coming from major hydro. At present, the primary energy supply is dominated by biomass and petroleum in equal proportions, while the contribution of other sources has increased progressively. Figure 3.2 shows the variation on percentage shares of the Primary Energy Supply. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% NRE Major Hydro Coal Petroleum Biomass Figure 3.2 Percentage Share of Primary Energy Supply 16 ı Sri Lanka Sutainable Energy Authority

34 Biomass is the most common source of energy supply in the country, of which the largest use is in the domestic sector for cooking purposes. Due to the abundant availability, only a limited portion of the total biomass use is channelled through a commodity market and hence the value of the energy sourced by biomass is not properly accounted. However, this situation is fast changing with many industries switching fuel to reduce the cost of thermal energy. As a result, a sizable fuelwood supply is emerging to supply the new demand, albeit many questions on sustainability. Sources of Production of Biomass Biomass comes in different forms. Following are the most common forms of biomass available in Sri Lanka. Fuel wood Municipal Waste Industrial Waste Agricultural Waste General biomass conversions are given in Table 3.2 Table 3.2 Biomass Conversions Primary Source Conversions Firewood (natural yield, home gardens, dedicated woodlots) Coconut Shell Bagasse Wood Thermal energy for boilers to generate steam for industry uses and electricity generation and combustible gases to drive Internal Combustion engines for electricity generation Charcoal, activated carbon; mostly for export as a non-energy product Thermal energy to generate steam for boiler-turbine units used for electricity generation Charcoal; mostly for the hotels and household markets Energy Supply from Petroleum As a country with little indigenous petroleum resources, Sri Lanka totally depends on petroleum imports, both in the form of crude oil and as finished products. Table 3.3 summarises the imported petroleum products. Sri Lanka Sutainable Energy Authority ı 17

35 Table 3.3 Importation of Petroleum Products kt Crude Oil Import 2, , , , , ,626.1 Product Imports 1, , , , , ,470.1 LPG Gasoline Avtur Kerosene Auto Diesel , , , , ,652.2 Fuel Oil Avgas Bitumen Mineral Gas Oil Solvents The importation of crude oil, finished petroleum products and coal has increased over time. In 2011, the imported quantity of crude oil increased by 5.8%, while finished product imports increased by 12.2% The increase in finished petroleum products is visible in all types of imports except fuel oil Energy Supply from Coal Coal is an imported energy resource. The commissioning of the coal power plant in 2011 has increased the demand for coal as indicated in Figure 3.3. The demand for coal in 2012 has increased compared to Table 3.4 summarises the importation of coal in the recent six years, while Figure 3.3 depicts the importation of petroleum and coal over time. Table 3.4 Importation of Coal kt Coal Imports ı Sri Lanka Sutainable Energy Authority

36 kt 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Coal Finished Products CrudeOil Figure 3.3 Importation of Petroleum Products Supply from Major Hydro The topography of the country provides an excellent opportunity to harness the energy stored in river water which flows from the central hills of the country to the Indian Ocean surrounding the island. Although the use of hydro resource for direct motive power was common in yesteryears, electricity production has become the sole use of the hydro resource in recent times. Therefore, the contribution of hydro as an energy supply source is always through its secondary form, which is electricity Supply from New Renewable Energy The development of New Renewable Energy (NRE) commenced with the commissioning of the first hydro plant (Dick Oya) in 1996, with an installed capacity of 0.96 MW. The NRE industry however, was stagnant with an average capacity addition of 0.5% per annum, till about This situation changed for better with the establishment of the Sri Lanka Sustainable Energy Authority in 2007, which is an apex institution established for the purpose promoting indigenous energy resources. One of the main objectives of the Authority is to identify, assess and develop renewable energy resources with a view to enhancing energy security and thereby derive economic and social benefits to the country. At present, NRE is seen in many forms such as small hydro, solar, wind and biomass power plants. The Small Power Producers for hydro plants are typically run-of-the-river type. Solar energy is used mostly in non-commercial forms. Therefore, similar to biomass, the total usage of solar energy is not quantified properly. However, solar energy is the most frequently used form of energy in day to day life and its supply is unrestricted and persistent throughout the year in most parts of the country. Following are the most common uses of solar energy in Sri Lanka are for drying, heating and electricity production. Wind as an energy source is used only in power generation and agricultural water pumping, and that too, to a very small extent. Activities concerning the development of wind energy resources were first initiated Sri Lanka Sutainable Energy Authority ı 19

37 in 1976 focusing on small-scale technologies, primarily for water pumping and electrification of remote areas. This paved the way for systematic studies on large-scale wind power generation to be undertaken by the CEB, having got experience in small scale applications. These activities led to the launching of the first-ever detailed wind monitoring programme in the southern lowland of the country in 1988 by the CEB with technical and financial assistance from the Government of Netherlands. In continuation of this effort, the CEB launched the second systematic wind resource assessment study in 1995, covering the Northwestern coast and central plains of the country and this will later be extended to the Mannar Basin and Sabaragamuwa mountain range. The CEB commissioned the first grid connected wind power plant in 1999 in Hambantota. However, the private sector ventured into wind development only recently, encouraged by the new feed-in-tariff regime since As a result of their efforts, wind development has progressed expeditiously, adding 73 MW of installed capacity to the grid by The year 2012 also marked the retirement of the first NRE power plants from the grid. Dick Oya, the first New Renewable Energy project commissioned in 1996, lapsed in its Standardised Power Purchase Agreement, hence has stopped generating and selling electricity to the grid. The contribution of major hydro and NRE to the primary energy supply is depicted in Table 3.1, Figures 3.1 and 3.2 above. 3.2 Petroleum Refinery Operations Refinery Product Output The country s petroleum product requirements are met partly by direct import of finished products and partly by processing imported crude oil. The only refinery in Sri Lanka, located in Sapugaskanda, converts imported crude oil to refined products to supply approximately half of the petroleum demand of the country. The refinery produces its output at a rate of 2.3 million tonnes per year (50,000 bbl/stream day) and the refinery process flow is illustrated in Figure ı Sri Lanka Sutainable Energy Authority

38 Fuel Gas Crude 01 unit Crude Distiller 01 C3 Naptha Stabilizer Straight Run Naphtha Straight Run Kerosene 15 unit Kerosene Merox LP Gas 02 unit Naptha Unifiner 13 unit De-Propanizer Light Naptha Heavy Naptha 03 unit Platformer 06 unit LPG Merox 14 unit SBP LPG Special Boiling Point Fluids Chemical Naptha Gasoline Avtur Kerosene Long Residue Straight Run Gas Oil Cracked Naptha 08 unit Visbreaker Heavy Vacuum Gas Oil Cracked Gas Oil Cracked Residue 07 unit G.O. Unifiner 04 unit G.O. Unifiner Auto Diesel Super Diesel Fuel Oil Heavy Fuel Oil 08 unit Vacuum Distillation Light Vacuum Gas Oil Short Residue 09 unit Bitumen Blowing Blown Asphalt Figure 3.4 Sapugaskanda Refinery Process Flow Diagram CPC purchases most of its crude oil requirement from the open market. However, more recently, stateto-state contracts between the Government and state owned oil companies of Iran, Saudi Arabia, United Arab Emirates and Malaysia have supplied considerable amounts of crude oil at advantageous prices to the CPC. In 2012, a mix of crude oil was processed at the Sapugaskanda refinery, including Iranian Light, Arabian Light, Oman Crude, Miri Light and Dubai Crude. Table Types of Crude Oil Refined at Sapugaskanda Refinery kt Arabian light Iranian light 1, , , , , Miri Light Upper zakum Oman Crude Dubai Crude Total 2, , , , , , The refinery maximum throughput is less than the country requirement for petroleum products. Besides, its production slate differs from the mix of product demand. Although the refinery is operated at maximum Sri Lanka Sutainable Energy Authority ı 21

39 design capacity to meet the demand for middle distillates, petrol, kerosene, Jet A-1 and diesel are still in deficit with a need for supplementary imports. All petroleum products except solvents had to be imported to supplement refinery production in Details of refinery output are given in Table 3.6 and Figure 3.5. Table Refined Products from the Refinery kt Crude Input 2, , , , , , LPG Chemical Naphtha Naphtha Total Super Petrol Regular Petrol Petrol Total Avtur Kerosene Auto Diesel Super Diesel Diesel Total Furnace Oil 500' Furnace Oil 800' Furnace Oil 1000' Furnace Oil 1500' Furnace Oil 3500' Furnace Oil Total S.B.P Solvents Total Bitumen Total Output 2, , , , , , Crude Input 1,795 1,885 2,261 1,753 2,004 1,596 Own Use and Losses (kt) Own Use & loss as Percentage of Input 6.5% 6.5% 4.2% 5.8% 5.7% 6.2% In 2012, the total refinery output had sharply decreased to 1,481 kt from 1,724 kt in ı Sri Lanka Sutainable Energy Authority

40 2,500 2,000 1,500 kt 1, Other Bitumen Solvents total Furnace Oil total Diesel total Figure Refined Product Output Export of Surplus Products Naphtha total Kerosene Avtur Petrol total Surplus production of the refinery is exported by the CPC, but the exported quantities are negligible in comparison with the imports. Table 3.7 summarises the re-exported products over the past few years. There were no re-exports for Table 3.7- Surplus Exports of Petroleum Products LPG kt Naphtha Fuel Oil Total re-exported Sri Lanka Sutainable Energy Authority ı 23

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42 4 Energy Conversion 4.1 Grid Electricity Production As far as supply from secondary energy sources is concerned, conversion of primary energy in the form of hydro potential or petroleum to electricity is the most prominent. However, the conversion of petroleum fuel to steam which is used as an energy source in most industries for their thermal application can also be considered a secondary form of energy. Though widely used, the quantum of steam generated, the quality and the end use is not recorded properly, which causes the discussion on supply from secondary energy sources to be limited to electricity. Electricity generation in the country which was broadly divided into two parts based on whether they are connected to the national grid or whether they run isolated. Sri Lanka has a national grid, which now covers almost all parts of the country. Hitherto, the Northern Province was supplied by a separate mini grid. On September 13, 2012, the isolated mini grid which powered the Jaffna Peninsula was connected to the national grid through a 33 kv feeder, connected to the Kilinochchi 132/33 kv grid sub-station. A fully fledged transmission backbone to this region is under construction and will be operational by mid The power supply in the Jaffna peninsula improved with the commissioning of the new power plant Uthurujanani on January 14, The power plant, having the configuration of three 8 MW engine units, will contribute to a greater reliability and improved stability. Grid connected generation comprises of the following genre. (i) CEB hydro power plants (ii) CEB non-conventional power plants (only wind power at present) (iii) CEB thermal power plants (oil fired and coal powered) (iv) Independent Power Producers (IPPs) (presently oil-fired thermal power plants) (v) Small Power Producers (SPPs) (presently mini hydro, one CHP plant, one solar power plant, wind power plants and biomass based power plants, all embedded in the distribution network) Due to the significance of the grid supply compared with off-grid, most of the analyses presented in the report will be for grid connected electricity supply Grid Connected Power Plants As explained above, the electricity supply in Sri Lanka flows through the national grid and a brief description of the national grid is given in this section. Off-grid electricity generation is described in the next section. Both CEB and private power producers generate electricity and supply to the national grid. All the largescale hydro power plants in the country are owned by the CEB. Oil-fired thermal power plants and the coal power plant as well are owned by CEB. In addition to its own power plants, CEB as the single buyer, purchases electricity to supply the national grid from private Independent Power Producers (IPPs) who have entered into contracts with the CEB. All large IPPs are oil fired, while the mechanism to purchase Sri Lanka Sutainable Energy Authority ı 25

43 electricity from renewable based power plants has enabled many Small Power Producers (SPPs) to generate and sell hydro power to the national grid. With the increase of electricity demand and delays in construction of CEB s own power plants, the contribution from private power plants has increased significantly in the recent years. Different Categories of Power Plants in the National Grid CEB Power Plants As the sole operator of the Sri Lankan power system, until 1997, CEB owned and operated almost all the power plants in the national grid. Independent Power Producers Starting from 1997, many IPPs entered the electricity market, supplying electricity to the national grid. Altogether, eleven IPPs were operational by end Small Power Producers The number of small power producers increased rapidly over the period, under the enabling environment created by the Government, and implemented by the SEA through its facilitation of the project development through the newly introduced transparent resource allocation process. These power plants are operated by private sector investors and the installed capacity is limited to 10 MW since the plants are non dispatchable. Attractive tariffs offered through the cost-reflective, technology-specific tariff scheme, a policy intervention of the Ministry of Power and Energy through the Working Group on Renewable Energy, and the dedicated financing facilities provided by a funding programme, also contributed to the development of the industry. Table Total Installed Capacity MW Major Hydro 1, , , , , ,357.4 Thermal Power Producers (CEB+IPP+Hired) , , , , ,695.3 CEB Wind New Renewable Energy Total Installed Capacity 1, , , , , ,368.0 Major Hydro (%) Thermal Power Producers (CEB+IPP+Hired) (%) CEB Wind (%) New Renewable Energy (%) ı Sri Lanka Sutainable Energy Authority

