Saturday, August 8, 2009

The Cost of a unit from Norochcholai Coal power plant

The Cost of a unit from Norochcholai Coal power plant

The Ministry says the cost will be about Rs 7/kWh

Unfortunately they have not taken the Real costs to the consumers like.

  • Taxes and duty to be levied by GOSL on Coal imported.
  • The cost to the environment. The cost of medical expenses to be met by people around the plant due to escaping Coal dust, Hot exhaust gasses and Warm cooling sea water and CO2 Mercury etc. Only about 35% of the heat in Coal will be converted to Electricity at the plant and balance will heat up the Clean Pure Norochcholai and Sri Lanka and the Indian ocean!
  • Cost due loses in Transmission and the Capital cost of transmission has not been taken in to account properly.
  • Pollution due to leaching of stored Coal stocks and the effects on the ground water in the area etc.
  • Will the Power plant be operated as specified? Will our operators perform? What happened at Sapugaskanda Heavy Fuel fired diesel plant The unwanted non fuel residue was pumped into CEB's tanks and Large quantity of refuse collected at the centrifuges has to be stored our side in Leaking Barrels till they could be disposed(Delayed due to Political interference in Tenders) polluting the whole area. The waste processing plant was never maintained or even properly operated and the whole place got polluted in addition to pollution from the Refinery!
  • Take the case of the KKS cement factory which had the best of the precipitators for exhaust. It was poorly maintained and after few years of commissioning the plant started polluting the whole area up to 5KM radius which was covered with cement dust. The management was not allowed to replace the precipitators and the plants were running at large profit. They kept the Poor staff kept silent by giving them a bottle of gingili oil to apply to there head!
  • What happened at the Kelenitissa Steam plant? It was not possible maintain as per slandered. At one stage it was unsafe as per the German Manufacturers of the Boiler Drum. It is unsafe to operate a boiler without two different Boiler level indicators in working condition in the control room for many years only one was in working order. No one is advised to operate the boiler without the flame failure detection equipment of the boiler. Due to lack of funds this was never replaced or repaired. We were told this never worked as it was not tropicalized. The plant was operated without same all the time we worked as operation staff. The Copies of operation and Maintenance Manuals of the plant which were handed over by the suppliers were lost only one copy was available in CEB and was kept locked up in the then DGM Generations room.

There were no permanent operation staff and they were brought down time to time when the plant had to be operated for the drought season Most of the Technical Minor grade employees were recruited from the area for obvious reasons and they are often found drunk in the evenings. Nothing could be done to them

Major engineering errors occurred in trying to reduce the time taken to clean the Boiler Oil Burning guns. Out of the four guns that was there two had it nozzle rotating clockwise and the other two anticlockwise. The original operation Maintenance practice was to remove the gun after reducing the load of the machine to 70% and then clean the nozzle every specified hour of operation. This takes more than 30 Minutes. Due to reasons of requirement of Higher power out put from the plant a spare gun was kept not realizing the fact that there were two different types of nozzle for the gun The direction of Rotation of Hot air arriving for combustion has to be posit to the direction of rotation of nozzle which sprays the oil for good missing and combustion. This resulted in Oil not burning properly and dripping to the floor and collecting there and burning slowly there with less air available. One fine day the plant was shut down after the night peak on a dry season. One shift engineer stayed behind and went to rest in the special air conditioned room. The other engineer went home before the end of the shift. There was FIRE in the Boiler uncontrollable with very big damage to the boiler and connected equipment. When the fire Brigade came to help they had little water and they could not couple to the fire fighting Nozzles available in the Power station as they were made in Germany and the Fire brigade had English couplings

All this are costs to the consumers. There was a second fire later as the defect was not detected. On stores verification we found that there were different types of Boiler gun nozzles and the wrong procedure corrected. There was long mitigation against the two Engineers and they had keep lawyers to defend themselves at high costs. There were two different Engineers Unions at that time and it was one union engineers finding fault on the engineers of the other union to which the unlucky two engineers belonged. Luckily these two engineers got exonerated. CEB spent large some of money in repairing the damage and in conduction the inquiry. Many Engineering Man hours were lost in the inquiry.

