Sri Lanka’s renewable energy sector is set for a major boost as the government allows duty-free imports for capital goods used in renewable energy generation and storage. The new regulation aims to accelerate sustainable power development nationwide.
Renewable energy investors gain from new duty-free import rule
In a move signaling its commitment to sustainable growth, the Sri Lankan government has expanded its list of duty-exempt capital goods to include renewable energy generation and storage systems. The announcement, detailed in a recently issued gazette, enables investors and developers in the renewable energy sector to import equipment and materials without the burden of import duties, provided they are used for approved energy projects.
This policy adjustment marks a strategic step toward enhancing the island’s energy independence and sustainability. Under the new directive, duty exemptions will apply to capital goods imported for the construction or expansion of renewable energy generation and storage facilities with a capacity of 1 megawatt (MW) or greater. This threshold ensures that large-scale and impactful renewable energy projects—such as solar farms, wind power plants, and battery storage facilities—can benefit from significant cost reductions.
The government’s decision aligns with Sri Lanka’s broader renewable energy goals, which include generating 70 percent of the nation’s electricity from renewable sources by 2030. By removing import duties on key components, authorities hope to encourage both local and international investors to accelerate their projects and contribute to a greener national grid.
Officials have also highlighted that the concession will extend not only to new facilities but also to expansions of existing projects. This provides established energy companies an opportunity to scale up operations and improve efficiency without the heavy financial burden that import duties typically impose.
The policy’s scope includes both renewable energy generation systems and energy storage infrastructure, such as large-scale battery installations. These storage systems are crucial for stabilizing the grid and ensuring consistent power supply from intermittent sources like wind and solar. As renewable generation increases, so does the importance of reliable energy storage, making this tax relief particularly impactful for long-term energy security.
Recent government advertisements have invited tenders for battery energy storage systems (BESS) under a build-own-operate (BOO) model, as well as for new wind and solar developments. The inclusion of such projects in the duty-exemption list suggests a comprehensive strategy aimed at promoting public-private collaboration and reducing financial barriers to entry.
Analysts note that these measures could attract significant foreign direct investment (FDI) into Sri Lanka’s energy market. By lowering upfront costs, the nation becomes a more attractive destination for renewable energy developers seeking stable policy environments and supportive infrastructure. Investors are also likely to view the move as a sign of Sri Lanka’s determination to modernize its power sector while fulfilling international sustainability commitments.
Moreover, industry experts expect the exemption to drive innovation in battery technology and localized renewable infrastructure development. With fewer cost constraints, companies can invest more in research, installation efficiency, and energy storage optimization. This could, in turn, help Sri Lanka mitigate grid instability issues and reduce dependency on fossil fuels.
Environmental advocates have praised the government’s decision as a progressive and timely initiative. They argue that fiscal incentives like these are essential for meeting the nation’s climate targets and ensuring long-term energy resilience. However, they also call for consistent policy enforcement and transparent monitoring to prevent misuse of the exemptions and to ensure that projects deliver genuine environmental benefits.
Overall, the government’s tax exemption policy represents a clear signal of intent: to empower Sri Lanka’s transition toward a sustainable, renewable energy-driven future. By enabling cost-effective access to critical technologies and encouraging private investment, this initiative lays the groundwork for a cleaner, more secure energy landscape in the coming decade.