44 Figure 4.1 depicts the total installed capacities serving the grid by type of power plant. 3,500 3,000 2,500 MW 2,000 1,500 1, NRE CEB Wind Thermal (CEB+IPP) Major Hydro Figure Total Installed Capacity by Type of Power Plant In the early stages, major hydro played a dominant role in power generation and continued until about Once the economically feasible major hydro schemes reached their saturation, the share of oilbased thermal plants in power generation increased. At present, about 50% of power generation is from thermal power. From 2007 onwards, the share of NRE (Small Power Producers) continues to increase Major Hydro Sri Lanka has two main hydro power complexes; namely Laxapana and Mahaweli, each consisting of several power plants. Laxapana complex is based on Kelani River while Mahaweli complex is based on Mahaweli River. The Upper Kotmale Hydro Power Station of a capacity of 150 MW was commissioned in March 2012, under the Mahaweli Complex. Other than these major schemes, there are two independent large scale hydro power stations, namely Samanalawewa and Kukule Ganga while small scale power plants such as Inginiyagala and Uda Walawa are also generating hydropower using their respective reservoir storages. For administrative purposes, these smaller hydropower plants are grouped together as a single complex identified by the CEB as the Other Hydro Complex, although these plants are located in different river systems. Sri Lanka Sutainable Energy Authority ı 27

45 Table 4 2 provides a list of major hydro power plants and their corresponding water storage capacities Table Storage Capacities and Generation of Major Hydro Power Stations Name of Hydro Power Station Plant Capacity (MW) Name of the Reservoir Reservoir Live Storage (million m3) Generation in 2012 (GWh) Share in Generation (%) Laxapana Complex Wimalasurendra 50 Castlereigh Reservoir Canyon 60 Maussakelle Reservoir Laxapana 50 Norton Pond Samanala 75 Laxapana Pond New Laxapana 100 Canyon Pond Mahaweli Complex Kotmale 201 Kotmale Reservoir Nilambe Ukuwela 40 Polgolla Barrage Bowatenna 40 Bowatenna Reservoir Victoria 210 Victoria Reservoir Randenigala 122 Randenigala Reservoir Rantembe 49 Rantembe Pond Upper Kotmale 150 Upper Kotmale Other Hydro Complex Inginiyagala 11 Inginiyagala Reservoir Uda Walawa 6 Uda Walawa Samanalawewa 120 Samanalawewa Reservoir Kukule Ganga Total 1, , By the end of 2012, a total of seventeen hydro power plants were in operation under the ownership of CEB Thermal Power There are six oil-fired thermal power plants that operate under the CEB. Eleven Independent Power Producers (IPPs) operate in private capacity, supplying power to the national grid. The first coal power plant of 300 MW was commissioned in 2011, by the CEB. Table 4.3 summarises thermal power generation in ı Sri Lanka Sutainable Energy Authority

46 Table Installed Capacities and Generation of Thermal Power Plants Name of Power Station Technology Type Fuel Type Capacity (MW) CEB Gross Generation (GWh) Share in Generation (%) Kelanitissa Power Station Gas Turbine (stg 2) Auti Diesel Kelanitissa Power Station Gas Turbine (stg 3) Auto Diesel Sapugaskanda Power Station Sapugaskanda Power Station Extension Diesel Engine Diesel Engine Auto Diesel HSFO 380 cst (FO 3500) Auto Diesel HSFO 380 cst (FO 3500) Small Generators Diesel Engine Auto Diesel Kelanitissa Power Station Puttalam Coal Power Station IPP Combined Cycle Steam Auto Diesel Naphtha Auto Diesel Coal 1, Lakdhanavi Diesel Engine HSFO 180 cst (FO 1500) Asia Power Diesel Engine HSFO 380 cst (FO 3500) Colombo Power Diesel Engine HSFO 180 cst (FO 1500) Ace Power Matara Diesel Engine HSFO 180 cst (FO 1500) Ace Power Horana Diesel Engine HSFO 180 cst (FO 1500) AES - Kelanitissa Combined Cycle Auto Diesel Heladanavi Diesel Engine HSFO 180 cst (FO 1500) Ace Power Embilipitiya Diesel Engine HSFO 180 cst (FO 1500) Diesel Aggreko Diesel Engine Auto Diesel Yugadhanavi-Kerawalapitiya Combined Cycle Auto Diesel 1, LSFO 180 cst Northern Power Diesel Engine HSFO 180 cst (FO 1500) Total 1,637 8, Sri Lanka Sutainable Energy Authority ı 29

47 The oil-fired CEB power plants generated 2,030.3 GWh, while the coal-fired power plant generated 1,403.7 GWh. The contribution of the coal power plant to generation is 16.6%. The IPPs generated in 4,983.9 GWh in total. Seven IPPs remained operational by end IPPs operate by entering into long term agreements with CEB. These contracts are individually executed under different terms and conditions. Four IPPS, namely, ACE Power Generation Matara (Pvt.) Ltd, Lakdhanavi (Pvt.) Ltd, ACE Power Generation Horana (Pvt.) Ltd and Aggreko International Project Ltd. (in Chunnakum) reached the end of the respective contract periods in CEB Wind Power In 1999, CEB commissioned the first grid connected wind power plant, primarily as a pilot project. The pilot wind plant is located in a 17 ha land close to Hambantota town. Table 4.4 gives the capacity and generation of the wind power plant. Table Installed Capacity and Generation of CEB Wind Power Plant Name of the Power Station Plant Capacity (MW) Capacity of Turbines (kw) Number of Turbines Generation in 2012 (GWh) Hambantota Wind Power Plant New Renewable Energy New Renewable Energy power plants are operated by private sector investors and the installed capacity is limited to 10 MW since the plants are non dispatchable. The first Small Power Producing Plant (Dick Oya) was commissioned in 1996, turning a new leaf in the New Renewable Energy industry. At present, the number and variety of SPPs have increased in many folds, and is scattered islandwide. Table 4.5 summarises the installed capacities and generation of SPPs contributing to the NRE industry. Table Installed Capacities and Generation of NRE Power Plants by end 2012 Type of Power Station Number of Plants Total Installed Capacity (MW) Generation in 2012 (GWh) Share in Generation (%) Hydro Biomass Solar Wind Total Seventeen SPP hydro plants and four wind SPP wind plants were commissioned in 2012, with a total installed capacity of 32.4 MW and 32.8 MW respectively. There were no capacity additions in SPP solar and biomass in ı Sri Lanka Sutainable Energy Authority

48 Figure 4.2 depicts the cumulative capacity additions and number of SPPs up to end Capacity addi ons (MW) Nos. of SPPs Capacity addi on Nos. of SPP Figure Cumulative Capacity Additions and Number of SPPs Gross Generation of Grid Connected Power Plants The total generation from major hydro plants, thermal plants and new renewable energy plants in 2012 was 11,878.8 GWh. Compared with the gross generation of 2011, which was 11,638.2 GWh, the generation in 2012 marks an increase of 2.1% as indicated in Table 4.6. Table Gross Generation to the CEB Grid GWh Major Hydro 2, , , , , ,726.7 Thermal (Oil) 3, , , , , ,012.7 Thermal (Coal) , ,403.7 CEB Wind New Renewable Energy Gross Generation to CEB Grid 6, , , , , ,878.8 Year-on-year growth rate 11.5% 9.6% -0.2% 8.2% 7.8% 2.1% Sri Lanka Sutainable Energy Authority ı 31

49 12,000 10,000 8,000 GWh 6,000 4,000 2, New Renewable Energy CEB Wind Thermal(Coal) Thermal(Oil) Major Hydro Figure Gross Generation to CEB Grid In early stages, the energy mix included only major hydro plants and oil-fired thermal plants. The generation mix starts diversifying from 1996 and continues todate. In the present context, the thermal share is dominant (71%), while major hydro share has decreased to 23%. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% New Renewable Energy CEB Wind Thermal (Coal) Thermal (Oil) Major Hydro Figure Evolution of Generation Mix The NRE industry, which commenced in 1996 has progressed expeditiously, increasing in capacity each year. Figure 4.5 depicts the growth of the industry since inception todate. 32 ı Sri Lanka Sutainable Energy Authority

50 GWh Wind Solar Biomass Combined heat and Power Hydro Figure Gross Generation of New Renewable Energy Power Plants The share of NRE generation was 6.2% in the total gross generation to the CEB grid in The generation from small hydro suffered a setback owing to the droughts in 2012, continuing from Sri Lanka Sutainable Energy Authority ı 33

51 4.1.3 Different Technologies used by Power Plants in the National Grid Table Grid Connected Power Plant Capacities (MW) by Technology Type Technology CEB Power Plants Major Hydro 1,137 1,207 1,207 1,207 1,207 1,357 CEB Wind Steam, Fuel Oil Steam, Coal Sub total, Steam Diesel Engine, Residual Oil Diesel Engine, Diesel Oil Sub total, Diesel Engines Gas Turbines, Diesel Oil Sub total, Gas Turbines Combined Cycle, Naphtha and Diesel Sub total, Combined Cycle IPP Diesel Engine, Residual Oil Diesel Engine, Fuel Oil Diesel Engine, Diesel Oil Combined Cycle, Diesel, Fuel Oil Sub total IPP SPP Hydro Combined heat and power Solar Biomass Wind Sub total SPP ı Sri Lanka Sutainable Energy Authority

52 Table Fuel Usage and Generation by Technology Type Technology Type CEB Gross Generation (GWh) Steam, Fuel Oil Steam, Coal , ,399.1 Steam, Diesel Diesel Engine, Residual Oil Diesel Engine, Diesel Gas Turbines, Diesel Oil Combined Cycle, Diesel Oil Combined Cycle, Naphtha CEB Fuel Use (million litres) Steam, Fuel Oil Steam, Coal (million kg) Steam, Diesel Diesel Engine, Residual Oil Diesel Engine, Diesel Gas Turbines, Diesel Oil Combined Cycle, Diesel Oil Combined Cycle, Naphtha IPP Gross Generation (GWh) Diesel Engine, Residual Oil Diesel Engine, Fuel Oil , , , , ,385.5 Diesel Engine, Diesel Oil Combined Cycle, Diesel Oil Combined Cycle, Fuel Oil (LSFO 180 cst) ,258.7 Combined Cycle, Fuel Oil (HSFO 180 cst) IPP Gross Fuel Use (million litres) Diesel Engine, Residual Oil Diesel Engine, Fuel Oil Diesel Engine, Diesel Oil Combined Cycle, Diesel Oil Combined Cycle, Fuel Oil (LSFO 180 cst) Combined Cycle, Fuel Oil (HSFO 180 cst) Sri Lanka Sutainable Energy Authority ı 35

53 4.1.4 Fuel Usage and Conversion Efficiency in Thermal Power Generation Thermal power plants operating in Sri Lanka primarily use petroleum fuels such as diesel, fuel oil, residual oil and naphtha. Table 4.9 details the total quantities of common fuels used in power generation by thermal power plants. Table Total Petroleum Fuels Used in Power Generation Fuel Oil (HSFO 180 CST, FO 1500) - (million litres) Coal (million kg) Residual Oil (HSFO 380 CST, FO 3500) (million litres) Diesel (million litres) LSFO 180 CST (million litres) Naphtha (million litres) In early stages of the power generation industry, diesel was the most commonly used fuel. At present, the types of fuel used in power generation have increased in variety, owing to the large share of thermal power, as shown in Figure 4.6. Liquid fuels have been converted into corresponding weights at 30 0 C (ambient temperature). 36 ı Sri Lanka Sutainable Energy Authority

54 2,500 2,000 million kg 1,500 1, Naphtha FO (LSFO 180 cst) Diesel Residual Oil Coal FO (HSFO 180 cst) Figure Fuel Consumption in Thermal Power Generation by Type Initially, the thermal fuel mix was dominated by fuel oil, with a marginal share coming from diesel. The present fuel mix has vastly increased in variety. Coal makes its first entry in 2011 and continues to 2012, expanding its share as the Coal Power plant in Norochcholai (300 MW) is in commercial operation. This is expected to increase even further in future, with the commissioning of new coal power plants % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Naphtha FO (LSFO 180 cst) Diesel Residual Oil Coal FO (HSFO 180 cst) Figure Percentages of Fuel Mix in Thermal Power Generation Sri Lanka Sutainable Energy Authority ı 37

