Sri Lanka RE Law/Policy

Table of Contents

Last updated Jan. 30, 2024.

Electricity Sector Overview

The state-owned electricity company, the Ceylon Electricity Board (CEB), was the monopolistic utility company from 1969-1983 and performed all functions from generation to retail supply except distribution within certain cities.

In 1983, power sector reforms established a state-owned company (LECO) for electricity distribution in certain areas. From 1996 on, the private sector could generate power as independent power producers (IPPs) or small power producers (SPPs).

In 2009, CEB was restructured slightly upon the introduction of the Electricity Act No. 20 of 2009 (EA 2009).

The EA 2009 introduced a single-buyer model with CEB transmission entity as the designated single buyer and transmission service provider. CEB holds one generation license, one transmission and bulk supply license, and four distribution licenses. These six entities within CEB do not have an independent ownership structure and management.

As of August 2022, Sri Lanka has shifted to a cost-reflective pricing structure, under which electricity tariffs are revised every quarter to reflect costs on a forward-looking basis.1The opportune moment for investing in Sri Lanka’s renewable energy sector has arrived, News.lk (Jan. 16, 2024), https://www.news.lk/news/political-current-affairs/item/36064-the-opportune-moment-for-investing-in-sri-lanka-s-renewable-energy-sector-has-arrived. Draft legislation (supported by the Asian Development Bank) was also published in December 2023 to unbundle the Ceylon Electricity Board, which will result in greater financial and operational autonomy for the distribution, generation, and transmission arms of the CEB and open up additional opportunities for private participation in distribution.2News.lk, supra.

The current structure of Sri Lanka’s electricity sector is represented in the figure below.

Source: ADB: Sri Lanka Energy Sector Assessment, Strategy, and Road Map

Sri Lanka’s electricity mix is composed primarily of 30.58% hydropower, 29.91% oil, and 24.65% coal. Solar represents 3.3% and wind 2.26% of the electricity mix. The following charts illustrate Sri Lanka’s electricity mix:

Source: OurWorldinData.org. Click to access interactive graphs.

Summary of RE Laws/Policies

The CEB, the state-owned utility, develops a Long-Term Generation Expansion Plan (LTGEP) every two or three years, outlining the generation options that need to be added to the system annually for the next 20 years to meet forecasted demand.3Gz. MeeNilankco Theiventhran (2022): Energy as a geopolitical battleground in Sri Lanka, Asian Geographer, DOI: https://doi.org/10.1080/10225706.2022.2098507. The basis for the LTGEP is a 25-year electricity sector master plan that CEB also prepares and updates every ten years.4Theiventhran, supra.

The Public Utilities Commission of Sri Lanka Act No. 35 of 2002, the Sri Lanka Electricity Act No. 20 of 2009, and the Sri Lanka Electricity (Amendment) Act No. 31 of 2013 define the objectives, functions, and legal framework of another important domestic actor in Sri Lanka’s electricity sector, the Public Utilities Commission of Sri Lanka (PUCSL).5Annual Report: To the Right to Information Commission of Sri Lanka, PUCSL (2017), https://www.pucsl.gov.lk/wp-content/uploads/2020/06/2018-RTI_FINAL_REPORT_2018.pdf

The Sri Lanka Sustainable Energy Authority Act No. 35 of 2007 established the Sri Lanka Sustainable Energy Authority (SLSEA), which is the governing body responsible for promoting sustainable energy development in Sri Lanka.6Sri Lanka Sustainable Energy Authority, https://www.energy.gov.lk/index.php/en/about-us/who-we-are. Section 8 of the Act mandates the SLSEA to develop a Renewable Energy Resource Development Plan and revise it every three years.7Sri Lanka Sustainable Energy Authority Act No. 35 of 2007, Section 8, https://cdn.climatepolicyradar.org/navigator/LKA/2007/sri-lanka-sustainable-energy-authority-act_e39ea65be53e06b4422f9d7c9432bfbc.pdf.

