Public Disclosure Authorized Sri Lanka Electric Power Technology Assessment (SLEPTA) February 2003 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) Contents Acknowledgement........................................................................................................................ v 1. Introduction........................................................................................................................... 1 1.1 Critical assumptions ..................................................................................................................... 2 1.2 Limitations.................................................................................................................................... 3 1.3 Options evaluated......................................................................................................................... 3 1.4 Structure of study ......................................................................................................................... 4 2. Economic Analysis................................................................................................................ 7 2.1 Screening curve analysis .............................................................................................................. 7 2.2 Small diesels............................................................................................................................... 10 2.3 Impact of the discount rate ......................................................................................................... 11 2.4 The impact of delay.................................................................................................................... 12 2.5 Steam cycle oil ........................................................................................................................... 14 2.6 Conclusions concerning oil vs. coal steam cycle ....................................................................... 19 2.7 The impact of infrastructure front loading ................................................................................. 20 2.8 Robustness to pessimistic assumptions ...................................................................................... 22 2.9 LNG............................................................................................................................................ 27 2.10 Clean coal technologies.............................................................................................................. 29 2.11 Conclusions of the one-on-one technology comparisons........................................................... 31 3. Financial Analysis............................................................................................................... 33 3.1 Impact of fuel taxes .................................................................................................................... 33 3.2 Impact of the financial cost of capital ........................................................................................ 35 3.3 Conclusions on financial analysis .............................................................................................. 36 4. Power Systems Planning Studies ....................................................................................... 39 4.1 Free run ...................................................................................................................................... 39 4.2 Sensitivity analysis..................................................................................................................... 41 4.3 Impact of hydro conditions......................................................................................................... 44 4.4 Choice of power systems model................................................................................................. 45 4.5 The CEB expansion plan............................................................................................................ 46 4.6 Transition issues......................................................................................................................... 48 5. Summary.............................................................................................................................. 51 5.1 Main findings ............................................................................................................................. 51 5.2 Recommendations for further analysis....................................................................................... 52 Annex I: Basic thermal options................................................................................................ 55 A1.1 Simple technology comparisons................................................................................................. 55 A1.2 Non-fuel O&M costs.................................................................................................................. 55 A1.3 Heat rate assumptions................................................................................................................. 57 A1.4 Fuel price assumptions ............................................................................................................... 58 A1.5 Adjusting overnight costs........................................................................................................... 58 A1.6 Infrastructure costs .................................................................................................................... 61 A1.7 Screening curves ........................................................................................................................ 62 A1.8 Small diesels............................................................................................................................... 66 A1.9 Impact of the discount rate ......................................................................................................... 66 A1.10 The impact of delay.................................................................................................................... 67 A1.11 Conclusions ................................................................................................................................ 68 Annex II: Other fuels for combined cycle plants.................................................................... 71 A2.1 Naphtha ...................................................................................................................................... 71 A2.2 Residual Oil................................................................................................................................ 79 Annex III: Steam cycle oil......................................................................................................... 83 iii A3.1 Past studies ................................................................................................................................. 83 A3.2 The sulfur issue .......................................................................................................................... 85 A3.3 Switching values analysis for steam-cycle oil plant................................................................... 87 A3.4 Conclusions regarding oil v. coal steam cycle ........................................................................... 93 Annex IV: LNG ......................................................................................................................... 95 A4.1 The Asian LNG market .............................................................................................................. 95 A4.3 Economics of LNG projects in Sri Lanka ................................................................................ 101 A4.4: The ENRON proposal .............................................................................................................. 107 A4.4 Screening curves ...................................................................................................................... 108 A4.5 Environmental aspects.............................................................................................................. 111 A4.6 Conclusions .............................................................................................................................. 112 Annex V: Other technologies.................................................................................................. 113 A5.1 Renewable Energy.................................................................................................................... 113 A5.2 Nuclear ..................................................................................................................................... 117 A5.3 Clean Coal................................................................................................................................ 118 A5.4 Demand side management........................................................................................................ 121 A5.5 Conclusions .............................................................................................................................. 121 Annex VI: Impact of financing............................................................................................... 123 A6.1 Taxes and duties......................................................................................................................