55 Table 4.10 summarises the efficiencies of thermal power plants by technology type. Table 4.10 Thermal Power Plant Efficiencies Power Plant Efficiencies CEB Steam, Fuel Oil 23.1% Steam, Coal % 30.6% Steam, Diesel % 19.5% Diesel Engine, Residual Oil 39.6% 39.5% 39.5% 39.5% 39.5% 39.5% Diesel Engine, Diesel 26.6% 21.9% 30.8% 29.8% 33.6% 26.9% Gas Turbines, Diesel Oil 24.7% 26.7% 24.0% 23.4% 24.5% 23.6% Combined Cycle, Diesel Oil % 40.6% 40.9% 27.5% 42.0% Combined Cycle, Naphtha % 41.1% 33.7% 28.1% 40.1% CEB Gross Thermal Generation (Gcal) CEB Fuel Energy Input (Gcal) CEB Power Plant Efficiency 1,896,595 1,859,282 1,798,247 1,199,040 2,177,234 2,952,044 6,442,702 4,909,253 4,823,183 3,198,724 6,406,225 8,599, % 37.9% 37.3% 37.5% 34.0% 34.3% IPP Diesel Engine, Residual Oil 38.7% 39.1% 39.5% 39.3% 38.5% 38.0% Diesel Engine, Fuel Oil 29.1% 39.2% 40.4% 40.2% 39.0% 38.1% Diesel Engine, Diesel Oil % 28.5% 33.4% 34.0% 36.5% Combined Cycle, Diesel Oil % 43.9% 44.4% 44.9% 44.3% Combined Cycle, Fuel Oil (LSFO 180 cst) Combined Cycle, Fuel Oil (HSFO 180 cst) IPP Net Thermal Generation (Gcal) IPP Fuel Energy Input (Gcal) % 39.9% 41.2% 41.0% % 707,298 2,732,531 3,068,920 2,684,904 2,894,470 3,142,342 2,171,413 6,796,878 7,597,198 6,639,385 7,223,634 7,958,944 IPP Power Plant Efficiency 32.6% 40.2% 40.4% 40.4% 40.1% 39.5% The combined cycle power plants use auto diesel, fuel oil and naphtha and they have a higher overall efficiency and other operational advantages compared with the diesel engine power plants. 38 ı Sri Lanka Sutainable Energy Authority

56 4.2 Off-Grid Electricity Generation Isolated power generating facilities are available in some locations either due to the unavailability of the national grid or as a matter of policy. In addition, standby power supplies are also available in most industries and commercial facilities, although their generation is very minimal due to the short-term nature of operation. The capacities and energy converted at these standby generators are not accounted for in this report. The non-conventional off grid energy systems such as village and estate hydro plants and household solar photovoltaic systems are discussed separately in this report. In some instances, electricity is generated and consumed in isolation to the national grid, due to reasons such as unavailability of the grid or economic and reliability reasons. (i) Diesel generators are maintained only as a standby option and run only for short durations during grid failures, periodic testing and during generator servicing. (ii) Renewable energy systems, such as small hydro (for industries and households), wind and solar photovoltaic systems for households are also operated off-grid due to unavailability of grid and technical reasons. Off-Grid generation broadly comprises the following genre (i) Self-Generation: Using own generating plants, even if the grid is available. Only a few locations, and they too are used sparingly. (ii) Off-grid (Industrial): Industries using their own generation either as a matter of policy, keeping the grid supply only as backup or owing to non-availability of the grid in close proximity. Only a few locations, and they too are used sparingly. (iii) Off-grid (non-industrial): Mostly rural systems of small micro hydro, wind, solar and other renewable energy based systems. With the rapid expansion of the national grid, off-grid electrification assumed a diminishing role in A scheme where these assets can be connected to national grid was launched in 2012, using the provisions of the SPPA. Further activities in this area are expected through the net metering scheme in coming years. Off-Grid Industrial (Hired) Power Plants and Self-Generation by Customers Most industries maintain diesel generators as a standby power supply option and operate these whenever the grid power is not available. During periods of severe power shortages in the grid, the CEB offers a rebate for self generation by its consumers. However, upon recovering from the grid capacity shortfall, this rebate scheme is discontinued. The last time such a scheme was introduced was in year 2000, and was thereafter discontinued in Thus, data on own power generation by consumers are not available from 2003 onwards. Given the reasonably reliable supply condition maintained by the grid since 2003 with no scheduled load shedding occurring in the system, and the high cost of generating own power using diesel generators, it is unlikely that self-generation by consumers is of any significance to the overall generation statistic of the country. Table 4.11 available estimates on off-grid self-generation and fuel usage. Sri Lanka Sutainable Energy Authority ı 39

57 Table 4.11 Gross Generation and Fuel Usage of Self-Generation and Off-Grid Industrial Generation Self Generation/ Off-grid Industrial Private Power Plants (Hired) Diesel Engine, Diesel Oil (GWh) Estimated Diesel Use (million litre) Self Generation by Customers Self Generation (GWh) Estimated Diesel Use (million litre) As reliable data on conventional off-grid electricity generation (mainly by diesel generators) became unavailable with the discontinuation of the CEB rebate scheme for self generation, amounts of self generation is estimated and presented in this report only up to year However, considering the stable power supply condition prevailed in the years thereafter, such self generation was only marginal and no further estimates were done. Off-grid Non Industrial Several non-conventional primary sources are used for electricity generation in Sri Lanka. Solar photovoltaic systems have been increasingly used from early 1980s. Small isolated hydroelectric systems have been used in the tea processing industry for over 100 years. Small village-level hydroelectric systems are increasingly used in remote locations for household use. Installation of household solar photovoltaic systems and off-grid, community-based, hydro power systems recorded a down turn due to the grid penetration or expectation of same. Data from the World Bank funded RERED project is no longer available, and the values will be updated when the data from the Census 2011 becomes available. Table 4.12 summarises the number of units, their capacity and annual electrical energy from off-grid non-industrial generation. 40 ı Sri Lanka Sutainable Energy Authority

58 Table 4.12 Generation from Non-Industrial Sources Off-Grid Non Industrial No. of Systems Village Hydro Estate Hydro Solar PV 10,000 97, , , , ,000 Wind Battery Charging Wind Community Biomass Aggregate Peak Capacity (kw) Village Hydro , , , , ,215.9 Estate Hydro 3, , , , , ,226.2 Solar PV , , , , ,416.5 Wind Battery Charging Wind Community Biomass Total 4, , , , , ,808.9 Estimated Energy (MWh) Village Hydro , , , , ,688.1 Estate Hydro 7, , , , , ,065.5 Solar PV , , , , ,009.8 Wind Battery Charging Wind Community Biomass Total 8, , , , , , Total Generation The bulk of electricity generation in Sri Lanka is from grid-connected power plants. Table 4.13 gives the summary of electricity generation from grid-based and off-grid, conventional and non-conventional sources. Sri Lanka Sutainable Energy Authority ı 41

59 Table 4.13 Total Gross Generation in Sri Lanka GWh Major Hydro Power 2, , , , , ,726.7 Thermal Power 3, , , , , ,416.5 CEB Wind Power New Renewable Energy Self generation by customers Off-grid Conventional Power (Hired) Off-grid Non-Conventional (Off-grid Renewables) Gross Generation 6, , , , , ,897.6 % Major Hydro Power Thermal Power CEB Wind Power New Renewable Energy Self generation by customers Off-grid Conventional Power (Hired) Off-grid Non-Conventional (Off-grid Renewables) ı Sri Lanka Sutainable Energy Authority

60 5 Energy Distribution and Pricing The supply of energy includes generation/conversion and distribution to end users. Distribution is the process of delivering energy from its source to the ultimate end use. For convenience, the terminal points of distribution are considered to be from the measuring point at generation/conversion to the measuring point at the end user. 5.1 Electricity Distribution and Prices Distribution of electrical energy is through the transmission and distribution network, the main difference between the two being the voltage at which the power is delivered. Transmission is at voltages 132 kv and 220 kv, whereas distribution is done at 33 kv, 11 kv and 400V Transmission and Distribution Networks Electricity Transmission Network Sri Lanka has a single transmission network for the country with the exception of a small area in the Northern Province. As a result of the war, the transmission line linking Jaffna Peninsula in the northern end of the country was destroyed, isolating the generation and distribution facilities in Jaffna from the main grid. However, with the end of the conflict in mid-2009, efforts are underway to rebuild the transmission line and reconnect the northern peninsula to the main grid by The national grid consists of overhead transmission lines interconnecting large scale power plants scattered mostly in the central region and the western province, and grid substations where the distribution networks spread from. Apart from the most common transmission lines carrying power at 132 kv, a limited number of 220 kv transmission lines are also available in the network. These 220 kv transmission lines strengthen the network, especially between nodes having heavy power flows, such as Kotmale-Biyagama and Kotmale-Anuradhapura. Sri Lanka Sutainable Energy Authority ı 43

61 PUTTLAM COAL POWER NEW CHILAW km UPPER KOTMALE BELIATTA km Figure 5.1 Electricity Transmission Network (2012) 44 ı Sri Lanka Sutainable Energy Authority

62 Electricity Distribution Network Electricity distribution and sales in Sri Lanka is the responsibility of the following organisations; Ceylon Electricity Board (CEB) Lanka Electricity Company (Pvt) Ltd. (LECO) In 1970s, CEB and Local Authorities (LA) were the only distributors. Over the period from 1983 to 1995, LA networks were transferred to CEB and LECO, and some of the CEB networks too were transferred to LECO. At grid substations, the high voltage electricity in the transmission network is converted to 33 kv to be distributed within the locality. In some instances, the electricity at 33 kv is again converted to 11 kv at primary substations and then distributed to consumers. Distribution networks operated by LECO use 11 kv as the distribution voltage. However, both CEB and LECO step down the distribution voltage again to 400 V prior to delivering power to small scale consumers such as households and commercial buildings. For a limited number of industrial and commercial establishments, electricity is provided and metered at the distribution voltage itself. The distribution responsibility ends at the consumer metering point up to which the maintenance work is carried out by the corresponding service provider (i.e. CEB or LECO) Electrification All categories of grid electricity consumers, except streetlighting, increased in number in While Table 5.1 shows the number of electricity consumers in the grid, Table 5 2 shows the share of electricity consumers of CEB and LECO separately. Table 5.1 Electricity Consumers Served by the Grid Total Number of Consumer Accounts Domestic 2,475,357 3,338,859 4,179,278 4,363,324 4,578,596 4,810,595 Religious 17,826 22,287 27,692 29,050 30,645 32,369 Industrial 31,231 38,299 45,936 48,461 50,885 54,017 Commercial 293, , , , , ,050 Streetlighting 1,569 4,050 3,142 2,931 3,803 3,622 Total 2,819,339 3,807,097 4,748,864 4,958,058 5,207,464 5,477,653 The number of total accounts served by the grid has increased by 5% in 2012 compared with Sri Lanka Sutainable Energy Authority ı 45

63 Table 5.2 Electricity Consumers in the Grid, CEB and LECO Total Number of Consumer Accounts CEB Domestic 2,191,301 2,988,223 3,781,674 3,958,829 4,165,738 4,391,445 Religious 16,041 20,365 25,419 26,763 28,320 30,009 Industrial 27,231 34,020 42,234 45,059 47,529 50,760 Commercial 255, , , , , ,646 Streetlighting Sub total CEB 2,490,250 3,396,010 4,280,131 4,480,385 4,717,447 4,979,861 LECO Domestic 284, , , , , ,150 Religious 1,785 1,922 2,273 2,287 2,325 2,360 Industrial 4,000 4,279 3,702 3,402 3,356 3,257 Commercial 37,680 50,201 62,013 64,559 67,676 69,404 Streetlighting 1,568 4,049 3,141 2,930 3,802 3,621 Sub total LECO 329, , , , , ,792 Note: CEB considers street lighting as one account, while LECO counts the street lighting systems individually as separate accounts. The total number of accounts of the CEB has increased by 5% in the CEB and 2% in the LECO respectively in 2012, compared with Figure 5.2 depicts the average household electrification rate of the coutry. 100% 90% 80% Household Electrifica on 70% 60% 50% 40% 30% 20% 10% 0% Figure 5.2 Household Electrification Rate 46 ı Sri Lanka Sutainable Energy Authority

64 The household electrification rate had reached 94% by Electricity prices A major role in electricity generation is played by the CEB while the IPPs and the SPPs play supportive roles. Unlike generation, CEB has a monopoly over electricity transmission. The distribution business is shared by CEB and LECO. Hence, the role of the CEB in the electricity industry in Sri Lanka is significant. As a result, analysis of the electricity sector financial performance is dominated by its main player; the CEB. Being a subsidiary of CEB and having a key presence in electricity sales, LECO financial performance is also important. Table 5.3 shows the sales and revenue of the two electricity utilities CEB and LECO, their annual revenue and average selling prices. Table 5.3 Average Electricity Sales, Selling Prices and Revenue of CEB and LECO CEB Sales (GWh) 4,433 6,228 7,321 8,067 8,756 9,173 Revenue from sales (LKRM) 21,496 49,735 96, , , ,328 Other Revenue (LKRM) 2,209 2,518 3,412 3,063 4,543 6,654 Total revenue (LKRM) 23,706 52, , , , ,982 Average Selling price (LKR/kWh) LECO Sales (GWh) ,051 1,124 1,216 1,217 Revenue from sales (LKRM) 3,691 8,175 13,064 14,035 18,424 18,941 Total revenue (LKRM) 3,691 8,175 13,064 14,035 18,424 18,941 Average Selling price (LKR/kWh) The national average selling price of electricity is given in Table 5.4 and the growth of the price is depicted in Figure 5.3. Table 5.4 National Average Selling Price of Electricity Average Selling price (LKR/kWh) Sri Lanka Sutainable Energy Authority ı 47

