Future Development of Mini & Micro Hydro in Sri Lanka: A Macro Level Study

Abstract

As a developing country, Sri Lanka needs energy for its future industrial development. The main energy source was large hydropower schemes and thermal power plants. However all the potential large hydropower schemes are developed or being developed and thermal generation is restricted because the fuel has to be imported. But the Ceylon Electricity Board is exploring possibilities of enhancing the grid capacity by introducing thermal power plants. However, there is a potential of mini hydro power plants to fulfill the energy requirement of the national grid. This report emphasizes the investment opportunities in mini hydropower projects in Sri Lanka, being a profitable source of investment. The annual electricity demand for .year 2000 was 5370 GWh with a peak demand of 1276MW. The annual growth rate for energy is estimated at 8%. It is expected that by 2008, the annual energy demand will be 10195 GWh with a peak demand of 2309 MW. Apart from the mega solutions to fill the gap, a short term solution is to bridge up with mini hydro power plants. With this idea the Ceylon Electricity Board has invited the private sector investors to develop mini hydropower so that the CEB can buy the electricity, which will be produced, by private investors. Sri Lanka, is a tropical country experiencing an annual rainfall of 5m in the wet zone. This blends with the country's unique geography resulting in a potential mini hydropower development capacity of 200 MW. 23 MW has been developed so far and 150 MW will be developed by prospective developers. With the favourable fiscal policies and the financing assistance an annual addition of 20MW of mini hydro can be expected. This means that with in seven years the total installed capacity of small hydro will be as high as 163 MW. (The installed capacity of the Victoria hydro power plant, which is the largest hydro power plant, is 270 MW). Apart from these, mini hydro will result in clean, renewable and environmentally friendly sources of energy. This paper illustrates the basic parameters, costs, centers of a mini hydropower projects (with different cases), and the revenue with the investment appraisal parameters such as NPV and IRR. Further, the author hopes to investigate the economic benefits of mini hydropower projects, the problems faced by the developers and possible solutions for these problems. The potential of micro hydro development, as an independent source for energy will also be considered in this paper as an off grid solution to the power crisis of this country. The technology of the hydropower projects will also discussed. The ultimate objective of this paper will be to enhance mini and micro hydro capacity in Sri Lanka and by fulfilling the above, develop our own technology in the industry due to the rapid expansion of the sector.