· There will added cost of keeping 300MW and later 900MW of spinning reserves to keep the system stable

· All these countries mentioned have there own cheap coal we will have to import. From Australia at March 2009 price was $125/ton FOB. When this is shipped and imported paying the duties to GOSL the cost will be $170/tin and if oil price doubles this price will be $340/ton. The cost of unit will rise above Rs 20/kWh when commissioned

· India and China are worst polluters in the world. But they are planning to go for more renewable.

· In US it is extremely difficult to get permission to put new coal plants. No new coal plants came in UK for the last 20 Years. Clean coal plants are very much expensive

· Hope the public who are now more educated will not allow this type of things to repeat. But this will cost more to operate the plants and we may have to import foreign Management and Staff to operate this plant as a clean plant to be away from COSTLY local politics in Operation and Maintenance.
There are many more such hidden costs not included and the author in mentioning only the ECONOMIC costs. What will be the COMMERCIAL cost to the consumer and the COUNTRY is what matters

· The Costs of Rushed Emergency Power the Independent Private Power Projects with very Costly Commercial Loans which used large quantity of imported costly diesel for all these years(20) also has to be added to the cost of Coal Plant as it coasted the country when this plant got delayed.

· The lack of experienced Operators and Bad Maintenance Practices will add costs to the units generated..

· The fights between Electrical and Mechanical engineers of the CEB also will add costs to the unit and there could be premature failure of the plant taking place. All this will add to the cost of unit!

Using these data we can get the real costs.

From 2009 Coal Statistics






AUD$ Per Tonne

AUD$ Per Tonne

Hard Coking Coal



Soft Coking Coal



Thermal Coal



The State of Queensland (Department of Employment, Economic Development and Innovation) 2009.

Cost of Coal at Norichcholai will be cost FOB in Australia+ transport+ Tax and duty* by GOSL+ Loss of business to Colombo port= Aus$ 156=($125/ton +$15)+38.2% Tax and duty+10%loss of business to CMB Port $(125+15)X1.382X1.1=$212/ton cost/unit for fuel=8.9US cents/kWh

(Therefore, at the official discount rate of 10 percent, the capacity cost of the project will be 1.77 UScts/kWh. The present estimated price of coal is about 100 USD/tonne delivered to Norochcholai, and hence it will have a fuel cost of 4.2 UScts/kWh.

The maintenance cost to run the power plant, inclusive of meeting all the environmental standards will be about 1.25 UScts/kWh. Therefore, the economic cost of electricity produced in this power plant will be 7.24 UScts/kWh. If oil prices reach 140 USD/barrel as they did last July, coal prices may also double, and then this cost will increase to 11.42 UScts/kWh.)

*Please see

Tariff Calculator Tariff Guide









Customs Duty

Unit of



Rates of Other Levies




















Coal; briquettes, ovoids and similar solid fuels manufactured from coal.


Coal, whether or not pulverised, but not agglomerated :




(PK)Free (IN)Free








Total duty due for the Import of Coal will be 38% excluding Loss of revenue tax for the Coal by CMB Ports

Already Oil price gone up to $70/B. It is increasing and the predictions are it will go to the value suspected by author.. He has assumed a price $100/ton for coal at Norichcholai. The March price of Coal as per Statistics from Australian Coal Board is US$125/ton and the price of oil was very much lower then!. When this arrives in Srilanka we have to pay shipping charges, all the duties by GOSL which stands as it is now at more than 32%, and any charges by Port Authority of CMB who could charge for loss of revenue to the Ports as CEB will use its own Coal unloading facility at the Plant. So at today's prices as per Calculations showed a unit from this Coal plant now will NOW cost almostRs12/kWh.

And may be at the time of commissioning of this plant if the oil price doubles the Cost of Production of a unit could go to more than Rs 20/kWh. This is what it will cost the Customer finally. So the rosy picture put forward now will not hold water. We have to wait and see. To avoid this we have to learn to conserve energy.

Total cost/unit at March 09 Rates of Coal, (Oil was cheaper then only $35/B and today is higher than $68/B)

Cost/kWh in March price = 8.9+1.77+1.25=11.92 US cents/kWh or if oil price doubles by the time the Plant comes into operation.

The costs could be17.8+1.77+1.25=20.8UScents/kWh (as per there own calculations)

The actual costs can be very much higher than this Rs 21/kWh at the time of commissioning of the plant!

