Estimation of External Cost of Thermal Power Generation in Sri Lanka

Project Name: “The study on Estimation of Externality Cost of Thermal Power Generation in Sri Lanka
Client: Public Utilities Commission of Sri Lanka (PUCSL)
Project Commencement Date: April 10 2020
Priject Completion Date: July 3, 2020.
Project url: www.slema.lk/projects/pucsl4

Since April 2009, Public Utilities Commission of Sri Lanka (PUCSL) has been regulating the electricity industry in Sri Lanka. As part of this regulation process, PUCSL has to review and approve the Long Term Generation Expansion Plan (LTGEP) prepared by the Ceylon Electricity Board (CEB), which follows economic least cost principles in identifying the optimal generation capacity mix to meet the electricity demand of the country forecast over a period of twenty years. To review and accept the proposed generation plan prepared bi-annually by the CEB, PUCSL needs to make judgements on the accuracy and validity of the data and assumptions used in the plan. One such parameter under review by the PUCSL is the externality cost of existing and proposed thermal power generation in Sri Lanka, as the economic cost essentially include monetary as well as non-monetary costs incurred by the country. These externalities are not appraised in the present process of LTGEP.

With the objective of estimating the social and environmental damage cost associated with fossil fuel based thermal power generation, PUCSL commissioned this study in October 2018. It is expected that the estimated externality values would be used for selecting the optimal technologies for power generation in Sri Lanka in the process of LTGEP. Sri Lanka Energy Managers Association (SLEMA), the pioneering energy management institution dedicated for promotion and knowledge sharing on energy management and efficiency improvement in Sri Lanka, was selected to conduct the study. SLEMA fielded a multidisciplinary team of experts to cover different aspects of the study and this report presents the compilation of finding of the study.

In terms of section 3 (k) of the Sri Lanka Electricity Act, No 20 of 2009 (as amended) and section 17 (b) of the Public Utilities Commission of Sri Lanka Act No 35 of 2002, the Public Utilities Commission of Sri Lanka (the Commission)intends to conduct a stakeholder consultation on the findings of the above study. The study was carried out by a group of experts selected by the Sri Lanka Energy Managers Association on behalf of the Commission. The Commission wishes to conduct the stakeholder consultation in regard to the findings and the methodology of the study. Due consideration to the stakeholder comments/inputs would be given to improve the content of the report as applicable. Power generation, particularly the thermal power gives rise to a range of social and environmental
issues due to air and water pollution, releasing toxic materials and GHG emissions during their operational life. These environmental issues lead to adverse community, social and ecological related costs referred to as externalities must be accurately quantified to assess the actual economic cost of thermal power generation in Sri Lanka. In view of the above the Commission initiated a study on Estimation of External Cost of Thermal PowerGeneration in Sri Lanka as a step forward to find the relevant figures applicable for Sri Lanka. The draftFinal Report of the assignment is completed and available for stakeholder consultation now.

The Commission intends to consult the stakeholders on the methodology and findings of the study carried out by the expert team. The externality cost pertinent to Sri Lanka as per the findings of the report will be revisited based on the valid comments.