Of course we’ve tried powering up!

111334367_07a3ddc6f1.jpegWe saw this particular post on Kottu this morning, referring to the 'govt-says-go-to-sleep-by-10pm' issue. The following article is a reproduction of the extended comment/repsonse left by PopularEconomix on that post.

The original article refferred to the supposed severe shortage of electrcity and the government's order for people to tuck in by 10pm – an electricity saving measure. It was mentioned that 3 strategies/solutions to this are very apparent, suggesting that these have, hitherto, been failed to consider. These 3 strategies and our comments on each, are reproduced here. 

Quote:"General knowledge of economics will suggest you strategies like,
1) Improving production capacity of CEB
2) Licencing Private companies to supply the excess demand
3) Alternative energy etc."

General knowledge of economics could suggest these strategies, but one must question as to whether or not these strategies have already been explored. Allow us to answer that one oursleves. Yes. All 3 of these have been looked into at great length, with significant steps taken to activate relevant policies for their implementation. Let's take each point individually.

1. Improving capacity of CEB – hell yeah!

It's abso-bloomin-lutely the 1st thing we should do. Of course it's been attempted. In fact, it's ongoing. Significant restructure of the CEB is already underway, but as you would've read in the news, the parliamentary paper approving further restructure of the CEB has been stalled by the unions and the JVP. A few nights ago President MR withdrew the CEB paper on the very day to was to be taken to parliament. He felt that more dialogue with unions and other relevant stakeholders was needed.
2. Licencing Private companies to supply the excess demand

This is stale news. The CEB purchases quite a bit of its electricity for the national grid from private electricity companies. This was started many years ago when we had the ultimate electricity shortage and strike in the late 90’s. The project was further explored by Hon. Karu J during his term as Power & Energy Minister under the UNP regime. It was how we pulled out of that energy crisis. It was also why LECO (Lanka Electricity Company) was set up. You might say, "ok then…just flippin' get out there and buy more electricity from them!" Firstly, the CEB cannot afford this. It already pays a premium price per-electricity unit when buying from these pvt electricity suppliers. This was the only way these companies could be incentivised during the crisis of a few yrs ago. It has remained so ever since. Secondly, it seems like the capacity of these private companies have been somewhat exhausted, and the possibility of them contributing more to the national grid is unlikely. But this latter point is debatable.

3. Alternative energy?

Yes, this has been looked into. Duh. Many times. By many people. Local authorities. And keen foreign investors. With lots’ve money going into fancy feasibility studies. Norochcholai is underway, after much “hoo-haa” and seemingly endless delays. Next, Sri Lankan industries are actively looking into Dendro power. It’s absurdly abundant and access is easy. Setting up Dendro-power plants requires relatively less capital outlay. It’s cheap. Not so environmentally friendly. But you're missing the point, it’s cheap. Just this week, President MR announced that arrangements will be made to provide loans at concessionary rates for starting up alternative-power projects, especially solar power.

I understand all this was probably not the heart of your post, and you were more on the issue of the ‘go-to-bed-by-10pm’ story. But I was compelled to comment on the 3 strategies you mentioned as it seemed as if you suggested they had never been considered. If this was not the case, may that (exceedingly large) comment serve as enlightenment to those who think a ‘quick-fix’ to this electricity issue exists, and the only reason they haven’t been implemented was because the people entrusted with the job, are a bunch of lemons. But let's not dwell on that bit.

Until we have the coal power plant up and running, we are, to put it very bluntly, screwd. If the Upper Kotmale project goes ahead this screwed-factor might be slightly dampened, albeit at a huge ecological cost. (Personally, I’m not a major fan of cutting off the water to the lovely St. Clair’s Falls). PS – In a news update here at home, the CEB has announced a tariff hike, effective from August this year. The last hike was in 1992. There is not enough power being generated in the national grid, and the price of existing power is far to high. This has become a severe dis-incentive for production, falling profitability, and a serious loss in competitiveness in the int’l trade arena. Worst of all, it is the biggest cloud hovering over Sri Lanka’s fragile investment climate.

3 thoughts on “Of course we’ve tried powering up!

  1. Below is the reply comment I made on the original post on LLNO

    ————
    A lengthy comment but yet, shedding some light on some interesting areas. Thanks for that, first of all.

    I agree, that all these 3 strategies have tried several times by many authorities but was it in the best interest of adressing the crisis we are heading in? (Imagine in 10 years, when the population grow and people starts to spend more on luxury, how big would be the electricity consumption of SL)

    Forming LECO was no difference from “rebranding” Ceypetco. We can’t accept it as a good attempt to liberalize the market for elecricity to private sector. Even the smaller power plants licened in several parts of the island are all small scale.

    I never intended these are quick fixes or readily availeable solutions. But, these are the way forward. Regulating people consuming electricity is way backward, trying to take the country a decade back.

    About the union acts, I have the same perception towards it. It’s those labour unions which ruine our country, since many decades.

    Why they oppose reforming CEB is not because they are in love with CEB. They fear, they have to work more for the same salary. That’s how most labour unionists think.

    I remember one of my Economics teachers said in a lecture, “In Sri Lanka, there’s no labour exploitation. It’s capital exploitation what’s happenin”

    Labour’s added value to the economy, worth less than the salary they earn from the employers. That’s capital exploitation. That’s what happening in CEB and most government institutions. They don’t wanna change that. That’s why they oppose “reforms” Resistance to change.

    Coming back to topic, what I wanted to make clear is, “Governments should not try to revert back society & culture (That’s what JVP tried to do in 89). If the government can’t meet the demand for something, in the society they are governing, it’s there duty to expand the supply. Not regulating the demand.”

  2. Firstly, I agree wholeheartedly with your closing line….the govt shouldn’t use quick fixes like regulating/curbing people’s demand to a problem like a supply side shortage (of electricity, in this case). It’ll only serve to hamper economic activity even more.

    With regard to the LECO issue, by no means did we say that LECO was the result of liberalisation in the electricity sector. It was a means to an end. The means towards attracting and obtaining more PPI (Private Partnership in Infrastructure) at a time when the govt was struggling to keep up with demand. I agree that most pvt elec. suppliers operate on a relatively small scale, but one must admit that it is indeed a positive start. We can see with an example like Valibel Erathna Power Ltd(investor: Dhammika Perera), which recently went public, there is a lot of potential for private play in this sector. The opportunities are in no way hampered by govt authorities.

  3. About the government decision to regulate TV broadcasting after 10, we don’t need to argue anymore if you read This news 🙂

    But, I agree that we need a more in depth discussion is needed among the general public and the policy makers (should includes economists as well), how we should adress the Power Crisis in the future. We have to build a proper discussion in the society about the pro’s and cons of different solutions (Upper Kothmale, Thermo power, reforming CEB etc) and in the discussion all the parties involved have to be “open minded”, which will help us to achieve at an “actionable” solution.

    I appreciate your effort at “Popular Economics” to build a good discussion on this issue atleast among Sri Lankan Blogger community (Which is not representing the general public as I understand). If you could broaden your effor to reach the general public as well, in this discussion that’s ideal!

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