Sri Lanka Lights Up

Challenge

In 2002, nearly 60% of the population of Sri Lanka had access to electricity. However, the disparities between regions were staggering. While the more developed Western Province had around 80% access, the lagging Uva Province had less than 30% access.

Sri Lanka’s largest source of electricity came from hydropower and the task of increasing the supply with limited resources was challenging given that most of the major hydro sites had already been fully developed. The government would have had to rely purely on conventional thermal power generation as an alternative to hydro in order to serve the unmet demand and achieve its electrification targets. As a result, expansion of the grid through thermal power was the principal vehicle for electrification in the country along with expanding the national grid network.

Solution

The Sri Lankan Government recognized the problem of access to electricity and worked with the World Bank to lay the foundation for this transformation through the Energy Services Delivery Project (ESD) in 1997. The 2002 Renewable Energy for Rural Economic Development project (RERED) took grid/off-grid electricity services to the next level reinforcing the World Bank’s commitment to green energy. Increased demand fueled additional financing from IDA that further enhanced the successful impacts and results of ESD/RERED.

Moreover, the government was also keen to promote private sector participation in the energy sector and devised a mechanism that would enable private developers, commercial banks/financers and entrepreneurs to be key stakeholders in this endeavor and thus catalyze an entire industry in Sri Lanka for renewable energy.

Results

Since 2002, the project has achieved:  

• 147.8 MW of grid-connected renewable energy capacity commissioned; additional capacity supported by the project is under construction.
  
• 116,795 off-grid households electrified.
  
• 742 off-grid enterprises benefitted.
  
• 2.15 million tons of carbon emissions avoided.
  
• 173 Village Hydro Projects (VHP) were completed providing electricity to 6,220 households.
  
• 110,575 households, or half a million people, in the solar program have electricity for lighting and television.
  
• Schoolchildren can now study with electricity, replacing the use of kerosene oil lamps. Indoor air pollution is reduced and safety improved.
  
• Households with solar home systems have reduced monthly kerosene consumption from 11 liters to 0.7 liters.
  
• 93% of households have eliminated monthly expenditure of Rs 168 ($ 1.29) for charging batteries.

Bank Group Contribution

The RERED Project included a $115 million credit from the International Development Association (IDA) and a $8 million grant from the Global Environment Facility during 2002-2011.

Partners

The World Bank and the Global Environment Facility helped with the design of the project and the project relied on the commercial banks (known as PCIs or Participating Credit Agencies) to finance loans to the private sector with support from IDA

Moving Forward

The RERED Project addressed one of the most important barriers to renewable energy development in Sri Lanka, namely the availability and access to sufficient long-term credit. This was achieved by encouraging commercial banks to lend to renewable energy projects in order to demonstrate that the risks are manageable and that lending would also be profitable. The true criterion of success of RERED is in the continued lending for renewable energy projects by commercial banks and the initial findings post-project completion are very encouraging.

A possible follow-up to the RERED Project could be support for the development of wind energy as well as power generation from biomass and grid-connected solar photovoltaic (PV) (where installed, cost is dropping rapidly). Small hydro development is now considered a commercial practice with sufficient expertise in the country, which may not require additional support. Biomass generation, and to a lesser extent wind power and solar PV, are still facing a number of barriers including some of a technical nature, as well as regulatory and financing barriers. Support to overcome these would be beneficial to the country.