65 LKR /kwh Average Selling Price (LKR/kWh) Figure 5.3 National Average Selling Price of Electricity The average selling price of electricity per kwh depends on the tariff structure and the sales to different consumer categories. 48 ı Sri Lanka Sutainable Energy Authority

66 5.1.4 Electricity Tariff As illustrated in Table 5.5, the average selling price of an electricity unit in Sri Lanka increased over the time. There were no tariff revisions in 2012, the tariff applicable in 2011 was applicable for 2012 as well. Table 5.5 Electricity Prices in Year 2012 Effective Date: January 01, 2012 December 31, 2012 Unit Rate (LKR/Unit) Fixed Charge (LKR) Domestic Block 1 First 30 units Block units Block units Block units Block units Block 6 Above 180 units Religious and Charitable Institutions Block 1 First 30 units Block units Block units Block units Block 4 Above 180 units Sri Lanka Sutainable Energy Authority ı 49

67 General Purpose Industrial Hotels Rate - 1 Supply at 400/230 V Contract Demand < or = 42 kva Unit Charge (LKR/unit) Fixed Charge (LKR/month) Rate 2 Supply at 400/230 V Contract Demand above 42 kva Unit Charge (LKR/unit) Day (5.30 am 6.30 pm) (5.30 am 6.30 pm) Peak (6.30 pm pm) (6.30 pm pm) Off-peak 7.35 (10.30 pm 5.30 am) 9.10 (10.30 pm 5.30 am) Demand Charge (LKR/kVA) Fixed Charge (LKR/month) 3, , , Rate 3 Supply at 11 kv and above Unit Charge (LKR/unit) Day (5.30 am 6.30 pm) (5.30 am 6.30 pm) Peak (6.30 pm pm) (6.30 pm pm) Off-peak 7.15 (10.30 pm 5.30 am) 8.85 (10.30 pm 5.30 am) Demand Charge (LKR/kVA) Fixed Charge (LKR/month) 3, , , In 2011, Time of Use (ToU) tariffs were made mandatory for bulk customers in industrial and hotel categories. The road map for tariff reforms and rebalancing of the PUCSL specified that bulk customers in general category (commercial and office buildings), too be offered a mandatory ToU tariff from 2012, which was not implemented. Accordingly, the road map schedule for the implementation of ToU tariffs to industrial, general and hotel customers in the retail category by 2013, is likely to be delayed. The road map also stipulates that optional ToU tariffs be offered to household customers by The cost of electricity supply depicted below deviated from the tariffs, prominently in the case of domestic sector (Figure 5.4) 50 ı Sri Lanka Sutainable Energy Authority

68 Transmission Distribu on Network G Cost of Supply LKR/kWh Tariff Customer Category Figure 5.4 Cost of Electricity Supply Diagram MV Bulk LV Bulk Other Domes c Retail 5.2 Petroleum Distribution and Prices As described previously, Sri Lanka meets the country petroleum demand entirely by imported petroleum brought in as either crude oil or refined products. Since the processing capacity of the CPC-owned refinery is not sufficient to meet the country demand, considerable amounts of petroleum products have to be imported and directly sold in the local market Distribution Structure Until 2002, CPC was responsible for all aspects of petroleum supply, with the exception of retail marketing of LPG. By 2002, CPC owned and operated the refinery, all the import, storage and distribution terminals, and about 350 filling stations. In addition, there were about 700 privately-owned filling stations. The refinery located in Sapugaskanda consists of 50,000 barrels/day processing plant and a 540,000 tonne crude oil tank farm. The refinery gets crude oil either directly from the Single Point Buoy Mooring (SPBM) facility installed about 10 km offshore or from the four crude oil storage tanks of 40,000 tonnes (each), located in Orugodawatta. Part of the refinery output is stored at Sapugaskanda storage facility for distribution and the balance is pumped to the Kolonnawa storage facility. The Sapugaskanda tank farm (mini-distribution facility) receives products only from the refinery. This has a total storage capacity of 60,000 tonnes in twelve tanks for diesel, kerosene and fuel oil. Refined products from the refinery as well as imported products are received via pipelines to tanks at Kolonnawa. The Kolonnawa installation has a total capacity of 250,000 tonnes in 40 tanks for finished products and product loading facilities for loading railway bogies, which transport products to most of the bulk depots and to road tankers. Aviation fuel to the Katunayake airport is supplied from the Kolonnawa terminal through rail and road tankers. The Muthurajawela tank farm commenced operations in With the construction of this tank farm, Sri Lanka s storage capacity for finished petroleum products increased by 250,000 tonnes. Muthurajawela tank farm consists of 21 tanks of 10,000 m 3 capacity and 8 tanks of 5,000 m 3 capacity. These tanks store and distribute diesel and kerosene. Along with the tanks, CPC installed a new SPBM system, where 60,000 DWT (deadweight tonnage) ships could use the buoy for discharging imported finished products direct from sea to tanks via a submarine pipeline. This terminal includes a loading facility to distribute products by road tankers. However, rail transportation of petroleum products stored in the Muthurajawela tank farm is constrained due to the absence of a railway line. Sri Lanka Sutainable Energy Authority ı 51

69 Petroleum supply for retail sale is done at the following storage/distribution facilities Muthurajawela Kolonnawa Sapugaskanda mini distribution facility China Bay storage facility Several regional depots Lanka Marine Services (LMS) located at Bloemandhal in Colombo receives imported products directly as well as from the Kolonnawa terminal via pipelines, and provides bunker fuel to ships via pipelines connected to Dolphin pier and also from South jetty. LMS terminal has a storage capacity of 23,000 tonnes of fuel oil and 6,800 tonnes of diesel. Some amount of LPG is produced at the CPC refinery for local consumption. However, most of the country s LPG requirement is met through direct imports. LPG is imported through the Colombo Port, and also via a conventional buoy mooring system (CBM) for Litro Gas Lanka Limited facilities at Muthurajawela. Residual oil (heavy furnace oil) is transferred directly from the refinery to the 160 MW Sapugaskanda power plant owned by the CEB and to the 51 MW residual oil power plant owned by Asia Power to produce electricity for the national grid. The refinery LPG production is delivered to the private distributor by means of road tankers and then filled into bottles for onward distribution to consumers. As previously explained in this report, Sri Lanka meets all its petroleum demand by imported petroleum brought in as crude oil or refined products. Since the refining capacity of the CPC-owned refinery is not sufficient to meet the country demand, considerable amounts of petroleum products have to be imported and directly sold in the local market. Whether locally refined or directly imported, petroleum is channelled through the same distribution network which consists of several tank farms located in Kolonnawa, Sapugaskanda and Trincomalee and the local depots and the distribution stations (filling stations) spread all around the country Petroleum Prices Prices of Crude Oil and Imported Finished Products Crude oil imports increased in 2012, compared with As shown in Table 5.6, the average FOB cost of crude oil imported by CPC decreased by 24% in US dollar terms compared with 2011, and resulted in a decrease by 21% in LKR. 52 ı Sri Lanka Sutainable Energy Authority

70 Table 5.6 Costs of Crude Oil Imports Crude Oil Import Price Movements (F.O.B, Freight and C&F) Quantity (kt) 2, , , , , , Quantity (million bbl) Crude Oil Import Unit Price (USD/bbl) F.O.B. Price Freight Rate C&F Price Crude Oil Import Unit Price (LKR/bbl) F.O.B. Price 2, , , , , , Freight C & F Price 2, , , , , , The import prices of most finished petroleum products increased significantly in 2012, due to the refinery closure in several occasions. Details of costs of crude oil and other product imports are given in Table 5.7. Table 5.7 Finished Product Import Price Variation Product Import Price Variation (F.O.B) Mogas 92 Unl (USD/bbl) Mogas 95 Unl (USD/bbl) Naphtha (USD/bbl) Kerosene (USD/bbl) Gas Oil 0.05% S (USD/bbl) Gas Oil 0.25% S (USD/bbl) Gas Oil 0.5% S (USD/bbl) Gas Oil 1.0% S (USD/bbl) FO 180Cst (USD/t) FO 380Cst (USD/t) LPG (USD/t) Sri Lanka Sutainable Energy Authority ı 53

71 Petroleum Product Prices in the Local Market The impact of duty on petroleum prices is significant. The reason for gasoline prices to be considerably higher than other petroleum product is the impact of high duty rate imposed on it. Table 5.8 summarises the price variations of locally sold petroleum products. Table 5.8 Price Variation of Locally Sold Petroleum Products (Colombo Spot) Month Petrol (LKR/l) Kerosene (LKR/l) Diesel (LKR/l) Furnace Oil (LKR/l) LPG LKR/kg 90 Oct 95 Oct Industrial Domestic Super Auto 800 sec 1500 sec for Power Plants 3500 sec Litro Laugfs 2011-end Price Prices February May July December Prices of all petroleum products were revised in LP gas and 90 Octane gasoline underwent two prices revisions in Although fuel oil was sold at LKR 90.00/ litre, it was sold for power generation purposes at a subsidised rate of LKR LKR/litre. Figure 5.5 depicts the historical price changes of common petroleum products. The price indicated in the graph is the weighted average of monthly price revisions for a given year. The price of LPG is the average price of both Litro and Laugfs. 54 ı Sri Lanka Sutainable Energy Authority

72 LKR/l LKR/l Gasoline (90 Oct) Gasoline (95 Oct) Super diesel Auto diesel LKR/l LKR/l Industrial Kerosene Domes c Kerosene FO 800 sec FO 1500 sec FO 3500 sec LKR/kg LPG Figure 5.5 Historical Price Variations of Petroleum Products Sri Lanka Sutainable Energy Authority ı 55

73 5.3 Coal Imports and Prices The total quantities of coal imported are given in Table 5 9. The increase in quantity of imported coal in 2011 onwards is owing to the coal power plant in Norochcholai, which came into operation in Table 5.9 Coal Imports and Prices Imported Qty (t) 100, , , ,412.2 Imported price (LKRM) 1, , , , Biomass Distribution and Prices Biomass meets approximately half of the energy demand of the country. Abundant availability, especially in rural areas where the usage is most common, has simplified the distribution of biomass. The actual value of biomass is often misrepresented by its discounted price due to the simplified sourcing options. In terms of the cost of alternate fuels avoided, biomass has a significantly higher value to the economy. Although the use of biomass was limited to meeting household thermal energy needs and industrial thermal energy requirements, with the expected growth in biomass use for electricity generation and industrial applications, the price and value of biomass needs to be accounted in a more meaningful manner. However, the distribution structure of biomass has not developed yet to a commercial level to be discussed with reasonable accuracy. Table 5.10 gives the quantity of firewood produced and sold for industries. Table 5.10 Firewood Production and Sale for Industries Firewood (m 3 ) Quantity Produced 169, ,216 75, ,544 97, ,316 Quantity Sold 174,696 83,411 88, , , , ı Sri Lanka Sutainable Energy Authority

74 6 Energy Demand Supply of energy discussed up to now is a direct consequence of the demand for energy, which is analysed in detail in this chapter. Energy is a vital building block for economic growth. This chapter analyses the energy demand from electricity, petroleum and biomass. 6.1 Electricity Demand The System Demand Electricity demand has two aspects. The first being the energy demand where the cumulative electrical energy requirement is met by the supply system. The peak demand is the other criterion to be fulfilled in meeting the national electricity demand. The generating system needs to be able to meet the peak demand of the national grid. Since the national demand profile has an evening peak, the capability of the supply system in meeting the demand during the evenings (i.e. peak period) is important. Figure 6.1 shows the hourly demand profile of 21 May, 2012, the day the system recorded the annual peak. 2,500 2,000 1,500 1, :30 1:30 2:30 3:30 4:30 5:30 6:30 7:30 8:30 9:30 10:30 11:30 12:30 13:30 14:30 15:30 16:30 17:30 18:30 19:30 20:30 21:30 22:30 23:30 Figure 6.1 System Demand Profile on May 21, 2012 Sri Lanka Sutainable Energy Authority ı 57

75 Table 6.1 shows the development of the system peak demand over the years. Table The Growth in System Capacity and Demand System Parameters Total Gross Generation (GWh) Total Grid Connected Capacity (MW) 6, , , , , , , , , , , ,368.0 Maximum Demand (MW) 1, , , , , ,146.0 Reserve Capacity ,222.0 System Load Factor 51.8% 57.3% 60.0% 63.0% 55.9% 55.7% System Reserve Margin 30.9% 37.9% 44.4% 44.1% 45.2% 56.9% System load factors in the range 50%-60% are typical of a customer mix dominated by households with a high demand for electricity used for lighting in the evening. The peak demand in 2012 was 2,146.4 MW. Increase in the grid connected capacity resulted in an 11.7% increase in the system reserve margin. Figure 6.2 depicts the development of the system load factor, reserve margin and peak demand. 2, Sys Peak Demand (MW) 2,000 1,500 1, Sys Load Factor, Sys Reserve Margin SystemsPeakDemand System Load Factor System ReserveMargin Figure 6.2 Development of System Load Factor, Reserve Margin and Peak Demand 58 ı Sri Lanka Sutainable Energy Authority

