Energy regulator not worried over rising world coal prices

By Chandeepa Wettasinghe
The Sri Lankan energy regulator is currently not worried over the world coal prices, which have increased by approximately 38 percent year-to-date, in the midst of the government deciding to stop further reliance on coal over the next decade.

“We have considered the 6-month period ahead. Not only the coal prospects matter. Even the patterns of weather and the availability of renewable sources as well as hydro and the demand forecast matters here,” Public Utilities Commission of Sri Lanka Director General Damitha Kumarasinghe said.

The Australian thermal coal prices, which act as the barometer for global thermal coal prices, rose from around US$ 53 per tonne this January to just over US$ 72 per tonne at the start of this week, though the rally was not as alarming as coking coal, which doubled in prices since January.

The main causes for the price increase are the closure of coal mines in China by the Chinese government to curtail production which had gone out of control, as well as due to adverse weather creating concerns about mines being flooded.
China has begun a coal buying spree to maintain its energy security and construction momentum.
In Sri Lanka, after the third and final phase of the country’s first coal power plant in Norochcholai was commissioned last year, coal has emerged as the leading source of power generation.
According to statistics available from PUCSL, without taking into account mini-hydro, solar and biomass power generation from June-August, coal had contributed 36.81 percent to the 9,204 GWh (Gigawatt hour) power generation of the country for the first 8 months, and 48.20 percent of power generation in August.

Coal power generation was set to overwhelm the country’s power generation mix over the 
next decade.
Construction for the Sampur coal power plant with Indian funding was started in 2008, and the Ceylon Electricity Board (CEB) was awaiting government approval on the construction of a third clean-coal power plant in Sampur with assistance from Japan.
However, following a Supreme Court case, the Power and Energy Ministry yesterday announced that a coal power plant will not be built in Sampur. The projects have the option of being shifted to another location, according to the CEB.

Experts had warned that Sri Lanka, with its increasing demand for power, would have to face a power crisis between 2018 and 2021 before the first of these power plants were to come online, and the cancellation of the first project may stretch the crisis unless alternatives are found.
The crisis may be aggravated by the fact that the government is hoping to transform the country’s economy with an industrial revolution that demands extra energy, compared to the current service oriented economy.
According to the CEB, Sri Lanka has nearly reached its potential for hydro and mini-hydro generation, which may push the state to restart purchases from private sector oil power plants and further incentivize investments into non-conventional renewable energy such as solar and wind until ends are met.
Meanwhile, Kumarasinghe said that the Ceylon Electricity Board has recently started recovering their costs as well as making some profits.

The latest statistics of the Treasury noted that the CEB had recorded an operating loss of Rs. 5.78 billion for the first 4 months of 2016, compared to a profit of Rs. 1.84 billion year-on-year, due to power failure in the Norochcholai plant for 5 days in March, and prevailing dry weather.
However in May, Sri Lanka experienced some of the worst rains and flooding in history, which had however boosted hydro power generation, which has negligible costs of production.