Renewable power producers face loan repayment crisis

2026-02-05 - 10:39

A deepening financial crisis has emerged among solar and small hydropower producers, who are reportedly struggling to service bank loans amid policy and purchasing changes by the Ceylon Electricity Board (CEB). Industry sources say producers have been hit by the suspension of power purchases on weekends and public holidays, along with successive reductions in feed-in tariffs for renewable energy. The purchase price for a unit of solar-generated electricity has reportedly been reduced from Rs. 37 to Rs. 27, and later to Rs. 17, following the appointment of Minister of Power and Energy – Kumara Jayakody. Banking sector sources warn that this situation could pose a systemic risk to Sri Lanka’s banking sector, noting that a significant portion of renewable energy investments has been financed through credit. It is estimated that nearly 70% of capital invested in rooftop solar systems, solar power plants, and small-scale hydropower projects has been funded through bank loans. Banks are reported to have extended loans to nearly 150,000 individuals for rooftop solar installations, while around 360 investors operating commercial-scale solar power plants are also facing difficulties in meeting debt obligations under current conditions. Industry estimates that nearly Rs. 500 million is spent to construct a hydropower plant to produce 01 MW of electricity, while the construction cost to produce 01 MW of electricity from solar power is as high as Rs. 350 million, reports say. Although the Sri Lanka Sustainable Energy Authority (SLSEA) recently secured Cabinet approval for the Renewable Energy Resources Development Plan 2025–2030, sector representatives claim prevailing policy uncertainty could make the plan difficult to implement. Sri Lanka’s National Policy on Renewable Energy targets meeting 70% of electricity demand from renewable sources by 2030 and progressing towards carbon neutrality, but investor confidence is reportedly weakening, according to reports. Some investors have also alleged difficulty in securing meetings with the current Minister to discuss sector concerns. Meanwhile, one investor, speaking to ‘Sri Lanka Mirror’ on condition of anonymity, claimed that Cabinet approval for the SLSEA plan was largely a procedural step linked to securing the next International Monetary Fund (IMF) funding tranche, and that there is limited practical commitment to expand renewable energy generation. Meanwhile, it is reported that the CEB pays around Rs. 85 per unit for electricity generated from fossil fuels during peak demand, arguing that discouraging renewables could place additional upward pressure on future electricity tariffs.