76 Figure 6.3 depicts the historic growth of the load curve. 2,500 2,000 Demand (MW) 1,500 1, :30 1:30 2:30 3:30 4:30 5:30 6:30 7:30 8:30 9:30 10:30 11:30 12:30 13:30 14:30 15:30 16:30 17:30 18:30 19:30 20:30 21:30 22:30 23: Figure 6.3 The Growth in System Peak Demand 6.2 Petroleum Demand Demand for Different Petroleum Products The demand for different petroleum products vary primarily on their potential usage. For instance, auto diesel is widely used for transportation and power generation; in contrast to kerosene, which is used only for rural household energy needs, some industrial applications, agriculture and fisheries. Therefore, the demand for auto diesel is substantially higher than for kerosene. The refinery production process is adjusted to produce more of the high demand products while some products are directly imported to bridge the gap between refinery output and the demand. The demand for petroleum products increased in the year 2012, compared with Table 6.2 summarises the demand for different petroleum products. Sri Lanka Sutainable Energy Authority ı 59

77 Table 6.2 Demand for Different Petroleum Products kt LPG Naphtha Gasoline Kerosene Auto Diesel 1, , , , , ,968.4 Super Diesel Furnace Oil , , ,186.0 Total 3, , , , , ,354.5 Figure 6.4 depicts the evolution of the demand for different petroleum products through time. The demand for transport fuels like auto diesel, gasoline is on the rise and power generation fuels like auto diesel and furnace oil have increased over time. The demand for LPG has also risen. The demand for super diesel remains uniform, but the demand for heavy diesel phased out. Heavy diesel, which was the primary source of process heat, experienced a loss in demand mainly because the cement industry, which was its large scale user, switched to pulverised coal. 4,500 4,000 3,500 3,000 2,500 kt 2,000 1,500 1, Furnace Oil Super Diesel Heavy Diesel Auto Diesel Kerosene Gasoline Naphtha Fuel Gas LPG Figure 6.4 Evolution in the Demand for Different Petroleum Products 60 ı Sri Lanka Sutainable Energy Authority

78 6.2.2 Demand for Petroleum by District Table 6.3 details the district-wise retail and consumer sales of petroleum products, of the CPC and LIOC in Figure 6.5 depicts the distribution of the petroleum demand by district in PJ. Table 6.3 Demand for Petroleum by District kl Petrol (90 Octane) Auto diesel Super diesel Kerosene Industrial kerosene Petrol (95 Octane) Fuel oil 800 sec Fuel oil 1500 sec Fuel oil 3500 sec Marine Diesel Oil Kandy 53, ,340 1,452 5,138-3,122 1, Matale 18,830 40, ,574 1, Nuwara Eliya 10,745 37, , , Batticaloa 14,923 28, , Ampara 21,061 44, , Trincomalee 11,857 43, , Anuradhapura 38,933 95, , Polonnaruwa 15,754 45, , Jaffna 19,559 57, , Mannar 2,808 10,610-5, Mulalativu 2,554 16,147-3, Vavuniya 6,597 36, , Killinochchi 2,878 15, , , Kurunegala 77, ,919 1,069 2,660-1, , Puttalam 37,541 79, , , Ratnapura 36,204 79, ,122 3, Kegalle 26,252 49, , Galle 43,392 78, , ,053 1, Matara 26,859 80, , Hambantota 21,965 56, , Badulla 20,440 59, , Moneragala 14,560 36, , Colombo 240, ,369 17,493 19,191 6,499 34,937 18, ,416 62, ,602 Gampaha 147, ,765 3,379 19,312 1,789 5,656 24,559 61, ,220 - Kalutara 53,780 91, ,201 6,349 1,399 4,521 1, Total 966,709 2,449,534 29, ,005 20,926 53,265 65, , , ,602 Sri Lanka Sutainable Energy Authority ı 61

79 Jaffna 3,307 Kilinochchi 868 Mullaittivu 819 N Mannar 710 Vavuniya 1,698 Trincomalee 2,342 Anuradhapura 5,218 Puttalam 5,164 Polonnaruwa 2,372 Batticaloa 1,790 Kurunegala 8,469 Matale 2,424 Demand (PJ) Gampaha 26,576 Colombo 82,890 Kegalla 2,958 Kandy 6,357 Nuwara Eliya 2,220 Badulla 3,063 Moneragala 2,012 Ampara 2,568 < Kalutara 6,056 Ratnapura 4, >50000 Galle 4,767 Matara 4,183 Hambantota 3, km Figure 6.5 Districtwise Demand for Petroleum (PJ) The highest demand for petroleum fuels is in the Colombo District, followed by the Gampaha District. 62 ı Sri Lanka Sutainable Energy Authority

80 6.3 Coal Coal is an energy resource used in industries, rail transport and power generation. Until the first coal plant commissioned in 2011, coal was not a widely traded commodity in Sri Lanka (Table 6.4). Table 6.4 Demand for Coal kt Total Consumption Biomass As the most significant primary energy supply source in the country, biomass has a widespread demand for both commercial and non-commercial applications. However, the informal nature of supply, mainly through users own supply chains, has prevented accurate and comprehensive usage data being compiled for biomass. Therefore, estimation methods are used to develop reasonable information based on available data. Mid-year population data and LPG consumption are used to estimate household firewood consumption. Meanwhile, industrial biomass consumption is estimated based on the industrial production data and surveys. Most of the information on biomass presented in this report is based on estimates and sample surveys. Table 6.5 summarises the total usage of sources biomass. Table 6.5 Demand for Biomass kt Firewood 11, , , , , ,019.6 Bagasse Charcoal Bagasse is the waste form of sugar cane, which is used in sugar factories for combined heat and power generation. By 2012, the bagasse production was 130 kt, generated from the Pelawatta and Sevanagala sugar factories. Charcoal is produced mainly from coconut shell and wood. A major portion of the production of coconut shell charcoal is exported as a non-energy product. 6.5 Sectoral Demand Electricity Demand by Different End Use Categories Based on the usage type, electricity consumers are separated into the following categories Domestic Religious purpose Industrial Commercial Street Lighting Sri Lanka Sutainable Energy Authority ı 63

81 Amounts of electricity used by different customer categories are given in Table 6.6, which also includes off-grid electricity generation using conventional and non-conventional sources. Although the electrical energy demand of different end users is established using electricity sales data, individual power demand of different categories cannot be established due to the lack of a monitoring system or regular load research. Nevertheless, by analysing the typical load profiles of different user categories, it is visible that the domestic category is most influential in the morning and evening peaks and the consequent low load factor of the system. Table 6.6 Electricity Sales by End Use Category GWh Domestic 2, , , , , ,064.7 Religious Industrial 2, , , , , ,528.0 Commercial 1, , , , , ,614.1 Streetlighting Total 5, , , , , ,409.2 % Domestic Religious Industrial Commercial Streetlighting ,500 9,000 7,500 GWh 6,000 4,500 3,000 1, Streetligh ng Commercial Industrial Religious Domes c Figure Electricity Sales by Consumer Category 64 ı Sri Lanka Sutainable Energy Authority

82 Figure 6.6 indicates that the share of the commercial sector has expanded, while the industrial sector has marginally increased. In contrast, the shares of streetlighting and religious purposes remain the same, while the domestic sector too shows a marginal decrease Petroleum Demand in Different Sectors Petroleum has a wide range of applications as a convenient energy source. Transport, power generation, industrial thermal applications, domestic lighting and cooking are the most common uses of petroleum in Sri Lanka. In addition, due to the strategically important geographic location of Sri Lanka in terms of maritime and aviation movements, foreign bunkering and aviation fuel sales also create a demand for petroleum in the country. Petroleum demand to meet the non-domestic needs such as bunkering and aviation fuel is discussed separately in this report Transport Sector Transport is the most important sector as far as petroleum is concerned. Almost all the vehicles in Sri Lanka are powered by either diesel or gasoline. Road transport is 100% fuelled by petroleum, while rail transport is fuelled by diesel and marginally by coal. But in 2012, there was no demand for coal in rail transport. The Internal Combustion (IC) engines in all these vehicles intrinsically introduce considerable energy wastage in terms of conversion efficiency from petroleum energy to motive power. Use of electricity to at least energise the train transportation can be an efficient and economical alternative to burning petroleum fuels in the transport sector. Table 6.7 summarises the demand for fuels in the transport sector. Table 6.7 Transport Fuel Demand by Type kt Gasoline Auto Diesel 1, , , , , ,505.8 Super Diesel ,500 2,000 1,500 kt 1, Super Diesel Auto Diesel Gasoline Figure 6.7 Transport Demand by Fuel Type Sri Lanka Sutainable Energy Authority ı 65

83 Table 6.8 summarises the auto diesel demand in road transport and rail transport. Table 6.8 Auto Diesel Demand in Road and Rail Transport kt Road Transport 1, , , , , ,495.4 Rail Transport Total 1, , , , , ,527.0 % Road Transport Rail Transport Only a marginal share of 2.1% of the total transport diesel demand is consumed by rail transport. The transport fuel mix is dominated by auto diesel. The demand for all fuels has increased in 2012, compared with The demand for super diesel is marginal in the transport fuel mix as shown in Figure 6.7. Figure 6.8 gives a snapshot of the cumulative vehicle fleet. Motor cycles and three wheelers account for the highest number of registrations each year. The registration of motor cars too show an increasing trend. 3,000 Vehicle Nos. (thousands) 2,500 2,000 1,500 1, Motor Cycles Motor Cars Th ree Wheelers Dual Purpose Buses Lorries Land Vehicles Figure 6.8 Growth Pattern of Road Vehicle Fleet The active vehicle fleet was reported for the first time from the Air Resource Management Centre (Air- MAC) of the Ministry of Environment and Renewable Energy, using information from the Vehicle Emission Test (VET) programme (Figure 6.9). 66 ı Sri Lanka Sutainable Energy Authority

84 1,400, % 1.5% 1,200,000 1,000, , % 20.84% 7.87% 11.45% 0.02% 600, % 400, , Bus/Motor Coach/Omni Bus Motor Cycle Motor Car Prime Mover Dual purpose Land Vehicle Motor Lorry Motor Tricycle Figure 6.9 Active Vehicle Fleet Sri Lanka s active fleet is characterised by an increased population of motor cycles (51.46%) and motor tricycles (20.84%). Undoubtedly, this is a clear sign of worsening public transport services in the country, which must be arrested early, to avoid a severe transport crisis in the medium term Petroleum Usage in Other Sectors Transport and the power sector are the largest petroleum consuming sectors. Fuel consumption of the power sector by type, technologies and quantities has been detailed in Chapter 4, under energy conversions in thermal power plants. Domestic sector petroleum consumption is limited to kerosene and LPG. However, with the increased use of LPG, especially in urban households for cooking purposes, the demand for petroleum by the domestic sector has also become significant. Industrial sector petroleum usage is mostly for thermal applications where diesel and fuel oil is used to fuel industrial steam boilers. LPG usage is also increasing in industrial thermal applications where the quality and control of heat generation is important for the industry operation. LPG fired kilns in the ceramic industry is one such example. The commercial sector including the service sector organisations such as hotels also contribute to the national petroleum demand, but to a lesser degree than the above-mentioned high petroleum consumers. Table 6.9 details LPG demand by sector. The Total LPG demand has increased over the years. Sri Lanka Sutainable Energy Authority ı 67

85 Table 6.9 Demand for LPG by Sector kt Household, Commercial and Other Industries Transport Total kt Household, Commercial & Other Industries Transport Figure LPG Demand by Sector The domestic demand for LPG is increasing substantially. This is often attributed to the improved per capita income levels. Although the LPG demand is increasing in the household sector, it is decreasing in the industrial and transport sector. Agriculture based petroleum demand in Sri Lanka is reported as considerably low, despite the fact that it is broadly an agricultural economy. This is also attributed to the difficulty in separating fuel dispersed for agricultural purposes and transport, as they are done through the same pumping station. Estate sector is one division which shows a fair usage of petroleum for drying purposes, but its energy consumption is accounted under industrial usage. Kerosene used in fisheries is another substantial consumer category with regard to petroleum demand. Engine powered boats commonly used in the fishing industry are fuelled by either diesel or kerosene. It is therefore, important to understand that kerosene, which is a subsidised petroleum product in Sri Lanka, is not entirely used by the poorest segment of the society as envisaged in petroleum pricing policies. Table 6.10 summarises the kerosene consumption. 68 ı Sri Lanka Sutainable Energy Authority

