The Hon. Kumara Jayakody - Minister of Energy

¶ 01 Let me continue, Hon. Presiding Member. It was also alleged we restricted wind power plants. That is false; prove it—after my speech.

¶ 02 We came to power with a compact with the people. Our single aim is to gradually bring the average tariff down to 8 US cents per kWh. Under current practice, tariffs fall when rains come and rise when rains fail. We want to reduce volatility and bring tariffs to a stable, lower level. Last year, the average paid for new solar was over Rs. 30 for 20 years—over 10 US cents. Diesel-based generation costs about Rs. 75 per unit—around 25 US cents. When government can procure at 5–6 cents, why should we pay 25 cents? We have no plants, sheds or deals with former ministers or their relatives. If you claim so, prove it.

¶ 03 Another Member spoke of conspiracies and mafias. On low-demand days—Sundays and public holidays—our duty is to supply everyone. We do not buy expensive fossil or diesel-based power at such times; the maximum day-time purchase price is around Rs. 43 per unit; beyond that we do not buy. At night there is no solar; we must dispatch what is available to meet night demand. Mixing day and night to manipulate narratives is common.

¶ 04 We cannot store day solar for night today; the strategic aim is to rapidly phase out fossil fuel use in generation. Oil-producing countries do not use oil to generate their electricity. We cannot abandon fossil fuels overnight, but we can rapidly reduce fossil-based generation. Stop the mudslinging; understand the matter correctly.

¶ 05 On pricing: under current law, up to 10 MW plants can be paid via a formula. Agitators want that formula extended to large plants as well. That is their wish. Our policy is to procure every unit at competitive prices. I will explain why they want a formula.

¶ 06 Under the formula, a committee chaired by the Secretary determines prices—this has been in place since 2008. Two main aspects: the formula itself, which is scientifically accepted; and the input parameters. For a 20-year-old model, we must make assumptions. The easiest is to call for base prices and consider the average—not the minimum. We have instructed to use average quoted prices when setting normative capex, not the lowest. O&M costs are also included with ample historical data. Debt interest is included: assuming up to 70 percent debt financing. We then compute an equity return over 20 years using the long-term policy rate proxies.

¶ 07 If panel prices fall, if the dollar falls, if interest rates fall, the tariff falls accordingly without reducing investor return. For example, in July 2024 the previous government reduced the solar tariff from Rs. 37 to Rs. 27 per unit when the dollar was Rs. 305; now it is about Rs. 300. PV module prices per kW fell from about USD 13.5 to USD 9—a 33 percent drop. The public did not receive that 33 percent benefit because a few companies—this “mafia”—did not pass it on. They are the ones protesting. Rate of equity has fallen from about 13.14 percent to 11.47 percent; average debt rates from about 14.35 percent (AWPLR+2) to around 11.09 percent. You cannot get 14.35 percent anywhere today. That is the issue.

¶ 08 Some Members speak loudly here on behalf of companies that refuse to pass reductions in module, inverter and finance costs to consumers. The truth must be known. We have already reduced industrial tariffs by 30 percent. Industry gets power at about Rs. 13 per unit. Yet some still demand that we buy at Rs. 27. Whose side are you on?

¶ 09 If and when we take a scientific decision, do not panic. We have not yet taken such a decision as a government; we will do it properly. Our target of 70 percent from renewables remains—if possible, we will exceed it, not reduce it. We intend to procure all energy competitively under the forthcoming Electricity Act amendments. Why do they demand formulas? Because by tweaking assumptions, they can influence outcomes—something that has happened before. Not anymore.

¶ 10 They claim a “solar industry” will collapse. There is no such domestic manufacturing industry; these are trading businesses earning high margins. If margins fall, improve efficiency or pivot to new business lines. Instead, they push engineers and technicians to the streets to protect their profits. Shameful.

¶ 11 They cite 40,000 or even 60,000 jobs; last year about 600 MW of rooftop was installed. Even if 40,000 workers were engaged, teams of eight could have installed 10 kW per month—roughly one or two houses’ worth. It seems many collected cash advances; time to deliver instead of crying collapse.

¶ 12 About batteries: we do not accept non-absorbable batteries attached to solar merely to enrich vendors. Storing in batteries alone costs about Rs. 40 per unit; charging from solar adds cost; add margins and interest, it rises further. We have proposals on battery-linked tariffs; we have introduced an initial framework—some hide these facts. With batteries, the cost approaches diesel; we will promote it prudently. We prefer every solar consumer to have at least 2–3 hours of backup for outages. But lithium-ion requires strict controls; if mishandled, fires occur, frightening consumers away. SLSEA Chairman Prof. Wijendra Bandara, an international expert, is framing policies; he has also prepared the green hydrogen policy. While those finalize, we cannot wait; we have proposed battery pricing to test market appetite and will bring it soon.

¶ 13 Our end-goal is to allow even consumers without good solar resource to competitively join the energy economy through batteries, via energy community units and cooperatives—villages investing jointly in solar plus storage and sharing benefits. Our Secretary Prof. Udayanga Hemapala, an expert, is working on this. Pumped hydro storage will take around six years to realize, and we are mindful of that.