Norochchalai failures and what 2014 may bring..
Friday, 27 December 2013
Norochchalai Coal Power Plant has failed again. It seems that Norochchalai has been out of commission since December 13th due to some problem with the water supply. Reportedly, it has broken down about 30 times so far. Norochchalai power plant has been operating below par, even by PUCSL lowered expectations - Up to December 26th, the coal plant utilization factor was 59% only for 2013. PUCSL assumed 74% in the PUCSL report, “Decision on Electricity Tariffs 2013,” issued in June 2013.
CEB AGM Bandula Tilakasena, seems to imply that Norochchalai failures is not a big concern, as the Norochchalai plant is still in defects liability stage (http://www.ceylontoday.lk/51-40188-news-detail-norochcholai-phase-ii-ill-timed.html). It is disingenuous for him to imply there are no significant negative consequences for Norochchalai failures during defects liability period. Sri Lanka is still liable to service the debt while the CEB has a non-productive asset. During the failure periods, the CEB has been running expensive oil thermals incurring much higher generation costs.
Also note in the PUCSL Generation and Reservoir Statistics on 25th December 2013, that hydro reservoir storage capacities as of December 24th was down to under 55 percent (Figure 1). This remaining water plus inflows has to last till next major rains replenish (see http://www.pucsl.gov.lk/english/wp-content/uploads/2013/12/Generation-Report_25-12-2013-Web.pdf ). Is the CEB running hydro plants more than prudent to offset Norochchalai loss of power, and to show “operating profits” for 2013? In both 2011 and 2012, hydro reservoir storage levels were steadily improving from September to December (See Figure 2). In 2013, ominously, the storage levels have been steadily dropping since July 2013. The December 2013 capacity is similar to its value in December 2011. If the rainfall trends in 2012 will reoccur in 2014, CEB may have to use more expensive oil thermal power unless Norochchalai Phase II is commissioned soon and is operating reliably.
Figure 1 Hydro Reservoir Storage Levels 2011-2013 (Source: PUCSL)
Unfortunately, the prospect for timely commissioning of Norochchalai Phase 2 is low. Norochchalai phase 2 was supposed to be operational by now. However, The Island on December 23rd reported that “The second phase scheduled to commence this week would be further delayed, informed sources said. Some engineers claim that they won’t be in a position at least to think about it until the latest problem in the first plant is solved”. Seehttp://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=94653
With Norochchalai failures and delays to its phase II, future lower rainfall will mean higher costs for electricity and further bonanza to oil power producers. This is especially true as CEB has effectively stopped non-conventional renewable energy (NCRE) development for the past two years by not accepting the NCRE tariff order issued by the regulator PUCSL in December 2011. Further exacerbating the problem for NCRE plant operators is that the negotiation of tariff for older NCRE plants that are currently operational, is stalled as their power purchase agreements have lapsed. The issue appears to be that the plant owners are seeking a tariff of Rs 7/kWh (approx), while CEB is not willing to pay more than Rs 5/kWh. In the meantime CEB is incurring much higher costs for operating their own oil thermal plants or buying more expensive power from IPP oil thermal power producers. See Figure 2 from the PUCSL Consultation Document for the 2013 tariff revision, which shows that NCRE (renewable) electricity had the lowest average cost next to large hydro and Norochchalai. All oil thermal power plants were more expensive at Rs. 20-80/kWh.
Figure 2 Average Total Unit Cost of Electricity from Various Power Plants (Source: PUCSL)
With Norochchalai failures and delays to its phase II, future lower rainfall will mean higher costs for electricity and further bonanza to oil power producers. This is especially true as CEB has effectively stopped non-conventional renewable energy (NCRE) development for the past two years by not accepting the NCRE tariff order issued by the regulator PUCSL in December 2011. Further exacerbating the problem for NCRE plant operators is that the negotiation of tariff for older NCRE plants that are currently operational, is stalled as their power purchase agreements have lapsed. The issue appears to be that the plant owners are seeking a tariff of Rs 7/kWh (approx), while CEB is not willing to pay more than Rs 5/kWh. In the meantime CEB is incurring much higher costs for operating their own oil thermal plants or buying more expensive power from IPP oil thermal power producers. See Figure 2 from the PUCSL Consultation Document for the 2013 tariff revision, which shows that NCRE (renewable) electricity had the lowest average cost next to large hydro and Norochchalai. All oil thermal power plants were more expensive at Rs. 20-80/kWh.
Figure 2 Average Total Unit Cost of Electricity from Various Power Plants (Source: PUCSL)
I am beginning to believe in conspiracy theories! Don't expect a tariff reduction any time soon unless for political reasons while further damaging CEBs financial situation. Who to tell?
R. Anil Cabraal, PhD
Consultant, Renewable and Rural Energy
Consultant, Renewable and Rural Energy
