Demand analysis of emerging PV markets: Sri Lanka
March 3, 2021 Mars Chang
Country profile:Sri Lanka
Since the change of regime in 2015, Sri Lanka, with 21.8 million of population, had experienced China’s deferral of investments, political infightings, and terror attacks from 2015 to 2019. Consequent negative impacts not only drew back, but also deteriorated the country’s economic progress, with annual GDP growth rate slid from 5% in 2015 to 2.283% in 2019. Moreover, Sri Lanka’s debt mountain has become so high that 95% of its annual revenues go towards foreign debt repayment every year. In 2020, COVID-19 added to the economic crisis. Under such circumstances, international rating agencies Fitch Ratings and Standard and Poor’s assigned Sri Lanka a credit rating of CCC/CCC+, which was almost equivalent to junk bonds.
Geographically, Sri Lanka is an island country. With tropical climate and distinctive dry and wet seasons, the mean temperatures range from 22°C to 32°C. The northern flatlands are drier, while the southern mountains are more humid. Sri Lanka has two major wet seasons, which is April to June and October to January, respectively. Situated in the South Asia, the country enjoys abundant sunlight, with approximately 3.6-4.6 kWh/m2 of solar irradiance in average.
Developments of renewables in Sri Lanka
The United Nations Development Programme (UNDP) and Asian Development Bank (ADB) set the goal for Sri Lanka to reach net-zero emission by 2050, and estimated that the country would have to achieve 34.3 GW of cumulative renewable energy installed capacity for the goal to be realized. Primarily, Sri Lanka drives demand for renewables through launching tenders.By the end of 2019, the country had only installed 2.2 GW of cumulative renewable energy capacity, and was still 32 GW away from its goal. Sri Lanka might continue issuing tenders to stimulate demand, and thus fulfills the goal.
Besides long-term objects from UNDP and ADB, Sri Lanka Sustainable Energy Authority also stipulates a renewable energy goal, under which its Renewable Energy Development Plan Phase I will add 2.5 GW of renewables capacity, with PV capacity additions accounting for more than 1.56 GW.
At end of 2019, Sri Lanka had installed about 2.2 GW of cumulative renewable energy capacity, of which hydropower accounting for as high as 82% (1.8 GW), PV standing for 10% (215 MW), wind power accounting for about 6% (128MW), and biomass representing merely 2% (54 MW.) Looking at the cumulative installed capacity of 2019, Sri Lanka have almost achieved the goal the UN set for them in terms of hydro power generation, but still fell behind as to solar PV, wind power, and even bioenergy. It is likely for Sri Lanka to scale up solar PV and wind power deployment in the future to meet renewables targets.
PV development in Sri Lanka
Sri Lanka launched the “Sooryabala Sangramaya” (Battle for Solar Energy) program during 2016 and 2017, aiming to reach 1 GW of cumulative PV installed capacity by 2025. To achieve the target capacity, the Ceylon Electricity Board (CEB) has issued tenders for 300 to 500 MW of solar projects.
In 2019, the country published the Renewable Energy Development Plan, further increasing the 2019-2025 target capacity to 1.56 GW. Having deployed 215 MW of solar capacity in 2019 and issued tenders for 300 to 500 MW of PV, Sri Lanka is estimated to have around 1.5 to 2 GW of potential demand in the foreseeable future, meaning that the growing trend is expected to remain.
However, Sri Lanka’s ever-weakening fiscal position and mounting debt are worth noting. While impacts on local renewables remain to be seen, the government may be forced to shift its focus away from renewables onto resolving foreign debt crisis and financial condition due to the immense economic pressure, bogging the development of renewables down into stagnation.
Sri Lanka-China trade: Module import and export
Sri Lanka’s PV demand started to grow as the government launched the “Sooryabala Sangramaya” during 2016 and 2017, driving inventory draw for modules. In 2017, China exported only 50 MW of modules to Sri Lanka, but the average export volume reached beyond 100 MW in 2018 and 2019 each year.
In 2019, the country has achieved 215 MW of cumulative PV installed capacity. Taking the 1.5 GW of target capacity set for 2025 into consideration, Sri Lanka is expected to see an average annual demand for modules of 250 to 400 MW until 2025. In the meantime, as 2025 approaches, inventory draw for modules is expected to become stronger. Nevertheless, whether the country’s financial morass would be an obstacle for its PV development or not still awaits further observation.
Presently, hydropower predominates renewable energy development in Sri Lanka. However, the cumulative installed capacity indicates that the country has already fulfilled its target for hydropower. Sri Lanka has, in recent years, developed other renewable energy technologies to serve the country’s energy needs, and PV is one of the renewable energy projects with great vitality.
With the introduction of “Sooryabala Sangramaya” in 2016 to 2017, the CEB, in order to achieve their goal, has gradually launched tenders. As a result, in 2017, demand for solar PV started to grow. In 2019, the country published the Renewable Energy Development Plan with an aim to add 1.56 GW of PV installations between 2019 and 2025. The capacity that has been installed thus far aside, there will be averagely 250 to 400 MW of demand expected each year during 2020 to 2025.
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