Six ways Sri Lankan industry can future-proof its energy security

Amidst Sri Lanka’s worst ever energy crisis, how can its critical industrial sector access more stable and secure energy sources? Leaders from across industry, civil society, finance and academia met in Colombo on 8 December to find a way forward.

The centre-piece of the event, which was organized by the European Union (EU)-Funded ‘Accelerating Industries’ Climate Response in Sri Lanka’ project, was a panel discussion between leading energy experts and innovators, followed by a networking session which gave the 100-plus participants the opportunity to connect, share and learn.

Here are six key insights from the event on how the energy crisis is creating opportunities to accelerate industry’s use of renewables and energy efficiency – building the momentum Sri Lankan industry needs to move to decarbonization and a sustainable, more competitive future.

1. For the economy and the climate, the time for action is now

Sri Lankan industry employs 30 per cent of the country’s workforce. As such, it is a cornerstone of the country’s economy, and the energy crisis has hit it particularly hard. Skyrocketing costs of imported fossil fuels on which Sri Lanka relies means many businesses are struggling to survive, especially small and medium-sized enterprises (SMEs). But for the sake of Sri Lanka’s economy and its people, it is a struggle they have to win.

At the same time, Sri Lanka is on the frontline of climate change caused by the use of fossil fuels. According to the Global Climate Risk Index, the country ranks as the 30th most vulnerable (out of 180 analysed) to the effects of climate change. It is already in the grip of a devastating cycle of floods, heat waves and droughts, causing food insecurity alongside economic woes.

Even though Sri Lanka is among the countries that have contributed the least to the climate crisis, the nation is committed to doing its part to reduce emissions now. At the same time, there is an opportunity to develop greener and cleaner energy, to not only future proof the economy but also to create new jobs. Sri Lanka has committed to reduce its carbon emissions by 14.5 per cent by 2030. As Sri Lankan industry is one of the biggest consumers of fossil fuels,7 per cent of the reductions are due to come from the sector.

Speaking at the event, Minister of Environment Naseer Ahamed said there is an urgent need to “support local industries to become carbon neutral or low carbon by making appropriate mitigation measures. These measures include energy efficiency as well as taking up renewable energy sources to replace petroleum-based energy generation, which guzzles foreign exchange that is a luxury today for our country.

“It is my hope that industries in Sri Lanka will become globally competitive green industries, bringing in foreign exchange … Introducing such major measures makes business sense by enhancing your financial bottom line. It will also contribute towards reducing the national-level loss and damage caused due to climate-induced natural disasters.”

Climate finance expert Ranga Pallawala, a consultant for the Commonwealth Secretariat who recently attended the global climate talks in Egypt, said that, as members of the global community facing a common crisis, “we need to transform, we need to change the direction; we can’t continue with business-as-usual. We need to change, and we can make it smoother if we start the change in direction now.”

2. From niche to mainstream: Sri Lanka’s key markets are more committed than ever to decarbonization

As Sri Lankan industries try to cope with soaring production costs, many businesses are rethinking the way they use energy. This, and market forces, is building momentum on industrial decarbonization.

Opening the event, EU Ambassador to Sri Lanka and Maldives, H.E. Denis Chaibi, said decarbonization is increasingly becoming a must for businesses that want to export to the EU: “Because the EU is aggressively pursuing the reduction of emissions, it is going to impose measures regarding access to its markets… It’s a massive signal to all the industries around the world – if your products are not produced in a sustainable way, they will have less and less access to the EU market.”

Economist Dr Nishan de Mel, Chief Executive Officer of Verité Research, said Sri Lankan companies were waking up to the many economic advantages of green energy: “Renewables are the cheapest source of energy. And if you want to keep your industry competitive, you want to bring costs down.

“Sri Lanka also wants to grow its exports as a country … Market access in the future, increasingly, is going to be a critical factor when thinking about decarbonization and an incentive [for industry] to do that. Global financial markets and investors also realize where the world is heading… So, if the country doesn’t perform well on decarbonization, that impacts the ability to attract investment to grow industry.”

Mr Pallawala added: “It is a question of competitive advantage … There was a time when you could run sweatshops and sell anywhere in the world, but labour standards developed to an extent where, if you didn’t fix your labour standards, you’re going to suffer in terms of buyer demand and market access. A similar transformation is taking place in the area of energy.”

3. Decarbonization starts with a mindset change – to make this shift, industry needs more information

While there is growing recognition of the need to decarbonize, the message is yet to penetrate across all of Sri Lankan industry, particularly among SMEs, which are experiencing the worst of the economic crisis. There is a need to make all businesses “energy literate” by making them aware of the options for energy efficiency and renewables.

