President's Report, 2010
Since we formalized our efforts to develop Bio Energy for Sri Lanka by forming the Bio Energy Association in 2004, at last we are seeing a glimmer of hope of our vision being fulfilled. The past year has produced several positive results which hopefully launch the change that we envisage and there would be a gradual build up of interest and initiatives to develop bio energy to a significant level in the country.
We note with immense sadness the loss of our founder president and good friend Vidya Jothi Dr Ray Wijewardene in August 2010. The best form of tribute we can pay him is by advancing the course of Bio Energy and Energy Security in Sri Lanka which was the dream closest to his heart. May he attain Nibbaana
However, constant vigilance and continued lobbying will be required to ensure that our gains are not negated by those who still have a large vested interest in preventing any indigenous energy resources being developed. Also in order that the positive gains made and the initiatives created do result in executed projects on the ground much more work needs to be done to overcome the barriers that still remain. Of these the development of the resource still remains the major barrier and is still quoted by our detractors as why bio energy is not a viable option for Sri Lanka.
The immense contribution that the Short Rotation Coppicing trees can provide for the Economy, Environment, Rural Development and Social Equity in Sri Lanka, has to be constantly espoused if we are the gain the attention of the state and the relevant authorities, without whose commitment we cannot hope to make a any significant progress. In this regard the close synergy between agriculture and bio energy needs to be highlighted and propagated . As such we have selected the theme “ Gliricidia for Food Fodder Fertility and Fuel ” in our deliberations during the annual seminar for this year. The gains made did not come without great efforts and the continued and strenuous efforts of the BEASL can be proudly stated as the main reason for the success achieved. In this task the support given by my colleagues in the council and by the general membership is gratefully acknowledged. I would like to appeal for your continued support in the coming year for the new council as well.
1.0 Highlights of the Year
The efforts of the BEASL since the last AGM have yielded some significant results. Of these the most important issue is the tariff payable for the biomass power export to the grid. In spite of efforts by some parties to reduce the tariff we have managed to get a an enhanced tariff of Rs 20.70 per kWh , by making a convincing presentation for the PUCSL which will hence forth be responsible for the tariff fixing
.This is also a welcome change as we may expect a more balanced and rational approach to the tariff calculation process. Unfortunately the short sighted measure of declaring a lower tariff for the agri waste based power still remains in force. I hope that the new committee will make a special effort to get this totally unrealistic division removed from the tariff tables.
Perhaps largely due to the enhanced tariff there has been a spurt of interest in development of bio mass power projects. To date 9 projects totalling 41.75 MW of projects have received the final energy permits and a further 8 projects totalling 44.4 MW have been granted provisional approvals.
2.0 Positive Advances Made
2.1 Non Conventional Renewable Energy Tariff Structure
The principle of this tariff structure was supposed to be Technology based and Cost Reflective. The concerns we expressed at the time on the basic philosophy itself which one might argue supports expensive technologies while there is no special incentives for the more economical technologies, still remain. However, we welcome this initiative of the Ministry and the improved tariff announced for the year 2010, although some what delayed due to the empowerment of the PUCSL which is now in charge of this process. The points of greater concern are the actual numbers and indices used in the calculation of the tariff for different technologies. This has led to a lower tariff being announced for the use of agricultural waste, based entirely on an incorrect and inadequate understanding of the sector. With the representation now possible by the developers in the public comments process now in force by the PUCSL, we have some chance of discussing this issue more rationally. .
It is unfortunate that the indices used for the calculation of the escalation rates under the three tier tariff are still baseless. This is another matter which requires continued action so that the distinct advantages of a three tier tariff can be realized by the developers.
The positive result of the announcement of the NCRE tariff of course has been the renewed interest in renewable energy and on bio energy. However it must be noted that the time taken for a developer to reach the point of signing the SPPA, so that the tariff for a particular project is assured, is still a long drawn and arduous process. This certainly cannot be achieved in a 12 month period, presently allowed by the SEA act, after which the provisional approval lapses automatically.
Under these circumstances, it is essential that the tariff announced in 2010 is held firm if not raised until the projects which are in the pipeline have progressed adequately to sign the SPPA. We have also made a request that the tariff for the year 2011 be announced early after due consultations.
2.3 Sustainable Energy Authority
The SEA has been in existence for over three years now. However, the view of the developers is that the SEA has not yet lived up to the promise of being a facilitator for project development and a one stop shop for the approval process. Of particular concern is the fact that the SEA is yet to perform an evaluation of the biomass resource which would lend a lot of credibility for the project proposals , particularly in the minds of the lending institutions.
It is hoped that the rest of the state agencies from whom the developers have to obtain approvals recognize the fact that the development of renewable resources as a national imperative, rather than a mere business venture by some individuals. The SEA’s task to simplify this process will be made that much easier if this paradigm shift can be achieved.
BEASL has provided whatever assistance and support possible for these developers who have approached us.
We are thankful for the SEA for conducting a stakeholder consultation, well represented by all sectors of the industry and which was graced by the Hon Minister for Power and Energy in August 2010. The very detailed discussions at this workshop served to reinforce our view that the target of 10% of NCRE by the year 2015 included in the National Energy Policy is totally inadequate and un challenging. The target considered more appropriate as agreed by all participants was 17%. But it is unfortunate that most authorities including the SEA still continues to cite the old target of 10% which done not dirve the SEA not the industry, considering the that the NCRE contribution now stands at 6.5 % mainly due to the mini hydro sector .
