ECONOMYNEXT – Sri Lanka’s solar power producers are seeking compensation for curtailed power purchases saying they are unable to service debt amid curtailment of renewable power to maintain grid stability which they say has expanded to week days in 2026.
Sri Lanka’s state-run Ceylon Electricity Board started curtailing power in February 2025 after a so-called ‘Sunny Sunday’ effect led to a nation-wide power failure from a too-large share of solar power in the system, which reduced inertia from rotating generators.
The Grid Connected Solar Power Association of Sri Lanka says the curtailment has since expanded from weekends to public holidays to also weekdays.
Cashflow hit
The Association says ground mounted solar firms have lost around 2 billion rupees or about 15 percent of revenues due to curtailment. With curtailment spreading to weekdays solar firms are facing three days of curtailment, which is a deadly hit on cash flows.
“We are now unable to service loans taken to build the plants,” Prabath Wickramasinghe, President of the Association said.
“During Vesak, Poson, all the Poya days and Christmas, any national holiday they ask us to cut their power.
“Now for this week, as I said earlier, three days of this week they have cut off our power plants, Sunday, Monday, Tuesday.”
“These plants were built as ‘must run’ plants. It is a violation of the power purchase agreement.”
The power firms are not seeking full take-or-pay style payments but reasonable compensation to avoid defaulting on loans.
If a committee is appointed and payments are determined in a transparent manner that firms would be able to service loans, he said.
Committee member Kishan Nanayakkara says that unlike IPPs that get a capacity charge, grid connected solar companies depend on the full energy charge.
Competitive Bidding
In addition to solar companies which are paid on feed-in-tariffs of around 25 rupees, there are firms who have gone on the competitive bidding route who are getting 15 to 18 rupees a unit, Wickremesinghe said.
Feed-in-tariffs are controversial for their lobbied and negotiated high prices in Sri Lanka.
But companies on competitive bidding have got their price in a transparent and fair manner with no allegations of corruption or lobbying and are on thin margins.
The new feed-in-tariffs for new firms have also been reduced to around 17 rupees.
Capital costs are down on reduced solar panel prices, compared to several years ago.
Wickremesinghe warns that foreign investors in particular will not participate in future tenders or will require higher premiums if curtailment undermines their businesses.
Battery Delay
The solution to the problem is giving the solar firm a battery tariff to store the energy and sell to the grid during the night peak.
The CEB last year published a 45.80 rupee a unit price to sell power in the night through battery energy storage system (BESS), but no action had been taken to put that into effect.
No guidelines or contract amendments were given, despite repeated requests, Nanayakkara said.
The December deadline has since passed.
The solution to the problem is battery storage, but until it comes firms should be paid enough money to repay loans, he said.
Some companies are leveraged around 70 to 80 percent, Association members said.
Sri Lanka’s power minister Kumara Jayakody had pointed out earlier that after lobbying and getting controversially high feed in tariffs in the past, renewable firms had put in too little equity for projects for which the people had to pay high prices or the CEB had to run losses.
RELATED : Sri Lanka energy minister warns lobbying for high renewable power tariffs will backfire on nation
Rupee Depreciation
The CEB itself had run losses as it had not been given tariff increases until a default, when the central bank depreciated the currency from 2015 to 2022.
The last price increase was given in 2012 when inflationary rate cuts led to a collapse of the currency from 113 to 132 during an IMF program.
Unlike in countries like India, China and Vietnam, where utilities have built large coal bases, the CEB was blocked from building plants.
The rupee has become so bad for investment under so-called flexible inflation targeting and flexible output targeting under IMF technical assistance that large renewable firms are now on a dollar tariff.
Battery prices have also gone up since last year, Wickramasinghe said. China is planning to impose a 3 percent export tax on batteries from April.
The rupee had also depreciated compared to last year, he said. (Colombo/Jan22/2026)
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