Electricity generation

For whom? And by whom?

Prof Ranjit PERERA

Electricity is not just yet another form of energy. Electricity can be conveniently used to get various jobs done.

You can use electricity for lighting, ventilation, refrigeration and air conditioning, ironing and cooking, traction, audio and video entertainment, driving of various mechanical machines, computers, communication systems, control systems,. Which other single form of energy can be used to do all these things? Some of these actions can never be done using other forms of energy directly. Due to this reason electricity is considered to be a super quality form of energy.

Reasonable price

Further, electricity can be generated in bulk at reasonable prices and can be transported long distances cost effectively. Electrical transmission lines are cost intensive, but once constructed they can be easily maintained and operated remotely. They also have a very long life. Another distinct advantage of electricity is that it creates little pollution at consumer end. Compare a kerosene lamp with an electric one or a diesel engine driven mill with an electrically driven one. Due to all these positive characteristics electricity is considered to be an essential commodity for social wellbeing and industrial growth.

We often tend to underestimate the value of Electricity, probably because the world knows and uses electricity for the last hundred years. Can you imagine high-riser buildings or densely populated urban areas if there were no electricity available? Today people have a long life compared to the short average life span, which prevailed 100 years back. The average life expectancy at birth in many countries in the world, including Sri Lanka, was just around 40 years prior to 1950. Today we enjoy a life expectancy at birth approaching 75 years in Sri Lanka while some other countries have it passing even 80 years. One would say good nutrition and excellent health care has contributed to this achievement. But a more careful analysis would show that electricity has contributed in hiding to improve the agricultural productivity and even more to improve the health techniques and facilities.

Electricity is a wonder product of industrialisation. Do we Sri Lankans receive the fullest benefit of this wonder product? Around 4 million of our people have no electricity at their homes. Our industry complains that they are thrown out of international competitiveness due to high cost of electricity. As there are too frequent breakdowns industry is compelled to invest on stand by generators and uninterruptible power supplies (UPS). We experience load shedding during the evening peak. We all have the bitter experience of long power cuts in the dry years in the past. Last such power cuts were in 2001 and it is unlikely that such power cuts come in the near future again due to action taken by the Government.

Low and medium income people in our country are compelled to take drastic action to save electricity to see a reduction in their electricity bills.

While conservation is a welcome action, cut-downs in essential consumption are counterproductive. As an example some people switch off their refrigerators during night time to save electricity. Such an action can have adverse effects on the food and other items in the refrigerator. The cost of negative impacts of such an action exceeds the money saved by far.

Above all these, the electricity industry in Sri Lanka makes losses. If a private company makes losses they either close down or sell their assets to some other party. If a government owned company makes losses the losses are absorbed by the treasury. Treasury means the people, rich and poor, those who consume electricity and also those who do not consume electricity. It is the interest of the Government and it should be the interest of people and loss making companies to change this situation.

Satisfaction

How can we change this situation? We have to reduce costs of electricity industry and increase the customer satisfaction. In other words we have to improve the efficiency of the industry. What mechanisms are available for this? An internationally established practice is to regulate the industry. Our banks are regulated. Our insurance companies are regulated. Our retail outlets are regulated. Our telecommunication services are regulated.

But many attempts taken by the former Government and present Government to bring regulation in to electricity sector failed due to various barriers that emerged from time to time.

A rich country finds it easy to have a perfect electrical infrastructure. On the other hand, if we do not have a good electricity infrastructure our industrial development lags behind and we remain poor. Where do we start? The smallest improvement we make to the electrical sector will give rise to some growth in the industry and will improve the quality of life of some people.

That means we become richer. This will generate some revenue and profit to the sector so that the sector can improve further. This spiral goes on. We should never hesitate to implement any mechanism that contributes to this spiral of growth. The national energy policy that has been accepted by the Sri Lankan Parliament has already identified the need for electricity sector regulation. However, the policies that are not implemented are as worth as the paper on which they are documented.

What is regulation? Regulation means bringing something to balance and sustaining it in the balance. When it comes to electricity the prices, the quality parameters and continuity indices need to be regulated.

Subsidies

The supply authority should be able to recover its costs from the consumer, while providing for Government approved subsidies. On the other hand, the supply authority should not go for most costly methods and pass all the costs to the consumer. The regulator brings the balance to this. Electricity is a commodity, the quality of which is not seen or felt but to be quantified using complicated technical measurements. The consumer is not in a position to judge about the quality of electricity. Some of them are even unaware of he fact that poor quality of electricity cause malfunctioning of equipment and reduce the lifetime of the equipment. Thus the consumer should not be compelled to use whatever the quality delivered and pay for it.

There should be a third party, here the regulator, who intervenes in defining the quality parameters and take action to monitor them. Electricity is one of the few commodities in the world, that can’t be stored in large scale. Electricity should be supplied continuously to match the instantaneous demand, not more, not less. How many break-downs should be permitted? Zero break-down situations are not economically viable. The supply authority should take action to minimise the number of break-downs to a technically feasible and economically viable level.

Efficiency

A third party should be there to define this level and monitor that it is maintained. These are only few of the responsibilities that come to the regulator. All these regulatory interventions bring in better efficiency and better customer satisfaction.

There should be also a reliable mechanism to address customer grievances. It will be the responsibility of the regulator to handle all customer grievances and arrange settlements within a reasonable time period.

We continuously convert one form of energy into another. By burning firewood we generate heat for cooking. By burning carbohydrate in the body we generate muscle power to do work. All these are energy conversions.

Generation is just another form of energy conversion. There, we convert either heat energy, potential energy of water, energy in sunlight or wind energy into electrical energy.

Risk factors

Unlike the conversions mentioned earlier electricity generation involves certain risk factors and certain standards should be maintained throughout the process. Thus, the authority to generate electricity and supply electricity to the national grid was exclusively given to the Ceylon Electricity Board through the Ceylon Electricity Act of 1950. This limitation is outdated and was later relaxed due to two reasons.

The main reason was that Government finds it difficult to generate funds for investment in generation assets. Power Stations are highly capital intensive and are long term investments. Government has to allocate its limited funds also for more important activities like education, healthcare, transport infrastructure and defense. With the development of efficient generation technologies and various financial instruments even private investors were in a position to generate electricity at an affordable price even after providing for a reasonable return on their investments. This was a golden opportunity for Governments with tight finances. The second reason was the emergence of renewable generation options like small hydro power plants. A large number of privately owned power stations of this category amounting to a total capacity of over 130 MW have emerged during last two decades in Sri Lanka.

The writer is Director General, Public Utilities Commission