Sri Lanka (2012)

Source: REEEP Policy Database (contributed by SERN for REEEP)

This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.

Energy sources

Total installed electricity capacity (2010): 2,681 MW 

  • Thermal: 49.5%
  • Hydro-electric and other renewables: 50.5%

Total Primary Energy Supply* (2009) 9,281ktoe
Biofuels and waste: 51.1%
Oil: 44.7%.
Hydro: 3.6%
Coal/peat: 0.6%
*Share of TPES excludes electricity trade

According to provisional data for 2010, the peak demand on the national grid was 1,955 MW, and 10,600 GWh of electricity was delivered to the transmission grid. Electricity sales grew by about 7.0% per year during 1996–2006, but the growth rate declined to 0.2% in 2009. Since the end of the conflict in May 2009, and with the government’s current drive for economic development, demand and sales have picked up again and are forecast to reach 7% per year by the end of 2011 .

By the end of 2010, per capita electricity generation was estimated at 420 kilowatt-hours (kWh), lower than in India or Pakistan. Transmission and distribution losses in 2009 were 14.6% and are estimated at 14.5% in 2010 .

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Biomass and the hydro-electric resource are the only indigenous energy sources. In the case of oil, Sri Lanka imported 4.37 MtoE of crude oil and petroleum products in 2007.

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Extend network

Population Access to Electricity (2010): 88%

Substantial disparities in access to electricity still exist across the provinces, particularly in Northern and Eastern provinces where the conflict severely damaged the distribution network and prevented new rural electrification programs .

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Capacity concerns

Meeting increasing demand for energy; demand is expected to increase to about 15,000 kTOE by the year 2020 at an average growth rate of about 3%.

The major issues in the power sector are:  .

  • the high cost, poor reliability, and instability of the electricity supply;
  • the lack of access to electricity for about 15% of households, particularly those in rural areas;
  • a debt overhang restricting capital investments by CEB and discouraging private sector investments in the sector; and
  • the urgent need to undertake energy efficiency measures and develop renewable energy. As a result, the electricity system cannot meet demand at sufficiently low cost and acceptable reliability.
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Renewable energy

Due to the geographical configuration of the country, having a rain-fed central hill zone, Sri Lanka enjoys good hydropower potential. The country has used this resource for the conveyance of irrigation water for many millennia, and for electricity generation during the last two centuries. The early days of grid electricity generation saw hydropower as the major component, accounting for more than 90% of the total. Recently, this component has been reduced to 35%, mainly due to the exponential load growth, which cannot be met by this limited resource. However, a significant portion of small hydropower potential remains to be developed. Potential sites have capacities ranging from a few hundred kW to 40 MW, and total potential is estimated around 2,000 MW. 

Wind Energy
Sri Lanka has significant wind data. The Solar and Wind Energy Resource Assessment (SWERA) partners are the National Engineering Research and Development (NERD) Centre, and the Ceylon Electricity Board. The SWERA assessment, conducted under the auspices of the UNEP, found a wind electricity potential of about 26,000 MW, excluding offshore potential. This represents more than ten times the 1,800 MW of the country’s installed electricity capacity in 2002 . Senok Wind Power, a private enterprise, constructed the first wind plant, which commenced operation in 2010. The eight-turbine plant has a rated capacity of 30 MW.

Solar Energy
Ample solar resources exist throughout the year for virtually all locations for PV applications, such as solar home systems and remote power applications. The annual insolation assessment results, which range from 4.5 to 6.0 kWh/m2/day on average, are consistent with, and slightly higher than, earlier studies which gave results of 4.2 to 5.6 kWh/m2/day. The variability in global horizontal solar resources is relatively small across most of the country, despite the impact of terrain characteristics on cloud formation. The resource generally varies spatially at most 20% to 30% during any given season. The highest resources are in the northern and southern regions, and the lowest resources in the interior hill region. Current utilisation of solar energy primarily consists of rural electrification solutions.

Biomass Energy
Biomass is the most common source of energy supply in the country, with the majority usage in the domestic sector for cooking purposes. Due to the abundant availability, only a limited portion of total biomass usage is channeled through a market, and hence the value of the biomass energy is not properly accounted. The most common forms of biomass in Sri Lanka are fuel wood, municipal waste, industrial waste and agricultural waste.  The potential in biomass is assumed to be substantial but the exact statistics remain unknown.  Therefore, it is necessary to assess the types of biomass resources, their quantities, and points of origin on an island wide basis. It is also necessary to delineate a supply chain for biomass, establish retail centres and identify storage options.