2.4 Sub Station Augmentation
A most encouraging development that has taken place is the commencement of the projects by the CEB to augment nine substations and the construction of a number of new grid substations . Work has already commenced on the upgrading of several GSS as well as the new substations. BEASL will share the information on the progress made with any prospective developers.
2.5 Carbon Trading
The statement made last year that “The Lanka Carbon Fund which was expected to make a significant contribution to exploit the Carbon Credit Potential in Sri Lanka of which the Renewable Energy sector is a major player, is yet to make an impact” remains valid.
The utter failure of both the Copenhagen and Cancun conferences on Climate Change has dampened the interest on carbon trading . However, it is important to keep the avenues open for the development of the CDM projects alongside the Bio Energy projects , in the hope of more progressive agreements in the forthcoming UNFCCC convention and thereby the carbon trading business.
The BEASL is collaborating with a Japanese Company Ex-Corp to promote this sector targeting the thermal energy sector, particularly the industries with the potential to switch from fossil fuel to bio mass. The PDD for a Programmatic CDM project is now under the validation process.
2.6 Bio Energy Web Page
Our web page www.bioenergysrilanka.org evokes much visits, either directly or through referrals. It is indeed a matter of concern that we are not keeping it updated and fed with more news and information. I earnestly seek the assistance of some members to take on this responsibility and make our web portal even more attractive and informative. It is the best way to reach a wider audience of interested parties who are able to help our cause.
3.0 BEASL Projects
There has been no specific projects undertaken by the BEASL this year, although several ambitious proposals were submitted to the USAID and other agencies in response other call for proposals
3.3 New Thermal Energy Projects in Industry
The financial advantages of conversion of industrial thermal energy generation from fossil fuel to fire wood has been advocated by the BEASL for several years. Although, the very significant costs savings are appreciated by the industries the adoption of this change has been slow mainly due to the short sighted policy of the government to subsidize the price of furnace oil.
As a result of continuous lobbing part of the subsidy has now been removed. But the promise of removing the balance subsidy by January 2011 is yet to be fulfilled. It is understood that the Ceylon Petroleum Corporation is losing more than Rs 7,000 million annually due to this subsidies which is supposed to be granted with out the knowledge or approval of the Treasury.
4.0 Promotional Activities
The BEASL participated in several exhibitions, albeit with meager funds available, to continue dissemination of information on the value of growing Gliricidia and its uses for different segments of the society. Our stalls were well attended and the results of these efforts will only be seen in the years to come. In particular the Power Sector Exhibition and the Vidulka Exhibition conducted by the SEA evoked considerable interest.
We also participated in the Deyata Kirula Exhibition in Buttala in collaboration with the Mega Ten Bio Energy (Pvt) Ltd who are developing a 10 MW power plant at Kumbukkana.
5.0 Problems and Barriers
Of the many problems and barriers that are still prevalent two major issues have surfaced which require the concerted efforts of the BEASL. The most pressing need is the expansion of the fuel wood supply to overcome the diffidence of both investors and the lending institutions to enter into the dendro industry.
It is unfortunate that this is a problem that should not exist if the true value of the Gliricidia leaves is appreciated adequately. We are attempting to create the conducive situation so that this market segment would move forward giving the right signal for others to expand their cultivation. The support of the Gandhi Centre and the MONLAR and SARD and particularly Dr. Lionel Weerakoon’s efforts to promote zero budget agriculture, for which the Gliricidia Leaves plays a major role, is of great value to us.
With the enhanced tariff levels there is evidence of investor interest and openings for the sourcing of the necessary capital. In this light the major barrier for the development of the sector has emerged as the lack of confidence of the reliable fuel wood supplies. The issue of obtaining adequate lands for the developers to ensure at least part of the fuel wood supplies remains a major hurdle. The local banks who have expressed interest in the development of projects have instead at least 40% of the supplies to be in the control of the project developer.
The larger power projects are undertaken by the government with international loans and funding schemes at low interest and the loans are guaranteed by the state. These avenues are not available for the dendro developers and even though some foreign investors are available they would like to see the same level of state support at least by providing sovereign guarantees.
If the National Energy Policy of the government of Sri Lanka is to have any credibility there should be such measures instituted to ensure that the NCRE sector is supported at least to the same level as the fossil fuel based power generation.
6.0 Staff Movements
There has been no staff movements during the year.
7.0 Financial Status and Membership
The BEASL manages to survive on the interest received from the fixed deposits. The generous donations made by some members are gratefully acknowledged However, this drastically limits the scope of activities that can be undertaken. In particular, there is a grave need to repeat the public awareness campaign we conducted some year ago as the time is ripe for our message to be appreciated by the general public. The membership also remains somewhat static and the help of all committee members and other members are earnestly solicited to attract more members to the Association. All members are requested to bring up to date their subscriptions as well as to bring in more members to the association. The impact we can make is bolstered by a large membership. Those who are engaged in projects for whom the BEASL has provided much help are solicited to become corporate members.
L P Jayasinghe
President
April 3rd, 2011.