By: Staff Writer
May 11, Colombo (LNW): In a significant move to modernize its power infrastructure and ensure long-term energy security, Sri Lanka has secured international support to launch a comprehensive reform and development initiative targeting its electricity sector.
The effort is backed by policy-based financing from the Asian Development Bank (ADB) and other global partners, with a total commitment of $100 million under Subprogram 1 of ADB’s Power Sector Reforms and Financial Sustainability Program.
This initiative is part of ADB’s broader indicative budget support of $450 million for Sri Lanka in 2024. The power sector has been identified as a macro-critical area by the International Monetary Fund (IMF), and ADB remains the only international financial institution offering direct policy-based loan support to the sector — reaffirming its long-term engagement with Sri Lanka’s energy reforms.
The Cabinet of Ministers recently approved a new investment package to upgrade the country’s transmission network, framed under a partnership involving the ADB, the World Bank, and the International Development Institute, which also provides a risk guarantee facility. This package will fund 10 high-priority transmission projects outlined in the Ceylon Electricity Board’s (CEB) 2023–2032 long-term development plan.
“These projects are designed to enhance grid stability, accommodate growing energy demand, and support the integration of renewable energy sources,” said Cabinet Spokesman and Minister Dr. Nalinda Jayatissa during the weekly post-Cabinet briefing.
The proposal, submitted by Power Minister Kumara Jayakody, received Cabinet approval and is aligned with wider reforms embedded in the Sri Lanka Electricity Bill. Gazetted on April 17, 2024, the bill includes key provisions such as the unbundling of the CEB, the establishment of a new Electricity Council to oversee national planning and tariff policy, and stronger governance and independence for regulatory institutions.
Long-term objectives of the reforms include enabling private sector participation in generation and distribution through CEB successor entities, and introducing competitive market mechanisms like open access or ‘wheeling.’ This is expected to attract further investment in renewables and bring down electricity costs through competition.
The economic benefits of the program are far-reaching. By improving the sector’s creditworthiness and reducing its reliance on imported fuels, the reforms will unlock new renewable energy capacity and help make the power sector financially self-sufficient. This, in turn, will ease pressure on the national budget.
Moreover, increased transparency, performance incentives, and stronger regulation are expected to create a more efficient, cost-effective power sector — with gains for both consumers and businesses.
During the 2022 economic crisis, electricity sales fell by 4.6%, representing a loss of 694 gigawatt hours and an estimated $560 million cost to the economy. By mitigating future risks of load-shedding through increased capacity and financial stability, the reform program aims to prevent similar setbacks.
In addition to economic resilience, the program will deliver environmental benefits. CEB projections suggest that increasing the renewable share in the energy mix from 50% to 70% by 2030 could cut carbon emissions by approximately 4 million tonnes — translating into an estimated $190 million in social value.
The reforms signal a transformative step for Sri Lanka’s energy future, aiming for a more sustainable, reliable, and cost-effective electricity sector.
