Will a 100MW Vestas deal start to open up Sri Lanka?

Vestas Asia Pacific made headlines last week with a deal to construct a 100MW wind farm in Sri Lanka. The project, which is due to come online by the end of 2021, is on Mannar Island to the northwest of Sri Lanka, just across the water from India.

The scheme will be supported by a $200m loan from the Asian Development Bank, while the owner Ceylon Electricity Board will provide $56.7m towards project costs. This is indicative of a wider move by those in the southeast Asian country to embrace the wind sector.

Sri Lanka’s deputy power minister, Ajith Perera, said last year that a further 275MW of wind capacity in the region would be awarded by competitive tender and developed by private companies. This is big for Sri Lanka – given the small size of its market. At the end of 2016, Sri Lanka, Bangladesh, and Azerbaijan had a combined installed capacity of only 70MW.

And the government has long-term plans too. With energy demand in Sri Lanka expected to rise 4.9% per year from 2018-2037, the government sees the potential of renewable energy to provide for the country’s needs. It intends to install 1.2GW of new wind capacity during the same time period.

For the first time, it seems as if Sri Lanka’s wind energy ambitions might get off the ground.

The government ran its first studies for a pilot project in 1988, but it took over a decade until Sri Lanka’s first wind farm – the 3MW Hambantota project on the southeast coast – was commissioned in 1999. Since then, growth has been agonisingly slow, with intermittent periods of stagnation.

Political instability and violence in the country have not helped. The Sri Lankan civil war, which broke out between the government and insurgent group the Tamil Tigers in 1983, continued until the Tamil Tigers were finally quashed by the Sri Lankan military in 2009.

Now, as Sri Lanka approaches a decade of peace, the 100MW Mannar project could herald the entrance of a new era for Sri Lankan wind energy – and a promising new market for international investors.

The country’s wind resources are encouraging. A National Renewable Energy Laboratory satellite mapping study estimated Sri Lanka’s wind energy capacity potential at 20.7GW.

And it could also prove a promising market for offshore wind. Its close neighbour India is working to create its own offshore market, with the FOWIND project completing resource assessment and feasibility studies in the Gulf of Mannar, the stretch of water between southern India and the northern part of Sri Lanka. If India can do it, why not Sri Lanka?

There are risks, though. Building an offshore wind market in Sri Lanka would need tailored solutions to technical problems, including the monsoon seasons, which have implications for decisions including site choices and turbine design. It also doesn’t even have an onshore wind sector to provide support, meaning any offshore development will be some time away. That said, both are issues in Taiwan too and, so far, there is progress in that market.

In addition, the fact that a leader such as Vestas has committed to the Sri Lankan market is a significant milestone. If successful, the 100MW Mannar project should act as a signal to other international players that Sri Lanka must be taken seriously as an emerging market.