86 Table 6.10 Demand for Kerosene by Sector kt Industrial Household, Commercial and Other Figure 6.10 indicates that the household kerosene consumption is generally following a declining trend, mainly due to the deeper penetration of the national grid, displacing kerosene as a lighting fuel kt Household, Commercial & Others Industrial Figure 6.11 Demand for Kerosene by Sector In the early stages, the demand for kerosene has been only in the household and commercial sector. However since the 2000s, the demand for kerosene in the industrial sector has gradually increased and continues to todate Bunkering and Aviation Sales Local and foreign bunkering and aviation fuel sales are also contributing to the national petroleum demand. Although it is arguable that the real use may not occur within the country, the transaction of purchasing the product happens within the country and therefore, the national petroleum supply needs to cater to this demand as well. Upto about 2009, the bunkering sales were not properly reported, owing to the difficulty in collecting data from numerous bunkering operations operating islandwide. Now however, data on bunkering operations is collected from the Ministry of Petroleum Industries, by invoking Section 52 of the Ceylon Petroleum Corporation Act No. 28 of Table 6.11 presents a summary of bunkering fuel quantities, aviation fuel usage and the sales of the same. Sri Lanka Sutainable Energy Authority ı 69

87 Table 6.11 Bunkering and Aviation Sales kt Domestic Bunkers Marine Gas Oil Marine Diesel Oil Heavy Diesel Furnace Oil Marine Lubricants Sub total Foreign Bunkers Marine Gas Oil Marine Diesel Oil Heavy Diesel Furnace Oil Marine Libricants Sub total Domestic Aviation Jet A Avgas Sub total Foreign Aviation Avtur Avgas Naphtha Sub total ı Sri Lanka Sutainable Energy Authority

88 6.5.3 Coal Demand in Different Sectors The total coal demand is given in Table Table 6.12 Demand for Coal by Sector kt Transport Industries Power Generation Total Consumption % Transport Industries Power Generation In the past, the total demand for coal had been in the transport sector or industries. But since the commissioning of the first coal power plant in 2011 (300 MW), there has been an increased demand for coal in power generation. In 2012, the demand for coal for power generation alone was 86.4% Coal Demand in Transport The demand for coal in transport is owing to rail transport (Table 6.13). Table 6.13 Coal Consumption in Rail Transport kt Transport Coal Demand in Industries The coal demand in industries is given in Table Table 6.14 Coal Demand in Industries kt Industries Coal Demand in Power Generation The demand for coal in the power generation in 2012 was 625 million tonnes. This demand is expected to increase in future, with the scheduled commissioning of new coal power plants. Sri Lanka Sutainable Energy Authority ı 71

89 6.5.4 Biomass Demand in Different Sectors Biomass Demand in Industries The demand for firewood and bagasse has increased in 2012 compared with Table 6.15 Biomass Demand in Industries kt Firewood 2, , , , , ,156.9 Bagasse Charcoal By 2012, there were two sugarcane processing plants operating in the country Biomass Demand in Household, Commercial and Other Sector Firewood is a main source of cooking fuel in many parts of the country. Table 6.16 gives the total firewood requirement in the household and commercial sector. Table 6.16 Demand for Firewood in Household, Commercial and Other Sector kt Firewood 8, , , , , , ı Sri Lanka Sutainable Energy Authority

90 6.6 Total Energy Demand To summarise the demand for different energy sources presented above, demand data is presented in a comparable unit of energy (tonnes of oil equivalent [toe] and Peta Joules [PJ]) in this section. Table 6.17 summarises the total energy demand by source. Table 6.17 Total Energy Demand by Energy Source ktoe Biomass 4, , , , , ,999.5 Petroleum 2, , , , , ,320.3 Coal Electricity Total 7, , , , , ,277.0 PJ Biomass Petroleum Coal Electricity Total % Biomass Petroleum Coal Electricity The petroleum demand figures presented are only in terms of final energy use, this does not include the fuels consumed in electricity generation. The share of biomass consumption in the total energy demand is 53.9% in Sri Lanka Sutainable Energy Authority ı 73

91 PJ Electricity Coal Petroleum Biomass Figure 6.12 Total Energy Demand by Energy Source 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Electricity Coal Petroleum Biomass Figure 6.13 Evolution of Energy Demand by Energy Source As can be expected from any growing economy, the share of biomass in the energy demand portfolio is on a decreasing trend, while the share of petroleum and electricity is on an increasing trend. With the economic development of the country, these trends will further accentuate in the medium term. 74 ı Sri Lanka Sutainable Energy Authority

92 6.6.1 Total Industrial Energy Demand Table 6.18 Total Energy Demand of Industries by Energy Source ktoe Biomass 1, , , , , ,631.7 Petroleum Coal Electricity Total 1, , , , , ,272.3 PJ Biomass Petroleum Coal Electricity Total % Biomass Petroleum Coal Electricity PJ Electricity Coal Petroleum Biomass Figure 6.14 Total Energy Demand of Industries by Energy Source Sri Lanka Sutainable Energy Authority ı 75

93 6.6.2 Total Transport Energy Demand Table 6.19 Total Transport Energy Demand by Energy Source ktoe Petroleum 1, , , , , ,670.2 Coal Total 1, , , , , ,670.2 PJ Petroleum Coal Total % Petroleum Coal Total transport (road and rail) is 99% fuelled by petroleum. Road transport is entirely fuelled by petroleum, while rail transport is fuelled majority by petroleum (diesel) and marginally by coal. The number of electronic vehicles and plug-in hybrid vehicles are growing and any accurate assessment of electricity consumed by the transport sector cannot be made due to non-availability of information PJ Coal Liquid Petroleum Figure 6.15 Total Energy Demand of Transport by Energy Source 76 ı Sri Lanka Sutainable Energy Authority

94 6.6.3 Total Energy Demand in Household, Commercial and Other Sectors Table 6.20 Total Energy Demand in Household, Commercial and Other Sectors by Energy Source ktoe Biomass 3, , , , , ,367.8 Petroleum Electricity Total 3, , , , , ,332.0 PJ Biomass Petroleum Electricity Total % Biomass Petroleum Electricity Biomass accounts for approximately 77.7% of the total household, commercial and other energy demand. The share of biomass and petroleum show a marginal decrease, while the share of electricity has shown a marginal increase. The petroleum decrease could be attributed to the substantial price increase experienced in PJ Electricit y Petroleum Biomass Figure 6.16 Total Energy Demand of Household, Commercial and Other Sector by Energy Source Sri Lanka Sutainable Energy Authority ı 77

95 6.6.4 Total Energy Demand by Sector Table 6.21 Total Energy Demand by Sector ktoe Industry 1, , , , , ,272.3 Transport 1, , , , , ,670.2 Household, Commercial & Others 3, , , , , ,332.0 Total 7, , , , , ,274.5 PJ Industry Transport Household, Commercial & Others Total % Industry Transport Household, Commercial & Others In 2012, households, commercial and other sectors accounted for the largest share of energy being 46.7%. The transport and industry sector accounted for 28.8% and 24.5% respectively. Compared with 2011, the energy demand in the household, commercial and other sector has decreased, but marginally increased in the industry and transport sectors. 78 ı Sri Lanka Sutainable Energy Authority

96 PJ Household, Commercial & Others Transport Industry Figure 6.17 Total Energy Demand by Sector Figure 6.17 depicts the growth of energy demand in the three main Sectors. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Household, Commercial & Others Transport Industry Figure 6.18 Evolution of Total Energy Demand by Sector The growth of industry demand is stagnant. However, the transport energy demand has increased in its share, while the share of household, commercial and other is decreasing. Sri Lanka Sutainable Energy Authority ı 79

97 80 ı Sri Lanka Sutainable Energy Authority

98 7 Energy Balance The performance of the entire energy sector is summarised in the National Energy Balance shown in the following pages, in original commodity units, in unified toe (Tonnes of Oil Equivalent) and in SI Units of PJ (Peta Joules). The Energy Balance illustrates energy supply, energy conversion, losses and energy consumption (demand) within the year. Figure 7.1 gives the Energy Balance for 2012 in PJ. Relevant conversion factors are given in Annex II Total Energy Demand Biomass Petroleum Electricity Coal Industry Household, Commercial & Others Transport Figure 7.1 Energy Balance 2011 (in PJ) The total energy demand of the household, commercial and other sector was PJ, out of which PJ came from biomass, 15.6 PJ came from petroleum and 24.8 PJ came from electricity. The total energy demand in the industrial sector was 95.1 PJ. Biomass accounted 68.3 PJ, petroleum for 11.5 PJ, coal for 2.6 PJ and electricity accounted 12.7 PJ. In the transport sector, out of the total demand of PJ, the entire amount was sourced by PJ. Sri Lanka Sutainable Energy Authority ı 81

99 Table 7.1 Sri Lanka Energy Balance: 2012 (in original units) Renewables (GWh) Electricity (GWh) LPG (kt) Gasoline (kt) Naptha (kt) Av. Gas (kt) Kerosene (kt) Supply Primary Energy 3, Imports Direct Exports (36.7) - - Foreign Bunkers Stock Change Total Energy Supply Energy Conversion Petroleum Refinery Conventional Hydro Power (2,726.7) 2, Thermal Power Plants - 8, (90.9) - - Small Hydro Power (564.7) Wind Power (146.8) Biomass Power (22.2) Solar Power (2.0) Waste Heat Self Generation by Customers Off-grid Conventional Off-grid Non-Conventional (17.0) Charcoal Production Own Use - (296.3) Conversion Losses Losses in T&D - (1,192.1) Non Energy Use Total Energy Conversion (3,479.3) 10, (20.0) Energy Use Agriculture Industries - 3, Road Transport Rail Transport Domestic Aviation Household, Commercial & Other - 6, Total Energy Use - 10, ı Sri Lanka Sutainable Energy Authority

100 Table 7.1 Sri Lanka Energy Balance: 2012 (in original units) Jet A1 (kt) Diesel (kt) Fuel Oil (FO 1500) (kt) Residual Oil (kt) Solvents (kt) Coal (kt) Baggase Agro Residues (kt) Firewood (kt) Charcoal (kt) Crude Oil (kt) , , , (308.0) - (217.2) (238.8) (61.5) 1, , , (1,596.1) (430.0) (842.7) (268.5) - (624.9) (36.4) (98.6) (4.80) (30.1) (35.8) (411.2) (51.6) (1.1) (624.9) (36.4) - - (1,694.7) , , , , , Sri Lanka Sutainable Energy Authority ı 83

101 Table 7.2 Sri Lanka Energy Balance: 2012 (in thousand toe) Renewables Electricity LPG Gasoline Naptha Av. Gas Kerosene Jet A1 Supply Primary Energy Imports Direct Exports (40.0) Foreign Bunkers (323.4) Stock Change (0.2) Total Energy Supply (64.5) Energy Conversion Petroleum Refinery Conventional Hydro Power (654.4) Thermal Power Plants (99.1) Small Hydro Power (135.5) Wind Power (35.2) Biomass Power (5.3) Solar Power (0.5) Waste Heat Self Generation by Customers Off-grid Conventional Off-grid Non-Conventional (4.1) Charcoal Production Own Use - (25.5) Conversion Losses Losses in T&D - (102.5) Non Energy Use Total Energy Conversion (835.0) (21.8) Energy Use Agriculture Industries Road Transport , Rail Transport Domestic Aviation Household, Commercial & Other Total Energy Use , ı Sri Lanka Sutainable Energy Authority

102 Table 7.2 Sri Lanka Energy Balance: 2012 (in thousand toe) Diesel Fuel Oil (FO 1500) Residual Oil Solvents Coal Baggase Agro Residues Firewood Charcoal Crude Oil Total , , , , , (40.0) - (212.9) (536.2) (150.4) , , , , (1,643.9) (154.0) (419.9) (451.5) (825.9) (263.1) - (393.7) (1,309.3) (14.5) (25.5) (101.6) (101.6) (102.5) (4.2) (19.6) - (23.8) (37.6) (403.0) (50.6) (0.9) (393.7) (14.5) - - (1,745.5) (2,117.1) , , , , , , , , ,277.0 Sri Lanka Sutainable Energy Authority ı 85

103 Table 7.3 Sri Lanka Energy Balance: 2012 (in Tera Joules) Renewables Electricity LPG Gasoline Naptha Av. Gas Kerosene Jet A1 Supply Primary Energy 34, Imports - - 8, , ,731.2 Direct Exports (1,676.5) Foreign Bunkers (13,539.3) Stock Change , (9.4) 4,703.6 (106.2) Total Energy Supply 34, , , ,703.6 (2,701.9) Energy Conversion Petroleum Refinery , , , ,095.5 Conventional Hydro Power (27,399.0) 9, Thermal Power Plants - 30, (4,147.7) Small Hydro Power (5,674.2) 2, Wind Power (1,475.1) Biomass Power (222.8) Solar Power (20.1) Waste Heat Self Generation by Customers Off-grid Conventional Off-grid Non-Conventional (170.5) Charcoal Production Own Use - (1,067.0) Conversion Losses Losses in T&D - (4,292.2) Non Energy Use Total Energy Conversion (34,961.6) 37, ,917.2 (913.1) - 3, ,095.5 Energy Use Agriculture Industries - 12, , Road Transport , Rail Transport Domestic Aviation ,393.7 Household, Commercial & Other - 24, , , Total Energy Use - 37, , , , , ı Sri Lanka Sutainable Energy Authority