Geothermal Energy
Sri Lanka lies in a geothermal hot spring belt so there is potential for geothermal energy.  Traditional use is the main source of exploitation so far, so further assessment is required of the power generation potential.

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Energy efficiency

The country’s system losses are high, and there are wastages in electricity usage mostly in government institutions and street lighting. Prof Tissa Witharana, Hon Minister of Science & Technology, has disclosed that almost 20% of electricity is wasted due to bad usage practices . The potential for efficiency savings has been identified by the government, and programs are currently under-way to improve the country's energy efficiency, including standards and labelling programs  for home appliances, including lightbulbs and refrigerators. Further capacity-building for pertinent authority figures in energy efficiency is also being conducted by the USAID's SARI/E program.


  • Opportunities for energy conservation and efficiency measures in the tea industry.
  • ESCO establishment for industrial consumers, with financing from various national banks.
  • EE programs in SME sector, particularly in hotels, with 20% reduction targets in energy and water consumption.


  • Improvements in transmission and distribution efficiency to reduce losses.
  • Efficiency-conscious expansion of the distribution network.
  • Major hydro projects (1355MW capacity) by 2020.
  • Water and Energy programme (Watery) to implement EE measures in the water supply industry.


  • Proposals for alternate fuel use, including biofuels, as well as the promotion of efficient mass transit.


  • EE standards & labelling for appliances through the Sri Lanka Standards Institution (SLSI).
  • Promotion of CFL bulbs in the residential and commercial sectors.
  • Introduction of EE guidelines for building construction.


  • Capacity-building for EE in the municipal water sector.
  • Establishment of the Sri Lanka Sustainable Energy Authority, to act as a facilitating agency for RE and EE projects.
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Electricity market
Sri Lanka’s electricity generation to serve the national grid until 1996 was operated entirely by stated-owed institutions, initially by the Department of Electrical Undertakings (until 1969) and subsequently by the Ceylon Electricity Board (CEB, There are sixteen CEB hydropower plants, and six oil-fired thermal power plants .

The CEB owns and operates the entire electricity transmission network, while some lines are owned and operated by the Lanka Electricity Company Ltd. (LECO,  The CEB distributes electricity to 89% of the customers, while the LECO feeds the balance. The LECO was established in 1983 to distribute electricity in areas previously served by local authorities.  The LECO purchases electricity from the CEB, and distributes it amongst retail and bulk customers in their designated areas, between Galle and Negombo along the western coastal belt . CEB has 1,676 MW of installed generation capacity, with additional thermal generating capacity being procured from independent power producers (IPPs) and nonconventional renewable energy-based capacity from small power producers (SPPs). CEB owns and operates the entire transmission network and performs the bulk power purchase and delivery functions. The CEB distribution network serves about 90.0% of all customers in the country, while LECO provides electricity supply to the remaining 10.0% of customers in urban areas in the western costal belt .

Oil and gas market
The Ceylon Petroleum Corporation (CEYPETCO, imports crude oil and finished products, operates the 50,000 barrels per day refinery, and markets the products in bulk and through retail outlets. The Lanka Indian Oil Company (LIOC, imports products and markets them in bulk and through its own retail outlets. Ceylon Petroleum Terminals Ltd (CPSTL,, jointly owned by the CEYPETCO and the LIOC, operate the two main petroleum storage facilities. The Liquefied Petroleum Gas (LPG) industry has two suppliers.

Close Ownership


The CEB and the LECO are the only two utilities in the power sector. The CEB was created by an act of Parliament in 1969 as a state-owned, vertically-integrated utility. It is under the jurisdiction of the Ministry of Power and Energy, and is responsible for power generation, power transmission, and about 86% of electricity sales in Sri Lanka, serving 89% of all customers. The LECO was formed in 1983 as a distribution company under the Sri Lankan Companies Act. The CEB and the Treasury (Ministry of Finance), on behalf of the state, are the major shareholders of LECO. Other shareholders are also state entities. The LECO purchases bulk power supply from the CEB, and distributes it to consumers in its area .

At present there is competition in power generation as well as in retail. Since 1996, the private sector has been allowed to participate in electricity generation. Sri Lanka has nine IPPs supplying the national grid through thermal power plants, all of them oil-burning, and two IPPs serving the mini-grid in the Jaffna peninsula with oil-burning thermal power plants. In 2007, private thermal power plants accounted for 23% of installed generating capacity on the grid, and 36% of energy served to the grid .

