History Sri Lanka`s energy policies predict that the country`s hydroelectric potential will be fully exploited, as it is the main local resource for electricity generation, as is currently the case. Under this policy, all major hydroelectric plants will remain under state control for the foreseeable future. Private sector funding will be used to generate electricity from small hydroelectric plants. Starting in 1997, the CEB`s procurement procedure for small-scale electricity generators (PPS) was regulated by the publication of a standardised electricity purchase contract (SPPA) which provided for a system for calculating the purchase price on the basis of the principle of avoided costs. This has been offered to all energy sources with a capacity of less than 10 MW. The SPPA was developed with the help of the World Bank and developed with standardized conditions. All of the energy produced by the facility is purchased by the CEB and there is no penalty for non-delivery of energy from the facility. Key to Success Long-Term concessional financing through the RERED project As part of the government`s commitment to accelerate the development of renewable energy and integrate the use of unconventional renewable energy into the energy sector, LA GOSL has approved the joint project of the World Bank and the World Centre for the Environment (GEF) that supported the Renewable Energy for Rural Economic Development project. The RERED project aims to promote the economic development of rural areas and improve the quality of life in rural areas through access to electricity and to increase financial support for mini-hydro projects, with low-cost means.

The re-run position for the RERED project is the Department of Finance and Planning. The implementation, coordination and management of projects is within the jurisdiction of the administrative unit set up within the DFCC Bank. The government has identified the development of renewable energy projects as a policy issue of diversifying the electricity sector from high-cost thermal electricity generation. The incentives and support needed for the development of renewable energies (Mini Hydro, Bio Mass, Wind, etc.) have therefore been put in place. Another 2006 national energy policy identified fuel diversification and energy security in electricity generation as a strategic objective, and the development of renewable energy projects was identified as part of this strategy. In light of the above measures, a three-tiered cost-based tariff was introduced rather than avoiding cost-based tariffs from 2007. However, the Sri Lanka Public Utilities Commission (PUCSL) has repeatedly refused to approve agreements with three independent producers, including Ace Embilipitiya, saying that the option of a three-year emergency AAE was not the cheapest.