104 Table 7.3 Sri Lanka Energy Balance: 2012 (in Tera Joules) Diesel Fuel Oil (FO 1500) Residual Oil Solvents Coal Baggase Agro Residues Firewood Charcoal Crude Oil Total , , , , , , , , (1,676.5) - (8,912.0) (22,451.3) 10, , , (6,297.7) , , , , , , , , , , , , , (68,828.5) (6,447.0) (17,581.0) (18,901.6) (34,578.0) (11,015.2) - (16,481.8) (54,819.6) (609.0) (1,067.0) (4,253.2) (4,253.2) (4,292.2) (177.9) (820.2) - (998.1) (1,573.7) (16,870.8) (2,117.9) (40.0) (16,481.8) (609.0) - - (73,081.7) (88,637.7) , , , , , , , , , , , , , , , , , , ,411.0 Sri Lanka Sutainable Energy Authority ı 87

105 Finished Petroleum Imports 2, Coal Wind Off-grid 4.07 Non-Conven onal Hydro Power Solar , , Non-Energy Uses 4.25 Biomass 4, Conversion & Transmission Losses , , , Foreign Bunkers and Avia on Direct Export Industry 2, Domes c and Commercial 4, Transport 2, R e fi n e r y Crude Import 1, Stock Change 1.91 E l e c t r i c i t y G e n e r a o n Stock Change Stock Change Figure 7.2 Energy Flow Diagram (ktoe)

106 8 Energy and Economy 8.1 Electricity Sector Financial Performance The year 2012 recorded another year of poor financial performance for the CEB, and the return on assets (RoA) was (7.2%). LECO however, had performed well in financial terms, recording a RoA of 11.0%. Table 8.1 summarises the financial performance of CEB and LECO. Table 8.1 Financial Performance of CEB and LECO CEB Net assets in Operation (LKRM) 161, , , , , ,870 Return on assets (%) (2.8) (1.15) (1.7) 0.1 (2.5) (7.2) LECO Net assets in Operation (LKRM) 3,750 5,119 8,735 8,420 8,666 8,700 Return on assets (%) (3.3) (1.9) Financial Performance of the Petroleum Sector Impact on Macro Economy The price of petroleum in the world market increased in 2012, resulting in a net petroleum import bill increasing to USD 5,256 million. With the demand for petroleum increasing rapidly over the last two years, the oil prices have increased to historic heights and the expenditure on oil imports surpassed the 50% level for the first time in history, consuming a considerable share of the foreign earnings of the country. Petroleum imports in 2012 cost approximately 51.5% of the country s non petroleum export earnings, recording the highest drain in history, surpassing the share in 1982, during which the world experienced the second oil shock (44.8%). Table 8.2 shows the historic trends of the petroleum import costs. Sri Lanka Sutainable Energy Authority ı 89

107 Table 8.2 Petroleum Import Costs and its Impact on the Macro Economy million USD Total Exports 5,522 6,347 7,085 8,626 10,559 9,774 Total Imports 7,320 8,863 10,207 13,451 20,269 19,183 Petroleum Imports 897 1,730 2,164 3,183 4,977 5,256 Petroleum Re-exports Net Oil Imports 826 1,599 2,029 2,920 4,424 4,793 Non Petroleum Exports 5,451 6,216 6,950 8,363 10,006 9,311 Net Oil Imports as % of Non Petroleum Exports Crude Oil Import Prices C&F USD/bbl % of Non Petroleum Exports Crude Oil Import Price C&F Non Petroleum Exports Figure Crude Oil Price Variation and Net Oil Imports as a Percentage of Exports After 1977, a combination of increased consumption and the doubling of world oil prices resulted in a rapid rise in the oil import bill. By 1980, the net oil import bill increased more than three times and the proportion of export earnings devoted to importing oil rose sharply from 17.5% to 31.6%. The situation further deteriorated and this figure rose to 44.8% in 1982 but subsequently fell to 9.3% by 1986, mainly owing to oil price drop as a consequence of the OPEC oil surplus. The period from 1980 to 1983, which was considered the worst period in terms of the impact of the higher oil prices on foreign exchange earnings and reserves of the country, now portrays a less significant event, when compared with the perilous situation of ı Sri Lanka Sutainable Energy Authority

108 8.2.2 Petroleum Sector Financial Performance Ceylon Petroleum Corporation (CPC) dominates the petroleum sector of the country. However, the role of Lanka Indian Oil Company (LIOC) and the LP Gas companies also have a reasonable bearing on the overall sector performance. Several bunkering companies were also active in the petroleum sector. Table 8.3 presents financial performance details of the CPC and LIOC. Table 8.3 CPC and LIOC Financial Performance LKR million CPC Total Revenue 76, , , , , ,941 Total Cost 92, , ,541 (304,007) (477,239) - BTT/GST/VAT 12,707 12,703 19,846 20,222 (25,826) - Income Tax - 2, Estimated Tariff Cost 2, Crude & Product Import Cost 64, , ,095 (265,604) (428,071) - Estimated other Cost 13,075 9,695 - (18,181) (23,342) - Profit/ Loss (16,062) 7,601 (11,567) (26,923) (94,508) (89,657) LIOC * Total Revenue 47,679 51,423 54,303 75,364 Total Cost (49,179) (49,376) (53,529) 73,194 VAT, ESC, Debit,Payee & other taxes (1,124) (998) Income Taxes (25) (17) (20) 26 Import Duty N/A N/A 7,928 - Product Cost N/A N/A 42,952 59,437 Estimated other costs N/A N/A 2,579 3,037 Profit/ Loss (2,649) 1, ,144 *LIOC was formed in the year The CPC after recording the highest ever loss in 2011, which amounted to LKR 94.5 billion, marginally reduced the loss upto LKR 89.7 billion. But the LIOC on the other hand performed remarkable well and recorded a profit of LKR 2.1 billion in The main reason attributed to this visible disparity is the selective vending of products by the LIOC. Sri Lanka Sutainable Energy Authority ı 91

109 LKR billion CPC Profit/Loss LIOC Profit/Loss Figure 8.2 Profit/Loss of CPC and LIOC The performance of the petroleum sector depends on the import cost of petroleum and the local selling price. Owing to the scale of the financial transactions involved in importing petroleum, the impact of the petroleum import price is felt not only by the sector, but by the whole economy of the country. 8.3 Energy-Economy Indicators Commercial energy (petroleum, electricity and coal) intensity is an indicator of a country s energy utilisation with respect to the national output (measured in terms of Gross Domestic Product-GDP). Low commercial energy intensity would suggest stringent use of energy for economic activities in 2012, and a continuous trend could be an indication of a structural change in the economy. The commercial energy intensity marginally increased to 0.47 TJ/GDP million LKR from the previous year s figure of 0.44 TJ/GDP million LKR. The success of policies and action taken by the relevant authorities as well as the energy consumers in making their energy consumption more productive than ever, combined with the structural change of the economy where growth is largely in the services sector is presumed to have warranted this trend. 92 ı Sri Lanka Sutainable Energy Authority

110 Table 8.4 Sri Lanka Energy Indices Electricity (TJ) 19, , , , , ,473.5 Petroleum (TJ) 99, , , , , ,013.3 Coal (TJ) - 2, , , , ,605.9 Total commercial energy (TJ) 118, , , , , ,092.7 GDP at 1982 factor cost prices (million LKR) 214, , , , , ,558 Commercial Energy Index GDP Index (Index 1984=1.0) Commercial Energy Intensity (TJ/LKR million) Commercial Energy Intensity Index (1984=1.0) TJ/ LKR Million Commercial Energy Intensity Figure 8.3 Commercial Energy Intensity Sri Lanka Sutainable Energy Authority ı 93

111 94 ı Sri Lanka Sutainable Energy Authority

112 9 Environmental Impacts 9.1 Emissions An Emission Factor is the average emission rate of a given pollutant from a given source relative to the intensity of a specific activity. Emission factors assume a linear relation between the intensity of the activity and the emission resulting from this activity; Emission pollutant = Activity * Emission Factor pollutant Intensities are also used in projecting possible future scenarios such as those used in the IPCC assessments, along with projected future changes in population, economic activity and energy technologies. The Grid Emission Factors for were calculated using the Methodological Tool in EB 63 Report, Annex 19 "Tool to calculate the emission factor for an electricity system" (Version ). The Grid Emission Factor for 2012 was calculated using the Methodological Tool in EB 70, Annex 22 "Tool to calculate the emission factor for an electricity system" (Version ). 9.2 Grid Emission Factor The Grid Emission Factor (GEF) indicates the amount of CO 2 avoided if a specific intervention is made either through the introduction of a renewable energy project to a grid or through the incorporation of an energy saving project in the grid. The GEF also represents the quantity of CO 2 emitted by a power system during a year. The GEF pivots on three factors, viz., Operating Margin, Build Margin and Combined Margin. Margin refers to the happenings of renewable energy based power or an energy saving project Operating Margin The Operating Margin (OM) is a concept which includes all power plants which can have reduced outputs due to a project. It specifically excludes low cost, must run power plants, implying that with or without the project, such generation will continue. Table 9.1 gives the Simple Operating Margin (OM). Table 9.1 Operating Margin Emissions from Power Plants (t-co 2 ) 3,820, ,038, ,333, ,992, ,677,909.3 Net Electricity Generation (GWh) excluding low-cost must run power 5, , , , ,722.1 plants Operating margin CO 2 emission factor (t-co 2 /MWh) Annual average Three-year weighted average Sri Lanka Sutainable Energy Authority ı 95

113 9.2.2 Build Margin The Build Margin (BM) is a concept which attempts to foretell the happenings of a generation system in future, during the crediting period of a project, considering the recent additions to a generation system. Table 9.2 Build Margin Unit Emissions of power plants considered for the BM Generation of power plants considered for the BM tonnes of CO 2 1,513, ,239, ,229, ,757, ,573,387.8 GWh 2, , , , ,357.5 Build margin emission factor t-co 2 / MWh Combined Margin The Combined Margin (CM) is a weighted average of the OM and BM and is commonly known as the Grid Emission Factor (Table 9.3). Table 9.3 Combined Margin For solar, wind Projects All other Projects; 1 st crediting period All other Projects; 2 nd - 3 rd crediting period The OM, BM and CM are required for the assessment of CO 2 emission reductions for projects claiming carbon credits under UNFCC guidelines. 96 ı Sri Lanka Sutainable Energy Authority

114 The total emissions from power generation rose sharply in 2011 and 2012, with the commissioning of the coal power plant as shown in Figure ,000 6,000 kt of CO 2 per annum 5,000 4,000 3,000 2,000 1, Coal Biomass Heavy Sulphur Fuel oil Naphtha Residual fuel Low sulphur fuel oil Diesel Figure 9.1 Emissions from Power Plants by Type of Fuel Sri Lanka Sutainable Energy Authority ı 97

115 98 ı Sri Lanka Sutainable Energy Authority

116 10 Energy Sector Performance and Future Outlook 10.1 Electricity The country, for the first time after 2001, experienced scheduled power cuts (approximately two hours and fifteen minutes per day) from August to September The reasons were ascribed to relentless breakdowns in the first coal power plant, scheduled maintenance and repairs in other large thermal power plants, the lapse of a power purchase agreement of a private thermal power plant and reduced hydro power generation owing to the consecutive failure of monsoons. The electricity tariffs attracted a Fuel Adjustment Charge (FAC) ranging from 15% to 40% as a counter measure to curtail the sharp increase of generation costs. The Government deployed a public awareness campaign urging the electricity users to conserve energy, as another coping strategy. The total gross generation was 11,896 GWh in It marked an increase of 2.1% from 2011, which was 11,646 GWh. The droughts continued from 2011 to 2012, therefore the hydro power generation decreased by 10.9% in 2012, in comparison to In order to compensate for the loss of hydro generation, the thermal share increased by 12.9%. The increased dependence on thermal power generation worsened the debt situations of both CEB and CPC, and caused severe pressure on the foreign reserves of the country in The Upper Kotmale Hydro Power Plant was commissioned in July Several major power plants continued construction work as scheduled. These included the second phase of the Norochcholai Coal Power Plant (two 300 MW units), which is expected to be commissioned in 2013 and 2014 respectively, the Uma Oya Hydro Power Project (120 MW), which is expected to be commissioned in However, the Trincomalee Coal Power Plant (500 MW), which is expected to be commissioned in 2017, faced formidable issues at the early stages of negotiations between the Sri Lankan and Indian counterparts. The financial position of CEB further weakened in 2012, owing to the substantial decrease in hydro power generation and the subsequent increase in thermal power generation. This sanctioned a rise in the average generation cost. The fuel bill of the CEB increased to LKR 42.5 billion in The CEB s average unit cost at selling point stood at LKR per unit while the overall average tariff was at LKR 15.65, resulting in a loss of LKR 6.48 per unit of electricity at point of sale. The price of diesel used for power generation was revised from LKR to LKR /litre. Prices of furnace oil too, were revised. The price of high sulphur furnace oil and low sulphur oil were revised from LKR to LKR 65.00/litre and LKR to LKR 75.00/litre respectively. This meant the near complete removal of subsidies granted to the power generation sector. The Government deployed many measures to electrify the Northern and Eastern provinces through the extension of the national grid, in addition to the on-going rural electrification programmes. The Jaffna peninsula was connected to the national grid in September 2012, after 25 years, through a 33 kv express line from Kilinochchi. The 132 kv transmission line connecting Vavuniya to Kilinochchi was completed in 2012 and the construction of another 132 kv transmission line from the Kilinochchi substation to Chunnakam in Jaffna is in progress under the second stage of the project. Total system losses and own use as a percentage of the total gross generation of the country, decreased from 14.2% in 2011 to 12.5% in 2012, which is a remarkable achievement by a country committed to 100% electrification. Sri Lanka Sutainable Energy Authority ı 99