This may be the actual cost to the consumer at the time opening of the Coal plant! “(This may be the actual cost when plant is commissioned and will increase rapidly when plant ages)"

The lack of discipline among the operation and Maintenance staff of CEB, the Union fights, lack of coordination between the Electrical and Mechanical Engineers in CEB will add more costs. A person who has experience in having worked in CEB’s Thermal plants will know the realities. With Large size plant in the grid for Stability and continuity of supply we may have to have Hydro or costly Gas Turbines running as spinning reserves all the time. The Coal plant will be operated at its full load most of the time as a base load station and we may waste water in Hydro m/c and costly liquid fuel in running inefficiently the Gas Turbines at low load. All these costs have to be [aid by the consumer.

Please also consider the loss to the country in the delay in staring the Coal plant. We were forced to go for Emergency Power and High priced commercial loan funded Independent Power Projects and the fuel imported for these plants all this time. No wonder we have the highest tariff in this part of the world

One could say that all this costs will have to be also added to the unit cost not forgetting the cost to the environment including the medical expenses that the GOSL has bear for Poor Population around the project.

China, India and US have there own cheap Coal and are worse polluters in the world. It is extremely difficult to get permission to put a new Coal Plant unless it is a Clean Coal variety in US. These plants are very expensive to construct, operate and maintain.

Going for renewable Power like in India, China, Japan and even US for future expansion is the solution. These countries have decided to have 10% of Electricity Generation by 2010 and 20% by 2020.

The significance of Norochcholai power plant

Dr. Tilak Siyambalapitiya

The media has reported that the stages two and three of the on-going Norochcholai coal power plant construction in Puttalam would also commence shortly, with the signing of the agreements on 29th June 2009.

The Norochcholai coal power plant. Pictures by Sarath Weerasinghe

With the President and the Government firmly behind the project, construction of stage one is moving ahead, to be followed by stages two and three in the same premises. Once completed, the power plant will have a total gross generating capacity of 900 MW. After discounting for the in-house consumption and losses in transmission, the power plant would provide about 850 MW of capacity to the national grid.

The difference of 50 MW is typical for this kind of a power plant; there is nothing unusual. Even if a power plant is built to use oil, the same losses would occur.

The power plant would help Sri Lanka reduce the use of the most expensive power plants on its system: CEB system has four power plants burning auto diesel, adding up to about 600 MW.

They will be the first to be curtailed. Then the next group of power plants using fuel oil will be curtailed. All hydropower plants except Kukule and Ukuwela will move to operation only at the evening peak hours. Kukule and Ukuwela have no reservoirs, and they will run always when water is available.

None of the protestors who used all their might to block the Norochcholai project over 1996-2005, including national and local politicians, religious leaders, environmental forums and scientists, academics have said anything about the project, since it was launched by the President in 2006.

Construction of stage one is over 30 percent complete. The protestors have moved on to protest on other issues, depending on the amount of support and publicity they receive from various agencies. Numerous politicians who were against the project have changed sides, and are now with the Government. The development that is going on in the once sleepy Kalpitiya peninsula is seen everywhere.

There were two specific issues raised not only the protestors but by the many reasonable and knowledgeable people during the height of the debate: (1) Will the power plant cause any damage to the environment ? (2) Will it produce electricity cheaper than other means ?

The answer to the first question lies in the manner in which the environmental approval issued to the power plant is adhered to by its operator, Ceylon Electricity Board (CEB). The power plant is being built based on the approval to build issued by the Provincial Environmental Authority, after the due process in accordance with the Environment Act.

Once the power plant is ready for operation, CEB has to apply for an Environmental Protection Licence (EPL), and then adhere to the conditions stipulated in it. Once the emissions and other environmental impact data are available, CEA will determine whether there are any adverse impacts on the environment and violation of standards specified. There are many who would ask: will CEB adhere to regulations ?

Well the laws are there to force CEB to abide by the regulations, and for Central and Provincial Environmental Authorities to force CEB to do so, and for the public to force both parties to do their duty. Just because we do not know, Sri Lanka cannot force electricity customers to pay unreasonably high prices for electricity.

On the second issue of whether it will indeed produce electricity cheaper, some estimates can be made now, because the full cost of the project has now been published in the media. The full cost of the project has been reported to be USD 450 million for stage one, and a total of USD 890 million for stages two and three.

The costs include all the coal supply, power generation and transmission infrastructure, to deliver 850 MW of power to the grid at Veyangoda, Chilaw and Anuradhapura. The power plant has an economic life of at least 30 years.

