Rationalizing the time of use electricity pricing system in Sri Lanka

Abstract

Time-of-Use (ToU) electricity pricing is a widely used demand-side management strategy intended to shift electricity consumption from peak periods to off-peak hours. This enables easing pressure on the grid and improving cost efficiency in power generation. In Sri Lanka, with the rapid integration of distributed energy resources, particularly rooftop solar photovoltaic (PV) systems, the traditional daily demand profile has changed significantly. When adjusted for rooftop solar PV generation, which is not visible to the System Control Center, the timing of peak demand shifts from the evening to afternoon. This shift suggests that the prevailing ToU tariffs may no longer reflect the true cost of electricity generation at different times of the day. This study aims to rationalize the ToU pricing system in Sri Lanka which at present does not encourage consumers to go towards the tariff due to insignificant differences, by developing a data- driven framework. This incorporates high-resolution generation dispatch data, actual fuel costs, and adjusted demand profiles that account for both telemetered and non- telemetered solar PV generation. Hydropower, although assigned to zero cost in cost calculations in regulatory accounts, is given notional value under selected scenarios to better signal the use of thermal generation during certain intervals. A revenue-neutral seasonal correction factor was introduced to avoid unintended financial gains when using these adjusted cost values to determine ToU tariffs. The study evaluates the effectiveness of multiple ToU tariff structures based on cost reflectivity, consumer demand alignment, and practicality for adoption. A simplified two-interval tariff structure is proposed, for peak time from 05:30 -22:30 and off-peak from 22:30-05:30. This has combined the day and peak time intervals from the current thre-interval ToU tariffs, to better reflect the current generation mix and consumer usage patterns. Feedback from industrial consumers and analysis of shiftable household loads based on national survey support the feasibility of the new model. The proposed approach provides a foundation for policymakers and utilities to reform the existing tariff structure. By showing a 20% difference between the peak and off-peak costs and thus aligning tariffs with actual system costs and behavioral incentives, the rationalized ToU pricing framework enhances transparency, supports renewable energy integration, and promotes more efficient electricity usage across the country.