Saturday, April 23, 2016

Tug-Of-War For Power Purchasing

From The Sunday Leader - by Ifham Nizam
Sri Lanka’s utility and power Sector regulator – the Public Utilities Commission of Sri Lanka (PUCSL) – has opposed a move by Ceylon Electricity Board (CEB) to proceed with emergency purchasing of electricity from independent power producers (IPP), pointing out that catchments receive ample rain and three plants of the first coal-fired plant in Norochcholai is working in full capacity contributing 900MW.
Last week, PUCSL has come hard on the CEB’s decision to purchase emergency electricity from 100MW Ace Power Embilipitiya (Pvt) Limited, saying neither the Government nor the Cabinet had stated about an emergency situation. It is learnt that CEB took a decision to cancel all bidding with regard to the recent proposal for emergency power.
PUCSL pointed out that energy availability within the system is sufficient. However, following a letter by CEB General Manager M. C. Wickremasekara, the PUCSL had given a no objection letter, stressing that additional cost should not be passed to electricity consumers.
Commission’s Chairman Saliya Mathew said that they believe that the failures of two 250MWA transformers are due to negligence in maintenance.
He points out at present only one 250MWA transformer is out of operation in Kotugoda Grid Sub Station and Biyagama Grid is fully functioning.
“Hence, the information provided to the Commission regarding the non availability of two 250MWA transformers is incorrect and misleading,” he wrote to CEB General Manager and Additional General Manager.
The Sunday Leader learns that the only reason provided by the License to the Commission to consider emergency requirement is the restrictions imposed to discharge (49MW), for which the evidence for water restriction is not placed before the Commission.
The Embilipitiya Power Station, the heavy fuel oil-run power station, was commissioned in March 2005, and was operated by Aitken Spence (sometimes shortened to Ace).
The power station consisted of 14 Caterpillar 16CM32C generation units of 7.11 MW each, which consumed approximately 550 tonnes of fuel oil per day. The Ministry of Power and Energy discontinued purchasing power from the private power station after its licence expired in 2015, and hence was subsequently decommissioned. The facility cost approximately Rs. 8 billion to develop, and is built on a 44-acre (18 ha) land on a 33-year lease.

