Eng. K A Noel Priyantha

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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
2
Introduction

• Principles of tariff fixing
• Cost based, technology specific three tiered
  tariff calculation methodology
• Tariff applicable for year 2007

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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)

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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

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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
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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
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Three tier tariff estimation

• OM rates as a percentage of the capital cost
  (base value)

Technology Year 1 - 15 Year 16 onward
Small Hydro 3 3
Wind 3 3
Biomass 4 5
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Three tier tariff estimation

• applicable OM base value for 2007 in SLRs./kWh

Technology Year 1 - 15 Year 16 onward
Small Hydro 0.96 0.96
Wind 1.69 1.69
Biomass 0.84 1.05
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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

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Three tier tariff estimation

• Debt equity ratio - 6040
• Interest rate - 12.45
• Loan repayment - 6 years
• Construction period - 2 years
• Discount rate - 16.27
• Return on equity - 22

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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 )
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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 )
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Three tier tariff estimation

• Royalty to GOSL
• 10 of generation as royalty for mini hydro and
  wind projects from 16th year

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Cost based tariff for 2007 SLRs/kWh
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Interpretation of the cost based tariff
2007(based on the escalation rates applicable
for year 2007)

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Thank You
Energy Purchases Branch Transmission
Division Ceylon Electricity Board Web www.ceb.lk