Economic Impact of Poor Power Quality on Industry

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Executive Summary

Sri Lanka has experienced power shortages from time to time since the early 1990s.

These are mainly the result of generating capacity shortages and the inability of

hydropower plants to meet system demand during times of heavy droughts, which come

about every four to five years. The extent of such power shortages has increased in recent

years due to growing electricity demand coupled with inadequate additions to thermal

capacity. In particular, new generation capacity additions as proposed in the long-term

generation expansion plan of the Ceylon Electricity Board (CEB) have not been

implemented in accordance with approved time schedules. The resulting power shortages

have caused both planned and unplanned power interruptions that have seriously affected

the quality of power supplied to consumers. This situation is common throughout South

Asia, where the economies are significantly affected by poor power quality.

Under the South Asia Regional Initiative/Energy (SARI/Energy) Project of USAID,

Nexant SARI/Energy, the technical assistance contractor, has undertaken to study and

assess the economic impact of poor power quality on industry in the South Asia region,

comprising the countries of Sri Lanka, Nepal, Bangladesh and India.

This technical

assessment evaluates the costs to these economies resulting from higher energy costs and

environmental impacts of Backup Unit Generation (BUG) and the loss of production due

to poor power quality & reliability.

This report presents the Sri Lanka component of the regional study.

Due to time and budget limitations, the Sri Lanka study was confined to a sample

consisting of 150 industrial installations encompassing all subcategories of industries

(Classification of the Central Bank of Sri Lanka) that provide a significant contribution to

the country's GDP. In addition, the tea and coconut processing industries and the hotel

sector also were included in the sample.

The study found that the main economic impact...