Therefore, at the official discount rate of 10 percent, the capacity cost of the project will be 1.77 UScts/kWh. The present estimated price of coal is about 100 USD/tonne delivered to Norochcholai, and hence it will have a fuel cost of 4.2 UScts/kWh.

The maintenance cost to run the power plant, inclusive of meeting all the environmental standards will be about 1.25 UScts/kWh. Therefore, the economic cost of electricity produced in this power plant will be 7.24 UScts/kWh. If oil prices reach 140 USD/barrel as they did last July, coal prices may also double, and then this cost will increase to 11.42 UScts/kWh.

Oil and gas options

Now, 7.17 UScts per unit of electricity is the economic cost, based on the long-term country perspective. Today, the oil price is USD 70 per barrel, and instead of Norochcholai, if we build a power plant burning fuel oil, the costs will be as follows: Capacity cost 1.43 USCts/kWh, Fuel cost 7.61 USCts/kWh, maintenance 1.00 USCts/kWh. Total 10.04 USCts per unit of electricity. All this is if we build the power plant to use the cheapest liquid fuel, that is furnace oil.

Furthermore, if we rejected Norochcholai and went for the liquefied natural gas option, as promoted by many and opposed by many, the costs will be as follows.

This assumes that the gas terminal will be given to Sri Lanka free of charge by a company in Australia, as recently reported in the media. Although it is too optimistic to assume a company will give a USD 600 million gas terminal to Sri Lanka free of charge, for this comparison, let us assume so.

Then the cost of electricity from a gas fired power plant will be 1.37 UScts/kWh for the power plant investment, 8.21 UScts/kWh for gas and 1.00 UScts/kWh for maintenance. Total 10.58 UScts per unit of electricity.

So the comparison is 7.17 UScts (or Rs 8.21) for coal, 10.04 UScts (or Rs 11.54) for oil and 10.58 USCts (or Rs 12.17) for gas. So compared with coal, a power plant using the cheapest kind of oil will cost 40 percent more, and one using gas will cost 48 percent more.

The coal and its alternative oil power plant will have all its equipment and systems covered by the above cost, while the gas plant assumes that a company will gift a gas terminal to Sri Lanka, and we have to pay only for the gas, and not for the infrastructure. The above price of Rs 8.30 per unit is on the basis of economic costs.

Owing to the concessionary 20-year loan, the actual cost of production of Norochcholai at the present price of coal would be Rs 7.83 per unit. Yes, it is more than the approximate price of Rs 4.00 per unit stated in the late 1990s. Why?

The rupee has depreciated from 70 to 115 Rs to the USD, coal prices have increased from 47 to 100 USD to be delivered to Norochcholai, the investment has increased from USD 900 to USD 1340. These increases are all applicable to any other kind of power plant, oil or gas, we would have built if we did not build Norochcholai.

Future price increases

A frequent argument is whether coal prices will remain fixed. Definitely they will not remain fixed.

Workers at the project site

When oil prices go up, coal prices and gas prices too, also go up. Oil has the smallest proven reserves and coal has the largest proven reserves. So, when oil and gas prices double, coal prices too increase by about 80 percent. No country in the world can escape that. They go up together, and come down together.

Thus the decision of the Government to proceed with the full development of the Norochcholai coal-fired power plant to its full design capacity of 900 MW will cause Sri Lanka to see an economic cost of electricity around 7.83 Rs per unit to produce from coal. Mixed with 30 percent large hydropower and 10 percent of other small renewables (some of which are indeed very expensive), Sri Lanka is likely to see the most competitive cost of electricity production by year 2015.

Electricity customers should see the first price reductions in 2011 when Norochcholai power plant Stage one begins full operation and the full benefits by 2014, when all the stages are in full operation. If oil and coal prices remain as they are today (at 70 USD and 100 USD, respectively), electricity customers should indeed receive an actual price reduction from the first month of operation of Norochcholai.

Sri Lanka is not alone in building coal power plants. India is building five mega power plants 5000 MW each in various locations (total 25,000 MW against Sri Lanka’s 900 MW in Norochcholai), and Vietnam is building 2,000 MW in Mong Duong with finances from Asian Development Bank. Hundreds of projects are under construction in USA, China, and other larger economies.

Very informative very nice presentation in simple Language

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