Bandula S. TilakasenaProject Director

Trincomalee Coal Power Project Ceylon Electricity Board

21 October, 2007

Pricing policy for renewable energy: Avoided Cost based Tariff

Introduction

Classification of Renewable Energy

Main Features of the current Standardized Power Purchase Agreement (SPPA)

Tariff based on CEB’s avoided costs

Historical trends

Classification of Renewable Energy Plants

Grid Connected :Connected to the integrated electricity distribution grid and deliver electricity exclusively to the grid

Self Generating :Connected to the grid and while delivering electricity to the grid, a part of the electricity generated is used by the developer

Off- Grid : Operate in isolation

CEB/SPPA.bst

Standardized Power Purchase Agreement: Eligibility

Capacity Limit : Less than 10 MW

Energy produced from :

Mini Hydro

Bio mass

Cogeneration

Standardized Power Purchase Agreement

Main Features…

All energy produced by the Facility will be purchased by CEB

The power plant is not subject to dispatch

The Power Purchase tariff is based on the Avoided Costs of CEB, and is announced each year

The cost of transmission interconnection has to be borne by the Developer

Electrical interconnections to comply with the CEB Guide for Interconnection of Embedded Generators –December 2000

The floor tariff over the term is 90% of the initial year Tariff

Standardized Power Purchase Agreement

Main Features…

Tariff calculation methodology - Step 1

Calculate the cost of a unit generated by each plant in operation using applicable fuel costs and other plant data such as heat rates.

Tariff calculation methodology - Step 2

Compute the expected plant factors for each month in the year under consideration using projections prepared by CEB’s System Control Centre.

Tariff calculation methodology- Step 3

Calculate the fraction of time that each plant operates in the margin during a given month using the expected monthly plant factors.

Estimate the avoided costs for wet and dry seasons separately by taking the arithmetic average of the months in each season

Allowances made on account of Transmission Losses and Overheads incurred by CEB

May -January

February ,March-April

Seasonal Tariff – Step 4

Tariff calculation methodology - Step 5

Allowances made on account of Station Losses, Transmission Losses and overheads incurred by CEB are as follows:

Station Losses 3.0 %

Transmission Losses 3.2 %

CEB Overheads 1.5 %

Tariff calculation methodology - Step 6

Tariff offered each year is the arithmetic average of :

Avoided cost of generation for the year, calculated according to the methodology described above, and

Avoided costs of generation used for estimating the price offered in the previous two years

Tariff calculation work sheet for year 2007 Tariff Calculation Sheet

YearDry

Season Wet Season

1996 2.90 2.90

1997 3.38 2.89

1998 3.51 3.14

1999 3.22 2.74

2000 3.11 2.76

2001 4.20 4.00

2002 5.13 4.91

2003 6.06 5.85

2004 5.70 4.95

2005 6.05 5.30

2006 6.73 5.82

2007 7.64 6.94

Variations of SPPA tariff 1996-2007 Rs/kWh

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Year

Rs

./k

Wh

Wet Season

Dry Season

Variations of SPPA tariff 1996-2007 Rs/kWh

Thank You

Energy Purchases Branch

Transmission Division

Ceylon Electricity Board

Web: www.ceb.lk