Tradeable Electrical Energy Certificates to Facilitate the Development of Renewable Energy Based Power Plants, Bypassing the Ongoing Financial Crisis

Abstract

This paper proposes the use of Electrical Energy Certificates (EECs) generated from renewable energy (RE) based power plants to be used as an alternative to payments from the utility to power plants to settle for electricity generated and to give returns to investors to overcome the impasse created due to high cost of capital. Such EECs can be used by the original receivers, or holders (who purchase them from a secondary market), to set off the energy payment part of electricity bills. As the Single Buyer of electricity in Sri Lanka, the certificates are to be issued by the Ceylon Electricity Board (CEB), and hence are honoured by CEB (as the Transmission Licensee) to set off energy consumption portion (kWh part) of any electricity bill. EECs are to be valid for 10 years and can be traded at a secondary exchange if the holder desires. As EECs have an intrinsic value which embody the true utility associated with energy, in the long-term it could be regarded as a trading instrument. CEB (as the Single Buyer) is to pay the power plants with EECs as against LKR for the electricity generated (based on a formula) except the portion for Operations & Maintenance (O&M) cost and cost of finances. Being a non-material commodity, electrical energy can be easily tagged to digital transactions, overcoming the issues faced by the barter trading league in the yesteryear. EECs can provide a medium to raise equity capital for RE projects which has become expensive largely due to the present economic crisis.