Close Competition

Energy framework

  • National Energy Policy and Strategies of Sri Lanka

The increased penetration of indigenous resources, reduced consumption of fossil fuels, and diversification into cheaper fuels are the few options available to Sri Lanka. To address these issues, the National Energy Policy and Strategies (NEPS) in 2006 identified the development of renewable energy sources, and demand-side energy efficiency improvements, as major strategic pillars. A 10-year development plan to implement the NEPS aims to:

  • increase the percentage of households electrified through off-grid supply from 4% at present to 10% by 2016,
  • increase the share of unconventional renewable energy in on-grid power supply from 4.1% at present to 10.7% by 2016,
  • add 500 MW of renewable energy capacity by 2016,
  • introduce labelling of appliances for energy efficiency by 2010, and
  • update and make mandatory energy-efficient building codes by 2009.

The Government’s strategies updated in 2010 aim to :

  • (increase supply capacity of the system to 3,470 MW by 2012 and 6,367 MW by 2020 and reduce the generation cost by adding aggregate base load capacity of about 2,000 MW of three coal-fired plants;
  • increase the share in grid energy supply from nonconventional renewable energy sources from 4.1% in 2007 to 8.5% by 2012, 10.0% by 2016, and 20.0% by 2020;
  • increase the percentage of households connected to the grid from 88.0% in 2010 to 100% by 2012;
  • reduce the total technical and commercial losses of the transmission and distribution network from 14.6% in 2009 to 14.0% by 2012, 13.0% by 2016, and 12.0% by 2020; and
  • achieve energy savings of 4.3% in 2012, 6.4% in 2016, and 8.7% in 2020 from a potential consumption level through energy conservation.


  • Renewable Energy for Rural Economic Development (RERED)

With the support of the World Bank, this project has financed installation of 74,000 solar power systems in Sri Lanka, providing electricity to 3,200 households. Access to electricity has increased to 38%, from 30% in 2002. It aims at improving the quality of rural life, by utilising off-grid RE technologies, to provide electricity in remote areas, and promote private sector power generation from RE resources for the main grid. The key components of the project are:
1) grid-connected RE power generation by enabling, on a large scale, refinancing support for mini-hydro projects, and extending support to two other commercially available RE sources, wind and biomass;
2) solar PV investments, by integrating refinance, grants, and technical assistance (TA) support for the existing middle-range solar home system market, and expanding to smaller systems accessible to the poor, and community applications for health clinics, schools, and public services;
3) independent grid systems, which will support the commercialisation of village hydropower, and other community-based independent grid systems, through refinancing, and grant support;
4) TA and credit support to private sector development in EE services, and demand side management measures, including the integration of such programs into sector reforms;
5) cross-sectoral energy applications, i.e., the provision of credit support to rural enterprises, TA to service institutions for energy development, and co-financing support for investments in selected areas; and,
6) TA (in addition to the component-specific assistance) for project administration, sub-project promotion, technology and capacity building, and monitoring and evaluation.

  • Clean Energy and Access Improvement Project (formerly the Sustainable Power Sector Development Project)

Supported by the Asian Development Bank (ADB), this project aims to increase transmission and distribution capacity and affordable and reliable power supply by utilising clean energy resources. Its main outcomes are:
(i) enhanced transmission grid reliability to avoid system collapse and reduce losses; and
(ii) the removal of grid constraints to facilitate the use of 200MW capacity from small hydropower plants and future clean energy projects.

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Energy debates

In October 2009, numerous cases were filed over the approval of wind projects, leading to a complete halt in the wind power industry in Sri Lanka. The Ministry raised concerns about allocation of energy licenses, including the structuring of the wind power tariffs. There were also concerns that energy licenses are being sold, similar to how car licenses have been sold.

From December 2009 to March 2010, permits for another 50 MW of projects were issued by the Sri Lanka Sustainable Energy Authority (SLSEA), before concerns relating to the issuing of permits were raised again, leading to another deadlock in the industry. As of June 2010, the issuing of permits for the development of private wind farms has been halted.

In July 2010, engineers at the Ceylon Electricity Board raised further concerns regarding the approval of private wind projects with extra high tariffs. A review of the current wind power tariff is expected to be carried out in September 2010, after an agreed postponement.

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Energy studies

Sri Lanka is part of the South Asian Regional Initiative for Energy under USAID (SARI/E), a program that promotes energy security in South Asia through three focus areas :

(1) cross border energy trade,
(2) energy market formation, and
(3) regional clean energy development.

Through these activities SARI/E facilitates more efficient regional energy resource utilisation, works toward transparent and profitable energy practices, mitigates the environmental impacts of energy production, and increases regional access to energy. SARI/E countries also include: Afghanistan, Bangladesh, Bhutan, India, the Maldives, Pakistan, and Nepal .

