| Non-Conventional Renewable Energy Tariff |
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| The government of Sri Lanka has identified the development of Renewable Energy Projects, as a matter of policy to diversify the electricity sector from high cost thermal power generation. Therefore, required incentives and assistance was provided for the renewable energy resource development (Mini Hydro, Bio Mass, Wind, etc.,). Further National Energy Policy 2006 has identified fuel diversify and energy security in electricity generation as a strategic objective and development of renewable energy projects was identified as a part of this strategy. In view of above action has been taken to introduce a cost based, technology specific, three-tier tariff instead of avoided cost based tariff with effect from year 2007. |
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| Methodologies for Estimation of Generation Tariffs from Non Conventional Renewable Energy (NCRE) |
| There can be many different methodologies of estimating generation tariffs for non-conventional renewable energy plants. However, the two main approaches for computing generation tariffs for power purchase from small power producers are avoided cost based estimation and cost based tariff estimation. |
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A short description on the avoided cost based tariff estimation and the cost based tariff estimation are given below.
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| Avoided Cost Based Tariff Estimation |
| Avoided cost is the incremental cost to the electric utility that the utility would either generate itself or purchase from thermal IPPs if it did not purchase from a renewable energy producer. |
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| In the avoided cost mechanism, when a renewable energy generator is connected to the grid and delivers power to the system, some costs are avoided elsewhere in the system. First of all, the power plant, which would normally have produced the power (now being provided by the renewable generator), saves some fuel and operation costs because it reduces its power output. In Sri Lanka, the avoided cost methodology that is followed by CEB is based on the principle of short run marginal cost pricing. |
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| Avoided Cost Tariff estimation from 1996 to 2011 in Sri Lanka |
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| Year |
Dry Season (Rs,/kWh) |
Wet Season (Rs./kWh) |
| 1996 |
2.90 |
2.90 |
| 1997 |
3.38 |
2.89 |
| 1998 |
3.51 |
3.14 |
| 1999 |
3.22 |
2.74 |
| 2000 |
3.11 |
2.76 |
| 2001 |
4.20 |
4.00 |
| 2002 |
5.13 |
4.91 |
| 2003 |
6.06 |
5.85 |
| 2004 |
5.70 |
4.95 |
| 2005 |
6.05 |
5.30 |
| 2006 |
6.73 |
5.82 |
| 2007 |
7.64 |
6.94 |
| 2008 |
9.65 |
8.94 |
| 2009 |
11.17 |
10.59 |
| 2010 |
11.94 |
11.09 |
| 2011 |
11.19 |
10.23 |
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| Dry Season |
February, March & April |
| Wet Season |
Other Months |
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| Cost Based Tariff Estimation |
| The cost based approach of determining tariffs for a NCRE power plant is commonly used in many countries. The tariff that is computed using this method, allows a project developer to cover its operating and capital costs. Besides, it ensures an assured return on capital. |
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This method analyses the cash flows as a result of the project activity with return on equity as one of the components of cash outflow and estimates annual cost of generation. There are some variations in the application of this method. The tariff can be given in two parts where in the initial years (typically the loan repayment period), the tariff given is higher and then lower tariff is given for the subsequent period, which covers the operational costs and the return on the investment. The cost escalations, the O&M escalation, fuel cost escalation, and incentives in terms of subsidy or other fiscal incentives can also be included while estimating tariffs by this method. The tariff calculated by this method varies from technology to technology depending upon the performance and costs. Moreover, the tariff estimation by this method solely depends on the cost and performance of the project/ technology.
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| In the cost based approach, ideally tariff should be estimated for each project. However, due to resource and time constraints, technology benchmarking is commonly used wherein the average parameters such as the plant factor and, capital costs, are used for estimation of tariff. |
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| Cost based, technology specific NCRE Tariff Effective from 25/11/2010 to 31/12/2011 |
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| Non Conventional Renewable Energy Tariff Announcement >> |
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