Sri Lanka’s renewable energy sector has warned of a deepening financial crisis, accusing authorities of failing to settle billions of rupees owed for electricity already supplied to the national grid. Industry leaders say the mounting debt now threatens the survival of hundreds of local renewable energy companies and could push the country back toward costly fossil fuel dependence.
At a media briefing yesterday, the Federation of Renewable Energy Developers (FRED) called on the Finance Ministry and the Treasury to urgently release at least half of the Rs. 10 billion outstanding payments owed by the National System Operator Ltd. (NSO). According to the association, the unpaid balance has continued to rise since December 2025, increasing by nearly Rs. 2.5 billion every month.
FRED President Manjula Perera said the payment breakdown began after coal power shortages forced the electricity sector to rely heavily on diesel and heavy fuel plants to bridge supply gaps of 100 to 150 megawatts daily. He alleged that available funds were being diverted primarily toward thermal power producers, leaving renewable suppliers unpaid for months.
Perera argued that the situation highlights the growing economic burden of fossil fuel generation. With diesel prices nearing Rs. 500 per litre and international tensions involving Iran and the United States driving fuel prices higher, thermal electricity generation costs have reportedly climbed close to or beyond Rs. 100 per kilowatt-hour. In contrast, he said renewable power generation costs the country only a fraction of that amount.
Industry representatives claimed Sri Lanka currently spends almost Rs. 1 billion each day on thermal generation, while equivalent renewable energy production would cost roughly Rs. 150 million. Despite this, developers allege they are being sidelined in the payment process.
FRED estimates that nearly 1,100 megawatts of renewable energy capacity is now under severe financial pressure. This includes more than 130 ground-mounted solar facilities, over 220 mini-hydro projects, several wind farms, and other renewable plants supplying electricity nationwide.
The industry body also accused the NSO of failing to maintain communication with developers. Perera claimed repeated requests for meetings had gone unanswered, further intensifying tensions between the sector and the system operator.
Beyond delayed payments, renewable energy companies say they are suffering massive losses due to power curtailment measures imposed during Sundays and public holidays. Since February 2025, generation cuts between 9 a.m. and 3 p.m. have reportedly cost the sector between Rs. 2 billion and Rs. 2.5 billion every month.
FRED member Kishan Nanayakkara warned that both payment delays and routine curtailments may violate legally binding power purchase agreements. He described the situation as a “technical sovereign default,” arguing that because the NSO operates under state control, the Government ultimately bears responsibility for the unpaid obligations.
Other industry representatives questioned the financial structure created after the restructuring of the Ceylon Electricity Board, noting that electricity tariffs approved by regulators already include renewable energy costs. They asked why developers remain unpaid despite consumers continuing to pay for electricity.
FRED cautioned that continued defaults could collapse investor confidence, stall future renewable projects, and jeopardise planned battery storage investments. The group warned that if renewable firms fail, Sri Lanka may once again become heavily dependent on expensive imported fuel to meet growing electricity demand.