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Role of government

Ministry of Power and Energy
The Ministry of Power and Energy (MOPE, bears the responsibilities of implementing the government of Sri Lanka policies related to electricity and energy sectors.  Its departments and statutory institutions are the:

  • Ceylon Electricity Board,
  • Energy Conservation Fund,
  • Lanka Electricity Company (Pvt) Ltd, and
  • Lanka Transformers Ltd
  • Sri Lanka Sustainable Energy Authority.
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Government agencies

Sustainable Energy Authority (SEA)
To strengthen the institutional framework toward achieve the targets of the NEPS, the government enacted new legislation to convert the Energy Conservation Fund, a unit under the Ministry of Power and Energy, into a statutory body called the Sustainable Energy Authority (SEA, Mandated to develop and implement the country’s policy for renewable energy development, demand-side energy-efficiency improvement, and energy conservation, the SEA became operational on 1st October 2007 .

The Energy Conservation Fund has been established in order to finance and promote projects related to energy conservation and energy efficiency.

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Energy procedure

Government has requested assistance from the ADB in building capacity of its Sustainable Energy Authority. The concept paper for advisory technical assistance (TA) was approved in October 2007 for ADB’s 2007 TA program for Sri Lanka .

Upper Kotmale hydro power project
The 150 MW power plant of Upper Kotmale is expected to complete by December 2010. and will annually generate 409 GWh. The total estimated costs are JY 23,329 million and Rs. 12,828 million. The Contract for Preparatory Work between the CEB and the Maeda Corporation of Japan was signed in July 2005.

Conflict Affected Area Rehabilitation Project (CAARP)
The ADB provided US$6.5 million for an electrification project for the rehabilitation & expansion of the Conflict Affected Areas of the North & East,  expected to benefit 12,000 households affected by civil unrest. The total cost is 18.5 million rupees. The Norwegian Agency for Development Cooperation (NORAD) provided a further grant of US$8.6 million to provide electricity to 9,000 additional households. The work is nearing completion.

The Swedish International Development Cooperation Agency (SIDA) has provided assistance for the rural electrification project RE4, at a cost of US$36 million, to improve the socio-economic conditions of the rural regions. The work is being carried out by the CEB, and would involve 218 schemes, serving 34,300 new consumers.

RE 8 – Iran Project
The project RE8, commencing in year 2010, is funded by Iran to serve remote areas, as well as non-electrified areas between previously electrified areas, at a cost of US$108 million. About 1,000 areas are to be electrified, together with low voltage network extensions in several existing schemes. The project is expected to benefit 180,000 rural households.

Adavikanda small hydropower project
The Adavikanda small hydropower project in Sri Lanka has been registered as a Clean Development Project under the UNFCC.  The project has an installed capacity of 6.5 MW, and was developed by Alternate Power Systems Ltd. Construction began in January 2008, and, the project was commissioned in September 2009.

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Energy regulator

The government established the Public Utilities Commission of Sri Lanka (PUCSL, in 2002 as a regulator for the energy and water sectors, under the PUCSL Act 2002. The Electricity Reform Act 2002 was introduced to empower the PUCSL to issue licenses and determine electricity tariffs. However, the Act did not become fully effective because of the failure of the previous sector reform program, and PUCSL has only been advising the government on policy decisions, including tariff settings. To complete the regulatory reform, the Sri Lanka Electricity Act was passed by Parliament in March 2009, to replace the Electricity Reform Act .

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Degree of independence

To maintain independence, the appointment of officials to the PUCSL has been streamlined through the PUCSL Act. It specifies the appointment of five independent commissioners from different fields of specialisation, including engineering, law and business management. Appointment of the commissioners is undertaken by the Minister of Policy Development, with the concurrence of the Constitutional Council, and all appointments have stated eligibility criteria .

The Director General and the staff of the PUCSL are appointed by the members of the Commission, only to whom the staff is answerable.

Financing for the commission comes in the form of an annual fee levied on licensed entities in the sector, determined by the Commission .

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Regulatory framework

The Sri Lanka Electricity Act, No. 20 of 2009 (Act) was enacted on 8th April 2009. This Act repealed the Electricity Act of 1950 and the Electricity Reform Act of 2002, and brought minimal amendments to the Ceylon Electricity Board Act of 1969 to accommodate regulatory reforms to the electricity industry. Previously, the regulatory and policy making powers were with the Minister of Power and Energy. 

The Act clearly separates functions; operation, regulation and policy making in the electricity industry and, hence, the PUCSL is entrusted with the task of technical, safety and economic regulation of the industry. This Act also makes it mandatory for the PUCSL to protect consumer interests, for example via publishing consumer rights and obligations, and conducting public hearings when making critical decisions, such as approving tariffs.

