Sri Lanka Sustainable Energy Authority Resource Allocation for On-grid Renewable Energy Project Development : an Introduction Harsha Wickramasinghe Sri Lanka Sustainable Energy Authority

Prefeasibility & Consultants Content Background Background Applying for Provisional Approval Reapplications made for cancelled sites Pre-feasibility study and Consultants Granting and refusing Provisional Approvals Granting and refusing Energy Permits Effects of delays accrued Power purchase agreements and tariffs Cancelled Provisional Approvals and Energy Permits Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants Background Background On-grid Renewable Energy Projects Regulation 2009 published in Gazette No. 1599/6 of 27th April 2009 is to be amended (not repealed as contemplated earlier) A new regulation with new schedules was gazetted on 31 May 2011 (Gazette No.1705/22 of 10th May 2011) Effective date 10May, 2011 Halfway done projects, letters sent requesting balance payment New regulation requires the formulation of new guidelines Guidelines were formulated by SEA in association with PAC to; Advise the Board of Management of SEA on technical, economic and environmental guidelines on granting Provisional Approval (PA) and Energy Permits (EP) Review and recommend changes in policies, plans and strategies in developing renewable energy Need to overcome stalemate arising out of the prevalent regulation Many sites in abeyance with cancelled PAs Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants Background Background Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants Applying for PA Background Any person can apply to develop a new renewable energy (NRE) site, provided that the application is accompanied by ; A report on Pre-feasibility study carried out by a Consultant accredited by SEA, which include; A brief description of the project, including the amount of power to be generated The total estimated cost and financial model Project location, describing the relative location of energy conversion plant and equipment to the resource A sketch indicating the method of interconnecting the project to an existing point in the national grid A copy of the map of the geographical location of the proposed project, Proof of availability of adequate finances or the manner in which the required finances for the project are to be obtained, A copy of the receipt obtained from the SEA, for the payment of the prescribed application fee Applying for PA Reapplications Prefeasibility & Consultants Granting PA Full functionality of Section 16 enabled as requested Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants Applying for PA Background With the previous regulation, a resource verification process was available, and this will be taken out in the new regulation A possible contravention of the Act avoided A burden to the developer All applications to be tabled before the PAC Applications favourable considered for PA, if; the resource site is available for development, not associated with a another applicant who is; waiting for / carrying a Provisional Approval, is waiting for / carrying an Energy Permit the Government is having plans for development of the resource site the resource site is already being utilised by any other party for on-grid or off-grid electricity generation Refusal of PA, if the above conditions are not satisfied Queues maintained for a given site to be cleared By tabling all such applications before the PAC Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Applying for PA Application fee structure amended Background Application fee structure amended Presently LKR2,500 resource verification fee and LKR10,000 application fee Revised to reflect the process involved and also to become a deterrent, limited only to cash / bank drafts ? Applying for PA Reapplications Prefeasibility & Consultants Amount of power proposed to be generated Fee to be paid on application and reapplication 1,000 kW or part thereof LKR 100,000 Each additional 1,000 kW LKR 50,000 payable on pro rata basis Granting PA Granting EP Effects of Delays PPA and Tariffs Note: Projects of capacities less than 10,000 kW implemented by a single party or parties acting in concert, in parallel or in phases in a same geographical or spatial context will be considered as a single project capable of generating more than 10,000 kW of power and will not be considered unless a policy directive from the Ministry of Power & Energy is issued on that behalf Cancelled PA and EP