117 New Renewable Energy Development Renewable energy development is carried out in the country with the aim of increasing the stake of RE in power generation by 10% by 2015 according to the National Energy Policies and Strategies in Sri Lanka. This goal is to be accelerated to a further 20% by 2020 as per the Mahinda Chnithanaya The Way Forward. However, the year 2012 was a dismal year for the industry with record low rainfall, breaking the continuous growth trend of energy supplied to the national grid over the last few years from the small hydro sector. Apart from the weather related issues, the industry suffered from a regulatory standoff between the regulator and the utility, leaving them without new power purchase agreements to launch new renewable energy projects. Early resolution of this issue will be welcomed by all concerned, and will help to keep up the commendable pace achieved by the industry after In wind, the technology development effort, involving Vawin (Private) Limited of Sri Lanka and Nordic Folkecenter for Renewable Energy of Denmark, saw the successful casting of wind turbine blades in Sri Lanka, in Strenuous efforts are now underway in integrating the key technologies to complete the first ever grid scale wind turbine manufactured in Sri Lanka. This initiative will bring down the cost of wind energy to LKR 17.00/kWh in the prevalent cost structures. This will be on par with the average selling price of electricity, and will provide new avenues for local value addition, employment creation and skills development, paving the way for wealth creation in Sri Lanka. A rural energy services programme was formulated by the SEA to provide improved energy services to rural communities and the first stage of this project was commissioned in September 2012 in Meemure, one of the most remote villages in Sri Lanka. The project provided electricity to 125 village homes through a small hydro project Petroleum Crude oil prices were highly volatile in 2012, although the average crude oil price remained largely unchanged when compared to The average international crude oil price (Brent) was at USD per barrel. Significant supply uncertainties in crude oil were caused by political disturbances in the Middle East and North Africa. This in turn affected the domestic selling prices of petroleum products. The substantial increase in international oil prices in early 2012, followed by the depreciation of the rupee and the increase in sale of furnace oil to CEB at prices below cost, and increased thermal power generation caused heavy losses to the Ceylon Petroleum Corporation. As a result, a prospect of several large state agencies locked to each other in large volumes of debt loomed throughout the year The prices of several products were revised in 2012, causing noticeable change of consumption volumes, especially kerosene, which dropped by nearly a third six months after the revision. Despite the petroleum price revisions in the local market, the financial position of the CPC continued to deteriorate, owing to the provision of certain petroleum products below cost, depreciation of the rupee, the closure of the refinery on several occasions and falling refinery margins due to shifting to more costly sources of crude oil with the US led sanctions on Iran. The crude sourcing issues required the Government to explore newer producers such as Vietnam as an alternative. The delay in implementing the Sapugaskanda Oil Refinery Expansion and Modernisation (SOREM) Project has led to poor yields and frequent stoppages, lower refinery margins, which has reduced the economic efficiency of refinery operations. The refinery expansion project failed to move ahead as planned, with few investors submitting unsolicited proposals in With no sign of any firm decision, the sole refinery 100ı Sri Lanka Sutainable Energy Authority

118 of the country operated under stress for another year. Failure to move ahead with the modernisation project is expected to cause irrevocable damage to the petroleum industry, severe economic impact to the country and an ever increasing burden on the end user, well into the foreseeable future. Further, as a consequence of imposing sanctions on Iran, and the resultant constraint on making payments for oil, Sri Lanka had reduced crude oil importation from Iran and diversified to other sources and types of crude oil which gives a lower yield. Therefore, it is important to upgrade the refinery to increase the yield even for different types of crude oil. An inter-ministerial committee which was mandated to probe the fuel quality issues has recommended improving the quality of diesel fuel to low Sulphur category by end 2013, which might cause more complications to the refinery operations. A considerable expansion of aviation bunkering services is expected with the commissioning of the petroleum storage facility in the new international airport in Mattala, Hambantota. The facility will include a storage terminal, pipe network and apron area fuel hydrant system. The storage terminal will be equipped with three tanks capable of holding three million litres of Jet A1 fuel collectively. The facility will be initially serviced by road tankers operating from Colombo, and later by the proposed storage terminal at the Hambantota port. The terminal at the port will have nine tanks for marine bunkering operations, three tanks for aviation fuel storage and an LPG storage and distribution terminal as well. This important addition of petroleum infrastructure to Sri Lanka is expected to be fully functional by Oil/Gas Exploration Following the two successive discoveries of gas and condensate in two of the three exploration wells in late 2011, Cairn Lanka (Pvt) Ltd, the operator of the Mannar Basin Block SL , notified the Government of its intention to enter the second phase of exploration. Following these developments, the Petroleum Resources Development Secretariat (PRDC) decided to stage Sri Lanka s second international offshore exploration licensing round in early 2013 to offer more blocks in the Mannar and Cauvery basins to investors. On the international relations front, several National Oil Companies (NOCs) and International Oil Companies (IOCs) held discussions with the Government on potential exploration and business investment collaboration. Sri Lanka Sutainable Energy Authority ı 101

119 Annex I Independent Power Producers (IPPs) Starting from 1997, many IPPs entered the electricity market, supplying electricity to the national grid. CEB has separate power purchase agreements with these private sector companies. 1. Lakdanavi (Pvt) Ltd 2. Asia Power (Pvt) Ltd 3. Colombo Power (Pvt) Ltd 4. ACE Power Matara (Pvt) Ltd 5. ACE Power Horana (Pvt) Ltd 6. AES Kelanitissa (Pvt) Ltd 7. Heladhanavi (Pvt) Ltd 8. ACE Power Embilipitiya (Pvt) Ltd 9. Aggreko (Pvt) Ltd. 10. Yughadhanavi (Pvt) Ltd 11. Northern Power The IPPs ACE Power Generation Matara (Pvt.) Ltd., Lakdhanavi (Pvt.) Ltd., ACE Power Generation Horana (Pvt.) Ltd. and Aggreko International Project Ltd. (in Chunnakum) retired from the national grid in 2012, upon reaching the end of their respective contracts. Small Power Producers Many new small power producers came into existence as a result of the attractive tariffs offered by the CEB and the lending facilities provided by the RERED project. A total of 121 SPPs were operational by the end of ı Sri Lanka Sutainable Energy Authority

120 List of Small Power Producers hydro solar biomass/dendro wind waste heat Name of Power Plant Year of commissioned Capacity (MW) Generation (GWh) in Ritigaha Oya Rakwana Ganga Kolonna Ellapita Ella Carolina Weddamulla Delgoda Mandagal Oya Glassaugh Minuwnella Kabaragala Bambarabatu Oya Galatha Oya Hapugastenna I Belihuloya Watawala Niriella Hapugastenna II Deyianwala Hulu Ganga I and II Sanquhar Karawila Ganga Brunswic Sithagala Way Ganga Alupola Rathganga Waranagala Nakkawita Walakada Nianwita Oya Atabage Oya Batalagala Hemingford Kotapola Wee Oya Radella Kumburuteniwela Asupini Ella Kalupahana Upper Korawaka Sri Lanka Sutainable Energy Authority ı 103

121 List of Small Power Producers hydro solar biomass/dendro wind waste heat Name of Power Plant Year of commissioned Capacity (MW) Generation (GWh) in Badalgama (Biomass) Delta Estate Gomala Oya Gurugoda Oya Coolbawan Henfold Dunsinane Nilambe oya Kolapathana Guruluwana Kuda Oya Labuwewa Forest Hill Batatota Kehelgamu oya Kotankanda Lower Neluwa Barcaple Kadawala Blackwater Koswatta ganga Kadawala ii Loggal oya Manelwala Somerset Sheen Palmerston Giddawa Magal ganga Soranathota Tokyo Lower Atabage Halathura Ganga Nugedola Pathaha Oya Badulu Oya Amanawala Adavikanda Bogandana Gangaweraliya Watakella ı Sri Lanka Sutainable Energy Authority

122 List of Small Power Producers hydro solar biomass/dendro wind waste heat Name of Power Plant Year of commissioned Capacity (MW) Generation (GWh) in Ganthuna Udagama Aggra Oya Mampuri Seguwanthivu Vidatamunai Willpita Denawak Ganga Maduru Oya Laymasthota Kalupahana Oya (Pahala) Bowhill Kirkoswald Kiriwan Eliya Gonnoruwa - II Thirappane Gonnoruwa - I Kottamurichchana (Dendro) Nirmalapura Watawala B Denawak Ganga MHP Waltrim Branford Upper Ritigaha Oya Koladeniya Upper Magalganga Kokawita MHP I Kalugala Pitawala Bambarabotuwa MHP III Nandurana Oya Kaduruwan Dola Athuraliya Barcaple Phase II Bopekanda Falcon Valley Indurana Punagala Ambewala Madurankuliya Uppudaluwa Kalpitiya Total Sri Lanka Sutainable Energy Authority ı 105

123 Litro Gas Lanka Limited. Liquefied Petroleum Gas (LPG) industry was privatised in 1995, when Shell Gas purchased a stake in the previously Government-owned Gas Company, under a five-year concession. Over , Shell Gas purchased LPG available in the CPC refinery and also imported LPG, and marketed in Sri Lanka. The monopoly status ended in late The Company markets LPG to all customer segments, in all provinces of the country. The full ownership of Shell Gas Lanka (Pvt) Ltd was handed over to the Government in November 2010, forming Litro Gas Lanka Limited (LGLL). Sri Lanka depends on imported LPG to bridge the growing gap between demand and the limited local production by Ceylon Petroleum Corporation s (CPC) Refinery in Sapugaskanda. To meet this demand, the Government also took steps to purchase the Shell owned LPG Storage Terminal situated in Kerawalapitiya. The LPG Storage Terminal was re-named Litro Gas Terminal Lanka (Private) Limited (LGTLL). Litro Gas also owns a modernised LPG bottling plant situated in Mabima, Sapugaskanda which is one of the largest in the region and a fleet of modernised LPG tanker trucks.laugfs Gas PLC Established in the year 1995, LAUGFS Holdings is a Sri Lankan diversified business conglomerate covering most of the commercial spectrum of industries. LAUGFS Gas PLC is a subsidiary of Laugfs Holdings Limited. It plays a key role in the importation, storage filling, distribution and sale of Liquefied Petroleum Gas (LPG) for domestic, industrial and auto gas users. LAUGFS hold one of the state-of-art storage and filling facility at Mabima, with a storage capacity of 2,500 tonnes, equipped with a strong dealer network in the country. Lanka Indian Oil Company (LIOC) LIOC is a subsidiary of Indian Oil Company, which is owned by the government of India. It operates about 150 petrol & diesel stations in Sri Lanka, and has a very efficient lube marketing network. Its major facilities include an oil terminal at Trincomalee, Sri Lanka's largest petroleum storage facility and an 18,000 tonnes per annum capacity lubricants blending plant and state-of-the-art fuels and lubricants testing laboratory at Trincomalee. 106ı Sri Lanka Sutainable Energy Authority

124 Annex II Conversion to Uniform Energy Units For comparison, energy products expressed in their respective units used for ordinary transactions need to be converted to a common equivalent unit. Similar to most other countries, Sri Lanka used tonnes of oil equivalent (toe) as the common denominator for this purpose (1 toe = 10 GCal = kj). Sri Lanka is contemplating using Joules as the common unit in future. Shown below are the conversion factors used for converting each energy product to equivalent toe. Conversion Factors and Calorific Values Primary Energy toe/t kj Bagasse ,747,200 Charcoal ,214,200 Coal ,307,600 Crude Oil ,124,040 Fuel wood ,909,840 Hydro electricity (thermal equivalent) (toe/gwh) ,048,320,000 Products toe/t kj Aviation Gasoline ,380,080 Aviation Turbine Fuel ,961,400 Ethane ,404,240 Fuel Oil ,030,640 Gas Oil /Diesel Oil ,961,400 Kerosene ,961,400 LPG ,380,080 Motor Gasoline (Petrol) ,636,120 Naphtha ,636,120 Refinery gas ,148,200 Residual Oil ,030,640 Solvent ,262,520 Electricity kj Electricity (kcal/kwh) ,006,480,000 Electricity (toe/gwh) 86 3,600,648,000 Sri Lanka Sutainable Energy Authority ı 107

125