ADB Approves $200 Million Loan To Boost Sri Lanka’s Power Grid And Renewable Energy Projects

The Asian Development Bank (ADB) has granted a $200 million loan to support the modernization of Sri Lanka’s power sector infrastructure. This funding aims to improve the reliability and efficiency of the country’s transmission and distribution networks, while also enabling the seamless integration of renewable energy sources into the grid. The initiative is expected to boost the overall resilience of Sri Lanka’s energy infrastructure, ensuring a more sustainable and stable power supply for the future.

ADB Country Director for Sri Lanka Takafumi Kadono, said in a statement, “Driving power sector reforms, combined with targeted infrastructure interventions, is essential to facilitate competitive renewable energy development and reduce power generation costs. By expanding and modernizing infrastructure and incorporating digitalization solutions, this project will support the government’s goal of increased integration of renewable energy in the electricity mix, reduce power interruptions, and minimize transmission and distribution losses.

In 2016, Sri Lanka achieved the milestone of 100% household electrification. By 2023, peak electricity demand had risen to approximately 2,800 megawatts (MW), driven in part by the growing contributions from distributed renewable energy sources. This demand is expected to increase substantially by 2030. While Sri Lanka’s total installed power generation capacity reached 5,191 MW in 2023, nearly 50% of its electricity still came from thermal power plants, highlighting the challenges in transitioning towards a cleaner, more sustainable energy mix. The government has set ambitious goals in its updated nationally determined contributions (NDC), aiming for 70% of electricity generation to come from renewables by 2030 and achieving carbon neutrality in the electricity sector by 2050.

The Power System Strengthening and Renewable Energy Integration Project is designed to enhance climate resilience and improve the capacity of Sri Lanka’s transmission and distribution networks, facilitating greater integration of renewable energy. The project will expand the 220-kilovolt and 132-kilovolt transmission infrastructure, introducing new transmission lines and substations.

It will also modernize the medium-voltage distribution network, upgrade grid protection systems, and introduce the country’s first grid-scale battery energy storage system at the transmission level. Additionally, a renewable energy center will be established to monitor and forecast renewable energy generation. The project will implement network automation with SCADA and remote terminal units, providing operators with real-time data and alerts to ensure the efficient and reliable delivery of power.

The approval of this project marks a significant step forward in Sri Lanka’s ongoing efforts to reform its power sector, with a focus on improving financial sustainability, implementing cost recovery tariff revisions, and fostering competitive renewable energy development. The Asian Development Bank (ADB) recognizes the importance of these reforms for the successful integration of renewable energy and the overall enhancement of the sector’s performance, making ADB’s support for infrastructure upgrades contingent upon their implementation.

The project will strengthen the institutional capacity of the Ceylon Electricity Board (CEB) and Lanka Electric Company (LECO), the two utilities responsible for delivering electricity to end consumers. It will enhance their ability to integrate and manage renewable energy systems, adopt digital technologies, and increase the capacity for rooftop solar installations. In addition to the infrastructure upgrades, the project will include initiatives to promote gender equality and empowerment. This includes career development activities for female staff at CEB and LECO, awareness programs on the safe and productive use of electricity, and training to support women-led groups and businesses in adopting clean energy solutions.

The total project financing is split between CEB and LECO, with $150 million allocated to CEB and $50 million to LECO. Both financings will be backed by a guarantee from the Democratic Socialist Republic of Sri Lanka. ADB remains dedicated to fostering a prosperous, inclusive, resilient, and sustainable Asia and Pacific region, continuing its mission to eradicate extreme poverty. Founded in 1966, ADB is owned by 69 members, 49 of which are from the region.