Prefeasibility & Consultants Reapplications Background With the previous regulation, a stalemate condition occurred due to a statement assuring that the same applicant has not made any previous applications for the same site This statement replaced by the following statement ; ‘I attach herewith technical and other details related to the resource site, as requested by the Director General.’ This is to elicit the progress achieved by the Applicant with the PA granted to that site prior to the cancellation Extensions to PA and reapplications will have to be supported with a progress report and a presentation No Extension fee will be charged This will form the basis for DG’s recommendation to PAC The success will be based on a comprehensive marking scheme Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants   Pass Project Aspect Investigated Marks Mark How far the Developer has proceeded 23 10/23 Provisional Approval status : Extension requested 2 Extension for Provisional Approval obtained 3 Letter of Intent from CEB obtained 5 Divisional Secretary’s no objection obtained Local Authority approval realised National Water Supply & Drainage Board approval obtained Department of Agrarian Services approval obtained 1 Department of Irrigation / Coast Conservation approval obtained Forest Department approval obtained Department of Wild Life Conservation approval obtained Environmental Clearance 10 Registration Terms of Reference obtained Environmental approval issued Level of effort of Developer  50 20/50 Initial survey carried out Pre-feasibility study report available Detailed survey plans available 8 Full feasibility study report available 9 Layout confirmed after site inspection Full weather cycle resource assessment report available IEE or IEA report submitted to approving authority Land acquisition / vesting completed Land ownership identified / tenement list submitted to SEA How optimally the resource has been harnessed Installed capacity accurately calculated Energy yield accurately estimated Financial and technical capability 14 Equity support documents provided Bank references provided Audited accounts / sound bank statements provided Volume of transactions of partners declared Total 100 30/100 Background Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Results of the Evaluation Background Applying for PA Marks % No of Projects MW >50 34 62.9 40-50 24 31.4 30-40 34.4 20-30 25 90.8 10-20 27 66.6 10> 87 187 Total 221 473.1 Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Pre-feasibility and Consultants Background Pre-feasibility studies will be done by a panel of accredited Consultants Will involve 7 genres of technology Small Hydro Wind Biomass(Dendro) Biomass (Agricultural and Industrial Waste) Municipal Solid Waste Waste Heat Recovery Other: Any other NRE resource which can be converted to produce electricity which can be fed to the national grid. Authority unable to peruse reports on ‘Other’ genre, to be referred to PUCSL? Panel of Consultants to be reconstituted, to be limited to Chartered Engineers (Civil, Electrical and Mechanical only?) Retaining experienced good Consultants ? Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants Granting PA A Provisional Approval will be granted by PAC, based on the DG’s recommendation DG’s recommendation will consider whether; the application is complete in every sense, as per requirements of the Section 16(2) of the Act and On-grid Renewable Energy Projects Regulation 2011, the amount of power proposed to be produced by the Applicant is representative of the available resource, the CEB has granted its concurrence to consider the proposed capacity or part thereof for grid connection as required under Section 17(1) of the Act, there is any operational power plant in the same location or using the same resource area or part of the resource area required by the Applicant for the proposed project, SEA has issued a Provisional Approval or an Energy Permit to another Applicant for the same site or the resource or part of the resource area required by the Applicant for the proposed project, SEA or the Government of Sri Lanka has plans of their own to develop the site through a different mechanism, a policy directive from the Ministry of Power and Energy is available to consider a project with an installed capacity greater than 10MW, in the event of an application is received for a project of capacity greater than 10MW, Whether the project is impacting on any excluded area. Background Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants Granting PA A three phase approach is proposed Background Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants Granting PA Silence is consent approach? PAC rejected this approach For relevance check For scrutiny Background Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants Granting EP One time permit fees revised; Less than 10MW projects : from LKR50,000 per project to LKR500,000 per MW More than 10MW project : from LKR1,000,000 per project to LKR1,000,000 per MW Background Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Effects of Delays Accrued Background Delays in securing all approvals required for EP could result in cancellation of PA Remedy offered through the reapplication process Aggrieved parties may appeal to the Board of Management Delays in project implementation after securing EP Remedy offered through a show cause process All accrued delays to eat into the 20 year power purchase agreement from the front end Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Power Purchase and Tariffs Background For projects up to 10 MW: CEB offer a Standardised Power Purchase Agreement (SPPA) for renewable energy projects of the approved genres, with an installed capacity up to 10 MW. The SPPA is standardised and non-negotiable, and is valid for twenty years from the commercial operation date and tariffs will be paid under the Small Power Purchase Tariff (SPPT). For projects larger than 10 MW: There is no standardised agreement or standardised tariffs for the sale of electricity from renewable energy projects exceeding 10 MW. Such agreements to be negotiated between the Developer and the CEB, subject to policy directives issued from the Ministry of Power and Energy. Small Power Purchase Tariff: The tariff for projects that would enter into an SPPA is published at any given time, typically at the end of each calendar year. There will be a tariff review process conducted by the Ministry of Power and Energy typically once a year Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants Cancelled PA and EP Background Due to incapability of developers or impossibility of implementation, certain sites may face the cancellation of registration All sites can enter the auction process Or, only with sites reapplied for ?? An auction process is designed to assign such projects to new Applicants Evaluate resource sites and permanently delist undevelopable resource sites Prepare project briefs Register bidders during two cycles (December and June) Acquire all approvals and lands required for implementation A sizable bid bond, representative of the ‘ready to invest’ value of the business case Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

Prefeasibility & Consultants Table 3 : Marking Scheme (Auction Process) Note: Information provided by applicants is subject to validation by directly contacting reference sources provided by the applicant. Cancelled PA and EP Background Evaluation of Bids on QCBS method Price meaning the NPV of revenue paid to the Authority as royalty, during the life of the project Applying for PA Reapplications Aspect Investigated Marks Quality of bid 20 Quality of proposal 3 Implementation timeline 5 Qualifications of key people 2 Local value addition ratio 10 How optimally the resource has been harnessed Installed capacity accurately calculated Energy yield accurately estimated Financial strength 15 Equity support documents Bank references Strong audited accounts Volume of transactions of partners Past experience In similar projects (documented) In project management (documented) Financial consideration 40 NPV of revenue stream Total 100 Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

In Summary Background Applying for PA Reapplications Identify site Mark on map Pre-feasibility study and report Proof of financial strength Grid connection point Application fee Omissions ? Registration R 1 xxxx x Number Consult CEB Site inspection Presentation to Expert Committee Relevant to line agencies? Delist from PA Scrutiny by line agencies PAC Meeting Provisional Approval PA 2 xxxx x Number Token Number Proceed to Grant Energy Permit EP 3 xxxx x Number Reje ction Approval by line agencies Proceed to Grant Energy Permit EP 3 xxxx x Number Reapplication Feasibility Study Access to Land Resources Progress of Statutory Approvals Environmental Approval Auction Process Site inspection Presentation to Expert Committee PAC Meeting Provisional Approval PA 2 xxxx x Number Token Number Evaluation Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

In Summary Background Applying for PA Reapplications Registration of bidders Jun / Dec every year Project Proofing Project Brief Return Bid Bonds to Unsuccessful Bidders Invitation of Bids Deregister Resource Site Cancelled Resource Sites Land Acquisition Statutory Approvals Grid Connection Proposal Receipt of Bids / Bonds Bid Evaluation Auction Cycle Jan/Jul every year Award of Resource Sites Proceed to Grant Energy Permit EP 3 xxxx x Number Applying for PA Reapplications Prefeasibility & Consultants Granting PA Granting EP Effects of Delays PPA and Tariffs Cancelled PA and EP

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