The Asian Development Bank (ADB) has approved a $200 million loan to modernize Sri Lanka's power infrastructure, enhancing the reliability of its transmission and distribution systems while promoting the integration of renewable energy sources into the national grid.
“Implementing power sector reforms and infrastructure upgrades is essential for fostering competitive renewable energy growth and reducing generation costs,” stated Takafumi Kadono, ADB Country Director for Sri Lanka. “By modernizing infrastructure and adopting digital solutions, this project will support Sri Lanka's goal of increasing renewable energy's share in the energy mix, cutting power interruptions, and reducing transmission losses.”
Sri Lanka achieved full household electrification in 2016, with peak demand reaching approximately 2,800 megawatts (MW) in 2023, including contributions from renewable sources. However, thermal power plants still account for half of the nation's electricity generation, underscoring the urgency of transitioning to a greener energy mix. The Sri Lankan government has set ambitious targets, aiming to generate 70% of its electricity from renewable sources by 2030, with a goal of achieving carbon-neutral electricity generation by 2050.
The Power System Strengthening and Renewable Energy Integration Project is designed to enhance the nation's climate resilience and facilitate the integration of renewable energy. The project will involve expanding key transmission lines and substations, modernizing the medium-voltage distribution network, and upgrading grid protection systems. A notable component will be the installation of Sri Lanka's first grid-scale battery storage system, along with the creation of a renewable energy center to forecast and monitor energy generation. Additionally, the project will implement advanced network automation with SCADA and remote terminal units to optimize power delivery efficiency through real-time data.
The approval of the project underscores Sri Lanka's ongoing efforts to reform its power sector, aiming to improve financial sustainability, support competitive renewable energy development, and revise cost-recovery tariffs. ADB's backing for these infrastructure upgrades is contingent upon the success of these reforms, which are key to the country's renewable energy transition and overall energy sector performance.
The project will also bolster the operational capabilities of Sri Lanka's power utilities, the Ceylon Electricity Board (CEB) and Lanka Electric Company (LECO). Both companies will receive enhanced support in integrating renewable energy, adopting digital solutions, and expanding rooftop solar capacity. In addition, the project includes initiatives aimed at empowering women, such as career development programs for female staff at CEB and LECO, and training opportunities for women-led businesses and communities on adopting clean energy solutions.
Of the total loan, $150 million will be allocated to CEB, while $50 million will go to LECO, with both loans guaranteed by the Democratic Socialist Republic of Sri Lanka.
