Sri Lanka’s ambitious renewable energy drive is facing a serious credibility test as policy uncertainty, administrative delays, and controversial decision-making under the JVP-led National People’s Power (NPP) government begin to erode investor confidence in the power sector.
Local renewable energy developers supplying nearly 3,300 megawatts of clean electricity to the national grid warn that the industry is approaching a breaking point. At the centre of the controversy is the Ceylon Electricity Board (CEB), operating under the Energy and Power Ministry, whose recent actions critics describe as amateurish and economically reckless.
Since February 2025, the CEB has imposed repeated power curtailments on grid-connected renewable plants during weekends and public holidays. While the utility frames the move as an emergency grid-management measure, industry representatives argue that an “emergency” recurring for over nine months exposes deeper planning failures. These curtailments have resulted in an estimated Rs. 2 billion loss to developers, with ground-mounted solar operators reporting income drops of around 15 percent.
What has alarmed investors further is that many of these plants fall under the “must-run” category defined in legally binding Power Purchase Agreements (PPAs). The unilateral reduction of output, developers say, amounts to a breach of contract and undermines the sanctity of long-term investment guarantees.
Compounding the crisis is the prolonged delay in implementing Battery Energy Storage Systems (BESS), despite cabinet approval of tariffs and tax concessions. Developers are ready to store surplus daytime solar power and dispatch it during peak evening demand, reducing reliance on costly diesel generation. Yet five months after ministerial approval, the CEB has failed to issue implementation guidelines or amend PPAs, effectively stalling progress.
Critics argue that these delays reflect weak sectoral leadership. The Energy Ministry, headed by a minister facing unresolved corruption allegations, has struggled to inspire confidence among investors or financial institutions. While the government publicly champions energy independence and green growth, operational decisions paint a conflicting picture.
The proposed National Electricity Policy 2025 has intensified these fears. Plans to abolish the Feed-in Tariff system in favour of competitive bidding threaten the survival of small and medium-scale local developers who form the backbone of Sri Lanka’s renewable sector. Additionally, proposals to allow uncompensated curtailment and enforce rupee-only contracts expose investors to severe financial and currency risks.
Bankers warn that continued revenue disruption could lead to widespread loan defaults, triggering a future non-performing loan crisis. As Sri Lanka seeks to meet its 2030 renewable energy targets, analysts caution that sidelining private sector partners through erratic policy may derail the transition altogether.