CEB’s inclusion of coal in its LTGEPs is based on its master plan supported by Japan.8Theiventhran, supra.

Sri Lanka’s Nationally Determined Contributions Implementation Plan (2021-2030) outlines its plan for achieving its NDC obligations, including the expansion of the role of renewable energy. Furthermore, Sri Lanka’s Climate Prosperity Plan, launched during COP27 in 2022, discusses plans to increase renewable electricity generation from 35% to 70% by the end of the decade.

During COP28, Sri Lanka launched the Tropical Belt Initiative, the Carbon Net Zero 2050 Roadmap and Strategic Plan Synthesis Report, and the National Policy on Climate Change. The Carbon Net Zero 2050 Roadmap and Strategic Plan, which was published in August 2023, includes proposed renewable energy capacity additions and other detailed goals and plans on enhancing the share of renewable energy. The Roadmap and Strategic Plan mentions the potential of adding nuclear to the energy mix as well as an alternate pathway to achieving 100% renewable electricity generation without the addition of nuclear due to the government’s hesitation to develop nuclear power plants within the country.

The Tropical Belt Initiative focuses on commercial investment in natural resources within the tropical belt to unlock funds needed to address climate issues.9President Launches Bold Tropical Belt Initiative at COP28, Proposing a Paradigm Shift in Climate Funding, News.lk (Dec. 4, 2023), https://www.news.lk/news/political-current-affairs/item/35951-president-launches-bold-tropical-belt-initiative-at-cop28-proposing-a-paradigm-shift-in-climate-funding. The Tropical Belt Initiative also acknowledges the renewable energy potential of the Tropical Belt.10Launch of the Tropical Belt Initiative, Ministry of Environment of Sri Lanka, https://www.env.gov.lk/web/index.php/en/announcements/campaigns/299-launch-of-the-tropical-belt-initiative.

Initial Critique of RE Laws/Policies

Sri Lanka is currently emerging from an economic crisis, which has forced many to rely on firewood for cooking and impacted its push for renewable energy.11Uditha Jayasinghe, Sri Lanka’s economy to shrink by 2% in 2023, central bank says, Reuters (Apr. 27, 2023), https://www.reuters.com/markets/asia/sri-lankas-economy-shrink-by-2-2023-central-bank-2023-04-27/. Sri Lanka’s National Climate Change Policy and National Adaptation Plan for Climate Change aim to prioritize renewable energy, but an audit in February 2022 found that the state-owned utility Ceylon Electricity Board (CEB) had failed to do so in violation of the national policy and international pledges in part due to the cost of upfront investments needed.12Shihar Aneez, ANALYSIS–Sri Lanka’s economic crisis exposes gaps in renewable energy push, Reuters (Apr. 19, 2022), https://www.reuters.com/article/sri-lanka-crisis-renewables/analysis-sri-lankas-economic-crisis-exposes-gaps-in-renewable-energy-push-idUKL5N2WB21S.

Critics point out gaps in Sri Lanka’s renewable push including in technology and infrastructure, and protracted tender processes that delay renewable energy projects.13Aneez, supra.

Sri Lanka’s government continues to embrace coal despite its climate and renewable energy targets and commitments, in part due to an increase in demand over the past two decades to exceed the electricity supply, leading the state to push for as much energy as cheaply as possible regardless of source.14Theiventhran, supra. After many years of back-and-forth on the closure or expansion of coal plants, the CEB’s latest Long Term Generation Expansion Plan 2023-2042 seems to confirm the discontinuation of all non-committed coal plants identified in previous plans.15CEB Long Term Generation Expansion Plan unnamed plants, Global Energy Monitor (GEM), https://www.gem.wiki/CEB_Long_Term_Generation_Expansion_Plan_unnamed_plants (Accessed Aug. 4, 2023).

