Sri Lanka is a densely populated island nation, with about 20 million people whose per-person income is $US 1,500, well above the South Asian average. However, the country is characterized by wide disparities in income and opportunities. The majority of rural communities have long had limited access to energy. Where it is available, it is relatively expensive.
The IDA-financed Renewable Energy for Rural Economic Development Project was launched in 2002 to increase access to rural energy supplies, thereby improving the quality of rural life in Sri Lanka. The project followed a two-track approach for improving energy access: first, expanding off-grid renewable energy technologies and providing energy services to remote communities; and second, promoting private participation in grid-based power generation.
The project resulted in increased power-generation capacity, private-sector involvement, and rural energy access: more than 105,000 households have benefited from the off-grid electrification program; more than 4,700 households now have electricity provided to by village hydro and biomass projects; 826 additional rural small-scale and medium-scale enterprises (including public and religious institutions) in rural areas have been provided electricity.
Highlights:
- Renewable on-grid expanded. 105 MW of grid-connected mini-hydro capacity is newly in operation, compared to a target of 135 MW by June 2011. The Sustainable Energy Authority issued permits for 40 upcoming mini-hydro projects (with a combined capacity of 102 MW).
- Renewable off-grid increased. Under the off-grid electrification component, 105,032 solar home systems were installed; 126 village hydro schemes achieved an additional 1.23 MW capacity, providing electricity to more than 4,700 households.
- Credit expansion helped. A credit line extended to commercial banks at subsidized rates with longer tenures reduced barriers to accessing finance for renewable energy development.
- Private sector galvanized. This project enhanced the capacity of private sector developers, some of which provided technical advice for renewable energy development in neighboring countries.
- Rural business assisted. 826 additional small-scale and medium-scale enterprises (including public and religious institutions) in rural areas were provided electricity (compared to a project target of 1,500 businesses by 2011), and
- Household access expanded. The project provided 109,737 additional households in rural areas with electricity (on track to achieve a project target of 160,000 households by 2011).
The Renewable Energy for Rural Economic Development was launched in 2004 with an IDA credit of US$75 million, co-financed with a grant of US$8 million from the Global Environment Facility. The financial intermediaries and developers contributed a total of US$49.9 million, with the Government of Sri Lanka contributing US$0.8 million. IDA provided an additional US$40 million line of credit for RERED Additional Financing in 2008. US$7 million from the IDA credit was subsequently reallocated to the IDA-Financed Tsunami Emergency Recovery Program. By providing an institutional framework and implementation mechanisms, IDA has been the major driver behind the private sector in developing Sri Lanka’s renewable energy industry. The framework for a standard power purchase agreement has been put in place with IDA assistance. This has facilitated the process of contracting power, and has reduced transaction costs even for small power developers.
The project may soon provide support to the first commercial wind project. Recently, there has been some slowdown in implementation due to increase in cost of financing installation and construction of grid expansion and delays in the provision of subsidies. However, the Government and the World Bank Group are working on ramping up financing.
RSS