Story behind Emergency Power
a) Inability of successive governments to construct the second coal power plant at Sampur (or an alternative plant).
b) Retirement of  225MW (100MW – Embilipitiya, 100MW – Puttalam, 25MW –Matara) of  Diesel Power Plants at the end of their costly 10-year agreement period. The worst affected area was the Sothern Province due to the retirement of 100MW Embilipitiya Plant and 25 MW Matara Plant. CEB tried to extend the agreement for a lesser cost in 2015 but the then Minister was very adamant and wanted to stop it.
c) Very low (less than 10 per cent) amount of contribution from Mini-hydro (installed capacity) 240MW and Wind power (140 MW installed capacity) during this dry season.
d) Restriction CEB had on Mahaweli water (by end of March CEB had water equivalent to 500 GWhr of electricity units but out of that 375 GWhr was in Mahaweli reservoirs which are managed by Mahaweli Authority).
e) Rapid loss of water levels in Massuakele and Castlereigh reservoirs (in Laxapana Complex) and Samanalawewa reservoir due to over use of water due to 2X4 days plant outages of Norochcholai after two total blackouts.
f) Lack of required fuel supply by Ceylon Petroleum Corporation for CEB and private thermal power plants. According to CEB engineers, the deficit of power in southern region was first identified in mid-March. The situation was mainly due to b), c) and e) above. Unscheduled power cuts had to be imposed for a few days in the Southern Province. Giving power to some part of Central Province and Eastern Province was also an issue due to d) above. ( i.e. CEB could not operate Bowatenna and Ukuwela Power Plants as no water released by Mahaweli Authority)
Initially the government plan was to procure 100MW of emergency power. The government was on a very firm stand that there can’t be any power cuts in the country. Under the above-mentioned background, engineers were pressurized by the government to somehow avoid any possibility of power cuts. CEB engineers pointed out that ‘Emergency Power’ is a very costly solution but finally recommended to procure emergency power if government wants to avoid any risk definitely at a high cost.
“So engineers recommend to procure 55MW of emergency power for three months to cater to areas affected with network bottlenecks. As per historical data the most difficult period with regard to hydro power for first week of April to second week of May.
There is no point of procuring ‘emergency power’ if it can’t be installed at least by first week of May. Going by the Meteorological Department indicators we expect some rain by second week of May. If there is no rain, 55MW is anyway not enough to solve the possible power shortage which may arise due to delay in monsoon,” a senior engineer said.
CEB would have avoided the procurement of ‘Emergency Power’ if government agreed to share a calculated risk. According to engineers the 55MW of additional power was recommended not due to lack of energy in reservoirs or lack of thermal plants as claimed by some politicians.
“It is purely due to the fact that we had network restrictions (created due to retiring of diesel plants) for delivering power. The major requirement was to get some power input to Southern area. This is due to the bad decision taken by the government in early 2015 to not to extend 100MW Embilipitiya Power Plant which would have negotiated and procured at a lesser cost,” CEB Engineers Union President Athula Wanniarachchi said.
CEB negotiated with owners of ACE Power Embilipitiya and has signed a fresh contract to run the plant for another year. Out of 100MW, 60MW is available at the moment. It is expected that at least 80MW will be available shortly. The cost of a unit from this plant including capacity cost and fuel is around Rs. 23 per unit. The issue in the southern part of the country has been solved with the addition of Embilipitiya plant. As per a direction of the cabinet, CEB called tenders for 55MW of Emergency Power. There were about five parties interested about this but only two bidders participated at the final stage, i.e. APR Energy and Aggreko. The APR, said to be the lowest and the total (capacity+ fuel) cost is around Rs. 29 per unit. This cost is almost same as the unit cost of IPP with the highest cost in the country, i.e. Kerawalapitiya 300MW Combined Cycle Plant (or West Coast Power Plant).
However, the approval of the PUCSL is yet to be received for this 55MW Emergency Power purchase.
CEBEUs’ stand is now there is no need to go for emergency power. If government wants the state of ‘zero risks’ this can be proceeded for only 20MW but must be limited to three months as initially planned. In the 1990s, CEB was bankrupt due to continuation of ‘emergency power’ for a few years with Aggreko. 
The best solution may be to construct a 100MW power plant in the southern area to inject power at 132kV level. A conventional diesel power plant can be constructed within about 14 months. The cost can be lowered by putting up this by CEB but if finding capital is an issue, it can even be done with private investors through a competitive bidding process.
Meanwhile, some business tycoons are eying on putting up a 300MW LNG (Liquid Natural Gas) Power Plant at Kerawalapitiya without going for competitive bidding process through unsolicited bid. They want to capitalize this power shortage and bypass the competitive bidding process ‘to save time’.  Only a plant in Kerawalapitiya will not solve the issue in the Southern region. On the other hand the decision to go for LNG should be taken very carefully.
Although the LNG prices are comparatively low in this year, it might go up at any time due to the high demand from developed countries. In the long run,  LNG  may be feasible only if all CEB & IPP Thermal plants in Colombo are converted to LNG and even the transport sector is also to migrate to LNG from petrol/diesel. Under this backdrop, it is not prudent to handle first LNG solution by a private party.
There are two groups objecting ‘Emergency Power’.  Objection of the first group is purely due to the high cost of Emergency Power which might bankrupt CEB if continued. The other group wants the power deficit to be continued so that ‘emergency situation’ can be capitalized for cut-short competitive bidding process.
In 2006-7 period under a similar situation, 300MW West-Coast Combined Cycle Power Plant was constructed without any competitive bidding process. This has now become the most expensive Independent Power Purchasing (IPP) in the country, CEBEU points out.

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