Renewable Energy Targets

  • 70% renewable energy in electricity generation by 203016Sri Lanka’s NDC
  • Carbon neutrality by 2050 17Sri Lanka’s NDC
  • No capacity addition of coal power plants 18Sri Lanka’s NDC
  • Sri Lanka to become a net energy exporter by 2025 19Sri Lanka Climate Prosperity Plan 2022
  • Sri Lanka to exceed 100% of domestic power needs by 2040 with renewable energy production20Sri Lanka Climate Prosperity Plan 2022
  • 80% of outstanding renewable energy potential financed by 203521Sri Lanka Climate Prosperity Plan 2022
  • Contribute to grid connection partnership in South Asia by 203022Sri Lanka Climate Prosperity Plan 2022
  • Leverage the latest technology (e.g. waste to energy, wave, etc.) by 202523Sri Lanka Climate Prosperity Plan 2022
  • Promote energy efficiency technology to increase overall energy efficiency by 20% by 2025 and 40% by 203024Sri Lanka Climate Prosperity Plan 2022
  • 50% of new road vehicles electric or hybrid by 203025Sri Lanka Climate Prosperity Plan 2022
  • 50% of public transportation electrified by 2030 and 100% by 203526Sri Lanka Climate Prosperity Plan 2022
  • Share of non-motorized transportation 20% by 2030 and 30% by 203527Sri Lanka Climate Prosperity Plan 2022
  • 5 GW installed capacity of offshore wind by 203028Sri Lanka Climate Prosperity Plan 2022
  • 100% renewable electricity by 205029100% Electricity Generation through Renewable Energy by 2050: Assessment of Sri Lanka’s Power Sector, ADB & UNDP (2017), https://www.adb.org/sites/default/files/publication/354591/sri-lanka-power-2050v2.pdf.

Renewable Energy Laws/Policies

General Policies

  • Sri Lanka’s NDCs
  • Nationally Determined Contributions Implementation Plan (2021-2030)
  • Carbon Net Zero 2050 Roadmap and Strategic Plan (2023)
  • Sri Lanka Climate Prosperity Plan
  • Sri Lanka Energy Sector Development Plan for a Knowledge-based Economy 2015-2025
  • National Energy Policy & Strategies of Sri Lanka (2019)
  • The National Climate Change Policy of Sri Lanka (2012)
  • National Adaptation Plan for Climate Change Impacts in Sri Lanka (2016-2025)
  • Sri Lanka Climate Prosperity Plan (Preliminary Report, 2022)
    • Info / PDF / Backup PDF
    • Submitted to UNFCCC
    • Promotes the use of domestic renewable energy resources to meet 100% of domestic consumption needs in renewable energy, especially offshore wind and solar. Mechanisms to be used include financing RE and grid modernization (including connecting the grid to neighboring countries), promoting sustainable transportation, and accelerated transition and modernization through re-skilling and training.
  • CEB Long Term Generation Expansion Plan 2018-2037
  • CEB Long Term Generation Expansion Plan 2022-2041
    • Info / PDF / Backup PDF
    • Includes details (studies, project information) about planned generation expansion in various renewable energy sources including hydro, wind, biomass, and solar.
  • CEB Long Term Generation Expansion Plan 2023-2042
    • Info / PDF / Backup PDF
    • Confirmed the discontinuation of all non-committed coal plants identified in previous plans30GEM, supra.
  • SLSEA Renewable Energy Resource Development Plan 2021-2026

Financing Renewable Energy

Institutional Framework

  • Sri Lanka Sustainable Energy Authority Act, No. 35 of 2007
  • Public Utilities Commission of Sri Lanka Act No. 35 of 2002

Electricity Laws

  • Electricity Reform Act No. 28 of 2002 (ERA 2002)
    • Was not implemented and was replaced with the following act in 2009
  • Sri Lanka Electricity Act No. 20 of 2009 (EA 2009)
  • Sri Lanka Electricity (Amendment) Act No. 31 of 2013
  • Sri Lanka Electricity (Amendment) Act No. 16 of 2022

References