Pricing policy for renewable energy
- Cost Based Technology Specific Tariff
Eng. K A Noel Priyantha
Chief Engineer (Renewable Energy)
Ceylon Electricity Board
21 October, 2007
Introduction
 Principles of tariff fixing
 Cost based, technology specific & three
tiered tariff calculation methodology
 Tariff applicable for year 2007
Principles of Tariff Fixing
Cost
based , technology specific and
three tiered tariff
Tier 1: Years 1- 6
Tier 2: Years 7 – 15
Tier 3: Years 16 - 20
This tariff will be limited to small power
producers ( Capacity up to 10 MW)
CEB pays only 90 % of the avoided cost
Any difference will be provided by the GOSL
through Sustainable Energy Authority (SEA)
Principle of Tariff Fixing
This
tariff have been designed to eliminate
the problems of negative cash flows
experienced by many small power producers
during the period of loan repayment.
Tariff will be revised once a year due to rapid
changes in the project costs, exchange rates
and interest rates, etc.
 20 year term of the power purchase
agreement
Three tier tariff estimation
Capital costs used for the tariff
calculation in year 2007
Technology
SL Rs. Million/MW
Small Hydro
121
Wind
158
Biomass
147
Three tier tariff estimation
Plant factors used for the tariff
calculation in year 2007
Technology
Annual Plant Factor
Small Hydro
43 %
Wind
32 %
Biomass
80 %
Three tier tariff estimation
• O&M rates as a percentage of the
capital cost (base value)
Technology
Small Hydro
Year 1 - 15
3%
Year 16 onward
3%
Wind
3%
3%
Biomass
4%
5%
Three tier tariff estimation
• applicable O&M base value for 2007
in SLRs./kWh
Technology
Small Hydro
Year 1 - 15
0.96
Year 16 onward
0.96
Wind
1.69
1.69
Biomass
0.84
1.05
Three tier tariff estimation
Escalation of O & M.
 This will be calculated using the average of
Sri Lanka Consumer Price Index (SLCPI)
rates of change and SLRs/USD rates of
change for the five preceding years.
Source for SLCPI & SLRs/USD – Central bank
The five year average SLCPI – 8.75
Depreciation of rupee against the USD – 6.11%
Applicable O & M escalation rate – 7.43 %
Three tier tariff estimation
Debt
equity ratio
Interest rate
Loan repayment
Construction period
Discount rate
Return on equity
-
60:40
12.45%
6 years
2 years
16.27%
22 %
Three tier tariff estimation
Third Tier
The base rate will be 1.00 SLRs./kWh as of
year 2007.
This will be escalated at a rate of 2/3 of O & M
escalation rate ( 7.43 %)
Three tier tariff estimation
Biomass fuel cost escalation
The base fuel cost - 5.00 SLRs./kWh for 2007.
This will be escalated at a rate of 2/3 of O & M
escalation rate ( 7.43 %)
Three tier tariff estimation
Royalty
to GOSL
10% of generation as royalty for mini hydro
and wind projects from 16th year
Cost based tariff for 2007 SLRs/kWh
Technology
Mini-hydro
Wind
Biomass
Escalation per
year from 1st
January after
the commercial
operation date
Escalable
Escalable Non-escalable fixed
Escalable Year 16+
Year 1-6 Year 7-15 Base Tariff Royalty to Govt, paid
Base O&M Base Fuel
direct by the power
(year 1-20) (year 1-20)
purchaser
0.96
none
8.28
3.07
1.00
10% of total tariff
1.69
none
14.52
5.39
1.00
10% of total tariff
0.84
5.00
5.40
2.01
1.00
No royalty
7.43%
4.95%
4.95%
Interpretation of the cost based tariff 2007
(based on the escalation rates applicable for year 2007)
20
Mini-hydro
All InclusiveTariff Paid (LKR/kWh)
18
Wind
16
Biomass
14
12
10
8
6
4
2
0
1
2
3
4
5
6
7
8
9
10
11 12 13 14 15 16 17 18 19 20
Year of Commercial Operation
Thank You
Energy Purchases Branch
Transmission Division
Ceylon Electricity Board
Web: www.ceb.lk