Sri Lanka - Small Scale Renewal Energy Power Plant.
Legal News & Analysis - Asia Pacific - Sri Lanka - Energy & Project Finance
7 March, 2017
OVERVIEW OF THE PERMITS, LICENSES AND APPROVALS REQUIRED IN SETTING UP A SMALL SCALE POWER PLANT
Once the energy source to be utilized by the (SSPPP) Small Scale Power Plant Project has been identified a prefeasibility study should be conducted to ascertain the economic viability of the project.
The Study should be conducted by a Consultant accredited by the Sustainable Energy Authority.
The report must include the following:
(a) A copy of the map of the geographical location of the proposed project,
(b) A brief description of the project, including the amount of power to be generated,
(c) The total estimated cost and financial model including the optimisation criteria adopted,
(d) Proof of availability of adequate finances.
(e) Project location, describing the relative location of energy conversion plant, as a further explanation of (a) above,
(f) A statement explaining how the Applicant intends to deliver electricity generated by the project to the national grid, and geographical area traversed by the power line to be constructed for that purpose,
(g) A copy of the receipt obtained from the SEA (Sustainable Energy Authority).
A Prefeasibility report in the prescribed form should be submitted to the SEA together with a summary.
The application should be duly completed and handed over to the Sustainable Energy Authority along with the Prefeasibility Report.
In the event that all necessary requirements have been fulfilled the SEA in consultation with the CEB (Ceylon Electricity Board) shall grant provisional approval for the Small Scale Power Plant Project.
LICENSES AND PERMITS REQUIRED
Once provisional approval has been granted the Applicant should obtain the following licenses from the relevant authorities.
Letter of Intent
This document is issued by the Ceylon Electricity Board and signifies the assurance of the CEB to procure the electricity generated by the project.
It also serves to provide the intention of the CEB to buy all power produced by the Developer,
Environmental Protection License
A document in the prescribed form should be submitted to the Central Environmental Authority inclusive of the details requested, to ascertain whether approval should be granted for the operation of the Small Scale Power Plant Project.
The Application in the prescribed form should be duly filled and submitted to the Central Environmental Authority to obtain an Environmental Protection License for the Small Scale Power Plant Project.
A holder of the Environmental Protection License has legal authority for the discharge of effluents, deposit wastes; emit smoke/gases/fumes/vapour, noise/vibration into the environment in accordance with the standards and criteria stipulated by the Central Environmental Authority. This will help the Environmental Protection License holder to prevent or minimize the discharges and emissions into the environment from the industrial activity.
The Environmental Protection License can be cancelled under the following circumstances:
Violation of any terms, standards and conditions of a licence
Since issue of the licence the receiving environment has been altered or changed due to natural factors or otherwise.
Where the continued discharge, deposit or emission of waste into the environment under the authority of the licence will or could affect any beneficial use of the environment adversely.
Inspection fee has to be paid only when applying for the first Environmental Protection License. If the applicant fails to submit the renewal application on time, he has to submit a fresh EPL and pay the inspection fee as well. Environmental Protection License should be renewed either three months prior to the date of expiry or prior to one month effecting any changes, alterations or extensions to the activity.
PAC (Provisional Approval Committee Established under the provisions of the Sustainable Energy Authority Act) grants the Energy Permit to the Developer allowing him to use the resource under several conditions. Once an Energy Permit is obtained, it shall be valid for a period of twenty years from the date of commercial operation of the project.
The Applicant will have to pay the required permit fee in the case of projects with capacities of 10MW or less.
The Energy Permit carries a grace period of 2 years and the Developers are required to complete implementation within this period.
Delays to commission the Small Scale Power Plant Project within two years will erode the 20 year life of the Energy Permit from front end of the period, by a period equivalent to the delay caused. At the end of the twenty year period, the Energy Permit is extendable for a maximum further period of twenty years, provided the relevant Small Power Plant Agreement is extendable, based on the conditions stipulated in such agreements or other guidelines effective at that time.
As determined by the Minister, and as per the provisions stated in Sustainable Energy Authority Act, Developers and Operators of Small Scale Power Plant Projects are required to pay an annual royalty on renewable energy resources used.
In the event a Developer is unable to commission the project at the end of the two-year period that is granted to construct the Small Scale Power Plant Project, the Sustainable Energy Authority shall cancel the Energy Permit.
The Developer, possessing an Energy Permit is required to obtain a Generation License from the Public Utilities Commission of Sri Lanka with the enactment of the Sri Lanka Electricity Act 20 of 2009.
The conditions of the Generation License look into all matters pertaining to the operation of the Small Scale Power Plant Project beyond the shaft which transfers power from the prime mover to electricity generator.
Once a Generation License is obtained the same will be valid for a period of twenty years and can be renewed at the end of the
In addition to the above specified licenses, the Applicant may be required to obtain licenses from Local Authorities depending on the energy source utilized and the location of the project etc.
POWER PURCHASE AGREEMENT
A Small Power Purchase Agreement should be signed for the sale of electricity to the grid, within one month from the date of the Energy Permit.
The Small Power Purchase Agreement is standardised and non-negotiable, and is valid for twenty years from the commercial operation date.
For renewable energy projects up to 10MW the standardised tariffs would apply. The tariffs are published at the end of each calendar year.
The BOI (Board of Investment) provides special facilities to power generation projects, and the Developers are required to obtain an investment approval from the BOI by paying an annual supervision fee throughout the construction period. The concessions are granted to a Developer including duty free concessions on the import of project equipment.
However under the current budget there are no tax concessions granted for the establishment of renewable energy projects.
Just like any other construction project, renewable energy projects require planning approval for construction.
If the project is registered with the BOI, approval of the BOI is required prior to commencing construction.
The construction will be observed and a Certificate of Conformity (COC) will be issued by the relevant authorities.
Power Line Construction
The most important link to the market, the power line is required to be constructed at the Developer’s expense, and will have to be according to the standards of the CEB (Ceylon Electricity Board).
To avoid complex issues at the implementation stages, it is advisable to traverse the grid connection line path fully, at the planning stage itself.
Once the CEB accepts the installation as worthy of grid connection, the SSPPP (Small Scale Power Plant Project) will be allowed to operate on a commercial basis.
For further information, please contact:
Savantha De Saram, Partner, D.L.&F. De Saram.