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ENERGY-SRI LANKA: Solar Power Gets A Boost

Feizal Samath

COLOMBO, Jun 26 2007 (IPS) - There may be nothing new in a recent World Bank credit facility to provide electricity through renewable power to thousands of rural homes. But for the growing solar power sector here, it is a giant step in taking the industry forward.

Solar power is the fastest growing energy resource in the world. In countries such as Japan, Germany, the United States and South Korea, solar power units in institutions or homes are being connected to their national grids. Against this backdrop, the fresh provision of low-cost loans for home-based electricity connections would steer the solar industry through to a new phase, according to Pradip Jayewardene, founder member of the Solar Industries Association. Already, discussions are underway to make solar energy an urban product.

"So far, we have concentrated on solar power being available to rural homes that are not connected to national grid power and where power lines don’t exist or are unlikely to," he pointed out. "But this extended funding facility will help us take solar power to a new level."

The 40 million U.S. dollar soft loan from the Bank, announced last week, will help boost grid-connecting capacity by 50 megawatts and extend off-grid electricity services to 60,000 more households and 500 rural micro-and small-scale enterprises.

Solar power has so far always a better option in rural areas where grid power is not possible, says Jayantha Nagendran, vice president at DFCC Bank, the World Bank’s credit implementing agency.

The World Bank loan would allow the extension of an ongoing project ending December 2007 to 2010. The main aim of the first project is to bring electricity to remote communities and individual households through village-led electricity societies and provide solar energy services.

At present, almost half the total energy consumption in this South Asian island nation comes from imported petroleum products. The balance comes from biomass (47 percent) and hydroelectricity (8 percent). From this, electricity generation comes from imported fuel (slightly below 50 percent) and hydropower (49 percent). Renewable energy resources still account for a marginal percentage, though this component is quietly growing.

However, unlike other renewable energy resources, the local solar industry, which has grown in leaps and bounds from since 1996, has one key problem: the government still does not allow solar power to be connected to the national grid.

Other private power sources like hydro, wind energy, biomass and dendro are permitted to connect to the national grid, although the main state power supplier, the Ceylon Electricity Board (CEB), is running out of grid capacity to absorb these outside sources.

Jayewardene said that under the extended loan facility, the Bank has agreed to fund solar power projects that could connect to national grid power, but these need government approval. "The government should allow solar-connected grid power, which would save the country a lot of money."

He stressed that the new loan scheme is important to the solar because it is coming of age now and will soon be able to reach industrial power and urban homes.

"We have sun all around the year and the resource is unlimited. It costs a lot for industry to depend on grid power, which comes from expensive imported fuel," he said. "The initial investment for solar power may be high but after a few years you have virtually recovered the investment and thereafter pay nothing for the resource." Asoka Abeygunawardene, executive director of the Energy Forum, an umbrella group of environmental NGOs dealing in energy issues, says that solar power has so far been the best form of energy in areas where grid power is absent and the cost of power lines is exorbitant.

"Solar power is costly because the panels are imported. But in areas where infrastructure costs to connect homes to the national grid are costly to the government, this is the cheaper renewable energy option available because a state subsidy is provided," he added.

In Sri Lanka, solar power has got a headstart over others and is the fastest growing renewable resource, particularly because of its rural roots. The industry grew from nothing in 1996 to 15-odd companies that have helped install more than 100,000 units, mostly in homes of poor rice farmers. It is now growing at an average of 20,000 units a year.

Between 1.4 million to 1.5 million homes, or some 25 percent of the country’s population, do not have access to grid power. This is where renewable energy sources, particularly solar, have become useful. A previous credit line funded by the World Bank for private sector-led renewable energy resources provided 74,000 solar power systems to 3,200 households and nine schools, allowing them to give computers to school children.

Jayewardene, a pioneer in the private-led solar industry, said the association is discussing with the government the floating of a bond issue to raise funds for solar power credit.

"Because the industry is growing and demand is outstripping supply globally, the technology is getting costly. We have sun all year on but the panels and other equipment to tap this source is getting more expensive, because the demand is 75 times the supply. The huge demand for suppliers of equipment is driving up costs," he said.

Jayewardene said the government should subsidise the cost, currently at 60,000 rupees (545 U.S. dollars) for a basic home-use unit to 25,000 to 30,000 rupees, to make it more affordable to farmers.

The growing interest in renewable energy by the private sector is a blessing in disguise for energy planners, who say the country will face an acute power shortage soon due to a delay in the implementation of new power projects.

Tilak Siyambalapitiya, an energy sector specialist who has occasionally advised governments on power issues, reckons that even with the new hydro and thermal projects raising power generation by 2011, "we would still be short of power with annual demand rising by 8 to 10 percent".

Two mega power projects involving coal and hydro power, stalled for periods of over 10 years for a combination of reasons, including protests by residents and environmentalists and political bickering, finally got underway last year.

Reforms at the state-owned CEB are also underway in an Asian Development Bank-aided project that aims to cut wastage and improve usage.

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