By: Staff Writer
October 18, Colombo (LNW): Sri Lanka’s struggle to accelerate renewable energy development exposes a deeper structural weakness in the electricity sector: expensive thermal generation continues to impose a disproportionate financial burden while administrative delays, contractual uncertainty and institutional shortcomings obstruct the transition to cheaper power.
The warning by WindForce PLC Managing Director Manjula Perera at the Sri Lanka Economic and Investment Summit 2026 raises questions about whether the Government can deliver its renewable energy ambitions quickly enough to ease electricity costs for households and businesses.
Under the National System Operator’s interim plan for 2027–2029, Sri Lanka intends to add approximately 1,400 megawatts of solar power and 1,000 MW of battery storage. The wider investment requirement is estimated at around Rs. 400 billion.
Yet the economic case for accelerating these projects is already evident in the existing generation cost structure.
According to Perera, renewable sources account for approximately 54% of electricity generation, while thermal power supplies the remaining 46% but absorbs more than 71% of generation costs. Diesel-fired plants account for around 14% of electricity supply but approximately 40% of total generation costs.
At an average cost of Rs. 94 per kilowatt-hour, diesel-generated electricity represents a particularly expensive component of the national energy mix.
This imbalance has implications extending beyond electricity generation. Prolonged dependence on costly thermal power can increase pressure on electricity tariffs, raise operating expenses for industries and weaken the competitiveness of Sri Lankan exports. Households also remain exposed to electricity costs that affect disposable incomes and the prices of goods and services.
However, renewable projects cannot replace expensive generation simply because they offer lower production costs. They must secure land, obtain approvals, finalise bankable contracts and connect to the grid within commercially realistic timeframes.
Perera cited WindForce’s 100 MW Siyambalanduwa solar project, awarded in 2022, where land handover took approximately 1.5 years. Commissioning was expected by July 2027, meaning the project would take around five years from award to completion.
Two 50 MW Mullikulam wind projects awarded in February 2026 to WindForce and Vidulanka also remained affected by unresolved land issues and a draft power purchase agreement awaiting consideration by the Attorney General’s Department.
Such delays risk extending reliance on expensive thermal generation even when alternative capacity has been identified.
Battery storage offers an additional opportunity to address the intermittency of solar and wind power. Perera welcomed the Government’s storage programme covering 160 MW, 250 MW and a further 150 MW. The first tranche was approaching commissioning, while the second was expected to follow and the remaining capacity was due to be awarded.
Advanced battery systems, including grid-forming technology, could improve stability and reduce the need to keep expensive thermal plants operating solely to provide system support and reserve capacity.
Nevertheless, financing remains a major obstacle. Rupee-denominated tariffs, insufficiently bankable power purchase agreements and more than 17 approval requirements could discourage foreign investors needed to fund the expansion.
Perera also questioned whether restructuring the Ceylon Electricity Board into separate entities would succeed without sufficient skilled personnel and commercial expertise.
The Electricity Act may provide a foundation for reform, but institutional restructuring alone cannot guarantee efficiency. Success requires capable management, experienced professionals, clear accountability and commercially credible operations.
For the Government, the central test is whether energy policy can move from announcements to timely implementation. Competitive tenders may lower headline prices, but prolonged delays can erode those gains by keeping costly diesel generation in operation.
Sri Lanka’s renewable transition must therefore be judged by electricity actually delivered, generation costs avoided and savings ultimately passed on to consumers—not merely by investment targets or tender prices.
The post Costly Diesel Power Exposes Urgent Need for Energy Sector Reform appeared first on LNW Lanka News Web.