1. Bandula S. Tilakasena Project Director Trincomalee Coal Power Project Ceylon Electricity Board 21 October, 2007 Pricing policy for renewable energy: Avoided Cost based Tariff

2. Introduction  Classification of Renewable Energy  Main Features of the current Standardized Power Purchase Agreement (SPPA)  Tariff based on CEB’s avoided costs  Historical trends

3. 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

4. CEB/SPPA.bst Standardized Power Purchase Agreement: Eligibility Capacity Limit : Less than 10 MW Energy produced from :  Mini Hydro  Bio mass  Cogeneration

5. 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

6. 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…

7. 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.

8. 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.

9. 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.

10. 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

11. 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 %

12. 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

13. Tariff calculation work sheet for year 2007 Tariff Calculation Sheet

14. Year Dry SeasonWet Season 19962.90 19973.382.89 19983.513.14 19993.222.74 20003.112.76 20014.204.00 20025.134.91 20036.065.85 20045.704.95 20056.055.30 20066.735.82 20077.646.94 Variations of SPPA tariff 1996-2007 Rs/kWh

16. Thank You Energy Purchases Branch Transmission Division Ceylon Electricity Board Web: www.ceb.lk