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Eng. K A Noel Priyantha Chief Engineer (Renewable Energy) Ceylon Electricity Board 21 October, 2007

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

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Eng. K A Noel Priyantha Chief Engineer (Renewable Energy) Ceylon Electricity Board 21 October, 2007

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  1. 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

  3. 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)

  4. 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

  5. Three tier tariff estimation • Capital costs used for the tariff calculation in year 2007

  6. Three tier tariff estimation • Plant factors used for the tariff calculation in year 2007

  7. Three tier tariff estimation • O&M rates as a percentage of the capital cost (base value)

  8. Three tier tariff estimation • applicable O&M base value for 2007 in SLRs./kWh

  9. 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 %

  10. Three tier tariff estimation • Debt equity ratio - 60:40 • Interest rate - 12.45% • Loan repayment - 6 years • Construction period - 2 years • Discount rate - 16.27% • Return on equity - 22 %

  11. 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 %)

  12. 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 %)

  13. Three tier tariff estimation • Royalty to GOSL 10% of generation as royalty for mini hydro and wind projects from 16th year

  14. Cost based tariff for 2007 SLRs/kWh

  15. Interpretation of the cost based tariff 2007(based on the escalation rates applicable for year 2007)

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

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