In 2010, Sri Lanka launched a programme of feed-in tariffs and has now some of the highest tariffs in the developing world. The following technologies are eligible up to a capacity of 10 W .

  • Wind energy
  • Hydro energy
  • Mini-hydro
  • Biomass technology

The tariffs are cost-based and technology-specific, and the developers have the option of selecting either a three-tier tariff or a flat tariff.  The flat tariff is a fixed-price track without inflation protection, and a complex track that varies the tariff with the price of the base fuel rate, operations & maintenance, and the year of operation.  The three-tier tariff option provides a different tariff depending upon the year of operation. There is one tariff for years 1 to 8, another for years 9 to 15, and a third tariff for years 16 and greater.  CEB is obliged to make Standardized Power Purchase Agreements (SPPAs) for electricity generated from non-conventional Renewable Energy Sources (NCRE), signed on or after the 25th November 2010 .

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Regulatory roles

The functions of the Commission include:

  1. advising the government on all matters concerning the generation, transmission and distribution of electricity;
  2. the creation and implementation of codes of practice relating to the electricity sector, including technical and operational standards, and their enforcement;
  3. the regulation of tariffs and other charges relating to the provision of electricity service, in the interests of economic fairness and efficiency;
  4. the promotion of the efficient use of energy, and energy conservation.
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Energy regulation role

Policies are decided by the Ministry of Power. Regulatory roles are carried out by the Public Utility Commission of Sri Lanka.

The state is expected to retain its dominance in power generation over the long-term, as per the Sri Lanka Electricity Act of 2009. The Act requires that any plant with more than a 25-MW capacity be ultimately controlled by the government .

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Regulatory barriers

One of the challenges for the country is to create a system with the government for ensuring the sustainability of the renewable energy industry, without external financing, while maintaining the current momentum of renewable energy development. Sri Lanka has a very promising potential for renewable energy development, and the creation of a framework for its promotion, would increase the pace of its utilisation.

The Public Utility Commission of Sri Lanka will start functioning after the unbundling of the Ceylon Electricity Board. However the unbundling is yet to take place.

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Asian Development Bank (ADB). Sector Assessment Energy. Country Partnership Strategy SRI 2012-2016. 2010. Available at: [Accessed 11th September 2013]

IEA Energy Statistics. Sri Lanka Share of Total Primary Energy Supply. 2011. Available at: [Accessed 11th September 2013]

USAID. SARI/Energy website. Sri Lanka: Energy Sector Overview. Available at: [Accessed 11th September 2013]

Asian Development Bank (ADB). Sri Lanka-Sustainable Power Sector Support Project. Sector Assessment Summary: Power. 2010. Available at: [Accessed 11th September 2013]

RE Expo website. Country Paper – Sri Lanka. Available at: [Accessed 11th September 2013]

Ministry of Power and Energy. Government of Sri Lanka. Electricity Generation from Renewable Energy in Sri Lanka: Future Directions. Available at: [Accessed 11th September 2013]

SWERA. In the case of renewable energy, knowledge IS power. 2005. Available at: [Accessed 11th September 2013]

National Renewable Energy Laboratory. Renné, D, et al. Solar Resource Assessment for Sri Lanka and Maldives. Available at: [Accessed 11th September 2013]

Sri Lanka. Sustainable Energy Authority. Renewable Energy-Biomass. Available at: [Accessed 11th September 2013]

Senanayake, Buddhika (2008) Electricity Tariffs Hike, Subsidising or Other Method? In The Charted Accountant, the official publication of the institute of charted accountants of Sri Lanka, pp. 22-26

The Electricity Act of 2009 and the Development of the Sector. June 2009. Available at: [Accessed 11th September 2013]

Asian Development Bank (ADB). Sri Lanka Country Assistance Program Evaluation: Power Sector. August 2007. Available at: [Accessed 11th September 2013]

Asian Development Bank (ADB). Democratic Socialist Republic of Sri Lanka: Building the Capacity of the Sustainable Energy Authority. December 2007. Available at: [Accessed 11th September 2013]

USAID. SARI/Energy website. Available at: [Accessed 11th September 2013]

USAID. SARI/Energy. Sri Lanka. Energy Sector Overview. Available at: [Accessed 11th September 2013] website. Sri Lanka. Available at:[Accessed 11th Septmeber 2013]

Jerome, F P. RAM Ratings Lanka. Reviewing up Sri Lanka´s Power Sector 2010. Sector Report: Power Industry. 2010. Available at: [Accessed 11th September 2013]

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