NDB approves Rs. 5.4 bn for the promotion of renewable energy projects
Role of Power and Energy sector in the economic development
With the Sri Lankan economy growing steadily along with revived economic activities in post war era, the demand for energy has increased significantly. Presently, Sri Lanka is proud to be the only South Asian nation to have an electrification percentage above 90% and it boasts of a national grid which penetrates to most habitable parts of the country. The total installed capacity of all types of energy in the country as at 2011 was 3,141 MW with a ratio of 54:46 between thermal and Hydro/ Non-conventional renewable energy sources. The total gross generation of 11,528 GWh was distributed on 57:43 ratio between the Ceylon Electricity Board and Private Power producers.
Revived economic activities in North and East after them being integrated to the main stream socio-economic system of the country has created the need for a reliable source of power in the said areas. Further, the government’s plans to promote the country as a prime tourism destination, proposals to set up industrial parks to facilitate the manufacturing sector and the expected economic activities associated with the Hambantota port operations will further increase the demand for energy in the immediate future. Constantly improving living standards as a consequence to the increased economic activity across all geographic regions & economic sectors after cessation of the 30 year internal conflict, has resulted in the per-capita energy consumption seeing a steady growth. Hence, the demand for electricity in the future is estimated to grow around 7-8% surpassing the past trends. Therefore Power and Energy sector plays a more pivotal role in the economic development of the country than ever before and this requires the sector to meet the challenges of sourcing significant investments required to increase generation capacity to desired levels.
The national energy policy and strategies formulated by the Ministry of Power and Energy has envisaged a number of elements to be considered when meeting the rising demand for energy in the country. The use of economically viable environmental friendly, non-conventional renewable energy sources and establishing a facilitation agency for the promotion of non-conventional renewable energy resources were some of the strategies identified in implementing the said national policy. Key sustainable non-conventional forms of renewable energy promoted in Sri Lanka are small scale hydro power, biomass including dendro power, biogas and waste, solar power and wind power while other sources such as wave energy and geothermal are also popular in other parts of the world.
NDB’s role in financing renewable energy projects The endeavor to implement renewable energy technologies have been facilitated through dedicated credit lines from multilateral agencies such as World Bank through Energy Services Delivery Project (ESDP) which provided an initial support to the sector. This was followed by Renewable Energy for Rural Economic Development (RERED) which was with the objective of promoting the private sector participation in power generation and encouraging provision of access to electricity for rural households. NDB in its development banking operations played a significant role under these schemes by financing several mini hydro power projects and wind power projects.
Mini hydro and wind power projects funded by NDB NDB has been actively engaged in funding mini hydro power projects over a decade and has been a participating credit institution (PCI) in both the above credit lines. With the objective of participating in developing non – conventional renewable energy projects in the capacity of a development financier, NDB played an active role in funding 26 mini hydro power projects promoted by both small scale project developers and large companies. NDB hence was able to fulfill its development financier role by assisting mini hydro projects with assistance to connect an aggregate installed capacity of approximately 75 MW to the national grid. The total cost of the above mentioned projects were approximately Rs 8.5 bn while NDB’s contribution in terms of financial assistance amounted to approximately Rs 2.8 bn. In addition, NDB also partnered with the developers through lending (approximately Rs 940 mn) for diverse financial needs of power companies to a value of approximately Rs 1.0 bn for equity investments in new power projects and for strengthening of financial performance of some of the companies.
NDB is proud to be one of the financial partners to the nation’s first ever wind power project, thus playing a pioneering role in assisting the development of alternative sources of energy in the country. Since then, NDB has approved facilities aggregating to approximately Rs 1.6 bn for the purpose of financing wind power projects in Kalpitiya with an estimated installed capacity of 35 MW. While projects with installed capacity of 20 MW have already been connected to the national grid, two other projects with an aggregate capacity of 15MW are being implemented.
In addition to active role played in mini-hydro and wind power sectors, NDB is now in a stronger position to evaluate and appraise biomass projects which is still a comparatively new experience to the country. This is made possible with the experience it gained through preliminary evaluations carried out for several biomass projects and also through the experience it gained by funding the country’s first ever biomass power project.