Assessment of economic impact of electricity supply interruptions in the Sri Lanka industrial sector

Abstract

This paper presents the outcome of the Sri Lanka case study on assessing the economic impact of power interruptions on industry in the South Asia region, comprising the countries of Sri Lanka, Nepal, Bangladesh and India. The technical assessment evaluates the cost to the country’s economy in terms of the industrial loss due to supply interruptions and environmental impacts from standby generation used to supplement the power requirements of the industrial sector.

The study found that the main economic impact of the power interruptions, both planned and unplanned, is the loss of output in the industrial sector. In a typical year of power shortages, such as 2001, arising from a deficit in generation capacity, these losses can be as high as approximately US$ 81 million a year, which is approximately 0.65% of the country’s gross domestic product (GDP). Also, the economic impact due to unplanned outages can be around US$ 45 million (0.3% of GDP) in a typical year. On average, these values for planned and unplanned outages are US$ 0.66 and US$ 1.08 per kW h of energy loss, respectively.

It is also observed that 92% of the sampled industries have standby generation facilities to satisfy either, in full or partially, their own power requirements, which produced approximately 146 GW h of energy in 2001.

The serious economic and environmental impacts of power interruptions, both planned and unplanned, underlines the importance of timely implementation of the long term least cost generation expansion plan and proper maintenance of transmission and distribution networks to ensure their high reliability. Therefore, it is clear that the utility needs to take immediate steps to improve its supply reliability in order to retain consumers and justify the existence of a centralised generation facility.