National Electricity Policy concerns have intensified as leading industry bodies warn that Sri Lanka’s draft framework overlooks affordability, renewable incentives, and long-term sector stability, potentially undermining investment confidence and energy security during a fragile economic recovery.
National Electricity Policy draft raises affordability and investment concerns
Sri Lanka’s draft National Electricity Policy has come under scrutiny from a broad coalition of business and industry chambers, who argue that several critical economic and structural issues remain unresolved. The Ceylon Chamber of Commerce, together with prominent sectoral associations, has formally submitted joint observations highlighting what they describe as significant gaps that could weaken the effectiveness of future electricity sector reforms.
The submission, backed by organizations including the American Chamber of Commerce, the Exporters Association of Sri Lanka, the Federation of Renewable Energy Developers, the Joint Apparel Association Forum, the National Chamber of Commerce of Sri Lanka, and the Sri Lanka Association for Software and Services Companies, acknowledges the urgency of reforming the electricity sector. However, it cautions that the current draft falls short of addressing essential pillars required for a modern, financially viable, and competitive power system.
Industry representatives note that affordability has not been sufficiently integrated into the proposed policy framework. Electricity pricing, they argue, must balance cost recovery with the realities faced by export-oriented industries and small businesses operating under tight margins. Without a clear affordability lens, the National Electricity Policy could unintentionally erode competitiveness across key economic sectors that rely on predictable and reasonably priced energy.
The submission also raises concerns about Sri Lanka’s decarbonisation commitments and the absence of a clear pathway to support renewable energy expansion. While the draft policy references clean energy objectives, industry bodies say it lacks concrete incentives, long-term targets, and bankable mechanisms to attract private capital into renewable generation. This omission is seen as particularly troubling given Sri Lanka’s stated ambition to accelerate its energy transition and reduce reliance on imported fossil fuels.
Tariff reform proposals have emerged as another area of contention. The draft suggests removing cross-subsidies and limiting subsidies exclusively to households consuming less than 30 kilowatt-hours per month. Industry groups warn that such changes, if implemented without detailed economic analysis, could restrict access to affordable electricity for vulnerable users while introducing fiscal risks. They argue that abrupt tariff restructuring could also destabilize demand patterns and weaken trust in regulatory predictability.
Renewable energy developers have expressed specific concerns regarding provisions that allow uncompensated curtailment, remove feed-in tariffs, and impose mandatory time-of-use tariffs on rooftop solar customers. According to the submission, these measures could significantly undermine project bankability, particularly for facilities financed through international lenders. Higher perceived risk would translate into increased capital costs, ultimately raising electricity prices and slowing renewable deployment.
Beyond immediate pricing and financing issues, the industry coalition stresses that the draft National Electricity Policy does not sufficiently reflect the realities of modern electricity systems. They emphasize the need for forward-looking planning that incorporates energy storage, competitive electricity markets, cross-border power trade, and emerging technologies. Without such provisions, Sri Lanka risks locking itself into an outdated framework that may struggle to accommodate future demand patterns and technological shifts.
The long-term financial health of the electricity sector is another area flagged as underdeveloped. Industry bodies argue that reforms must clearly outline pathways to reduce losses, improve utility governance, and ensure regulatory consistency. Absent these measures, investor confidence may remain subdued, complicating efforts to mobilize private capital for generation, transmission, and distribution upgrades.
Calling for a more inclusive and transparent approach, the chambers and associations have urged authorities to comprehensively revise the draft policy, align it with the Electricity Act, and reissue it following substantive stakeholder consultation. They reaffirmed their willingness to engage constructively with policymakers to help shape a framework that balances affordability, sustainability, and long-term energy security.
As Sri Lanka navigates economic recovery and energy sector reform simultaneously, industry leaders argue that the National Electricity Policy must serve as a credible foundation for investment and innovation. Without addressing the concerns raised, they warn, the policy risks becoming a missed opportunity rather than a catalyst for resilient and sustainable power sector transformation.