Sri Lanka’s renewable energy industry is sounding alarm bells over a government decision to slash solar power purchase tariffs, a move developers say could undermine years of progress toward clean energy. The Federation of Renewable Energy Developers (FRED) warns that the drastic reduction in feed-in tariffs will disrupt investor confidence, halt growth in rooftop solar, and jeopardize the nation’s long-term renewable energy ambitions.
In a strongly worded press briefing held at the Ceylon Chamber of Commerce on Friday, FRED President Thusitha Peiris accused the government of mismanaging the country’s energy transition at a critical time. “The recent actions risk dismantling years of progress and plunging our sector into an uncertain future, with severe economic and social repercussions,” Peiris declared.
Central to FRED’s concern is a recent Cabinet decision that slashes feed-in tariffs — the rates paid to private producers of renewable energy — by over 30% in some instances. The federation argues these cuts are unjustified and financially devastating, especially when macroeconomic conditions such as exchange and interest rates remain largely unchanged since the last tariff review in 2024.
“There is no economic rationale to justify such steep cuts. This is a deliberate signal to discourage investment in solar and other renewables,” Peiris said, warning that the decision has already triggered fear among developers, threatened hundreds of jobs, and eroded investor trust.
Rooftop solar power, supported by feed-in tariffs, has contributed around 1,700 MW to the national grid, vastly outperforming the 200 MW generated through ground-mounted solar via state-run tenders in the past decade. FRED maintains that replacing tariffs with a tender-based system would be a “national policy blunder,” noting that tenders have consistently failed to deliver results.
“The evidence is clear: predictable tariffs drive growth. Tenders have not,” Peiris asserted.The situation is further complicated by the government’s lack of integration of Battery Energy Storage Systems (BESS), which are critical for managing excess solar power. Despite FRED’s long-standing call for at least 1,000 MWh of BESS to be added to the grid, progress has been negligible.
Peiris also criticized the recently introduced tariff for BESS projects as “confusing and directionless,” saying it lacks clear implementation guidelines and is rendered ineffective by nearly 50% import duties, which make such projects financially nonviable. He urged the government to urgently remove these tax burdens and allow developers greater flexibility to expand existing projects.
Without urgent course correction, FRED warns Sri Lanka could fall far short of its renewable energy targets — with consequences that extend far beyond the power sector.