Keerthi Gunawardane, president of the Federation of Chambers of Commerce and Industries in Sri Lanka, said: “Some of the people do not understand what needs to be done and what will happen to their business in the future … We need to educate the industries on the actual challenges that they face, and if they do not convert their businesses to a greener side there will be a bigger threat in the future. But, similarly, if they can do this faster, there are opportunities in the world market.”

Harsha Wickramasinghe, deputy director general at the Sri Lankan Sustainable Energy Authority, agreed. He said: “To make things suitable for SMEs, we have to create an ecosystem where people can easily access the knowledge as well as resources and can also make use of [what technologies are available], but we are not yet there.”

Ishani Palliyaguru, vice president at National Development Bank PLC, which promotes sustainable development financing, said: “The way forward is simply mindset change – at individual level, at entity level, at the state level. It has to happen today.”

But Ms Palliyaguru said she was already seeing signs of a shift among businesses, caused by the current crisis: “The message [on decarbonization], rather than it coming from us to them, it is mainly coming from them [to us] … They have realized energy security is now an essential component for their own survival, but it’s also about searching for markets as well – it’s driven by their own business requirements.”

4. Using energy more efficiently can be done now and at low-cost

One of the most straight-forward solutions easily within the reach of every Sri Lankan business is to find ways to use energy more efficiently.

But in the last decade, Mr Wickramasinghe said energy efficiency had often been overlooked: “The attention to energy efficiency by all of our industries … was not there in the past 10 years. [Businesses] were getting very cheap electricity and they were very happy. But we knew this was coming. It’s like a rubber band: if you keep on stretching it one way, it breaks.”

Mahendra S Jayalath, chief executive officer at EnergySolve International, added: “During these challenging times, industry has to first of all manage what is available, because it’s difficult for … industry to invest right at this moment. The way you use your air conditioning, lighting, motors and pumps can at least reduce your energy bills by 10 to 15 per cent.”

Mr Jayalath gave many examples of how businesses can save energy by adopting simple measures, such as hotels turning devices off in rooms that aren’t being used rather than leaving on them on standby, and air-conditioned factories utilising the colder outside air during the night as natural air conditioning, only turning on chillers from mid-morning when temperatures heat up. He spoke of how, after a CEO took an interest in energy saving and began to monitor energy use, he quickly realised there was a burst water pipe weeks before his engineers identified it, showing how even the straight-forward act of monitoring can save a company money and reduce unnecessary energy use.

5. Understanding energy use and where energy is being wasted will help businesses survive the energy crisis – and it’s the first step to decarbonization

There was widespread agreement that many Sri Lankan businesses have much to gain by embarking on energy audits to understand where energy waste is happening and where it can be reduced. This will help to ease the pressure on profits, reduce emissions and ultimately help businesses get the renewable energy systems that are right for their operation – avoiding over or under investing in this important technology.

Mr Jayalath said: “First of all you have to do an audit and establish your carbon footprint then look at the measures that you can take to reduce it, and they can be low cost, medium cost and high cost measures and small term, medium term and long term.

“Before we start talking about retrofits, it’s about changing the air conditioning, that’s step number one. Changing the lighting, that’s step number two – what we call the low cost and no cost options … Get your quota system in place so that every possible energy waste is eliminated … that’s the only way that you’re going to survive through this difficult era.”

6. When it comes to renewables, Sri Lankan industry is focused on solar, but there are many other options

Certain sections of Sri Lankan industry have been using solar for a number of years. But this has created the misconception that this is the only renewable worth focusing on.

Mr Wickramasinghe said: “We have seen a lot of development in the apparel sector because they have quite large rooftop spaces, so they have used solar rooftop systems quite regularly … But there are many, many [other] possibilities, like switching over to biomass power.”

Mr Gunawardane agreed: “When we talk to industry people they think solar is the only possible thing for them to apply … [There is a need for] information for the industry about the other multiple sources [of renewables] that they can use.”

Representing the Ministry of Industries, Secretary J. M. Thilaka Jayasundara said: “[We need to] look for … renewable energy sources which we can develop in this country, starting with improving energy efficiency in industries, using non-conventional renewable energy such as solar, wind, biomass and biofuels and even hydrogen. We have to drop our tunnel vision and acquire the vision of an eagle to see the opportunities awaiting us in these new fields.”

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The event is the first in a series of industry dialogues from the ‘Accelerating Industries’ Climate Response in Sri Lanka’ project, a five-year initiative led by the Sri Lankan Ministries of Environment, Industries, Power and Energy. The project is implemented by UNIDO and funded by the EU under the Global Climate Change Alliance+.