There may be nothing new in a recent World Bank credit facility to provide electricity through renewable power to thousands of rural homes. But for the growing solar power sector in Sri Lanka, it is a giant step in taking the industry forward.

Solar power is the fastest growing energy resource in the world. In countries such as Japan, Germany, the US and South Korea, solar power units in institutions or homes are being connected to their national grids.

Against this backdrop, the fresh provision of low-cost loans for home-based electricity connections would steer the solar industry through to a new phase, according to Pradip Jayewardene, founder member of the Solar Industries Association. Already, discussions are underway to make solar energy an urban product. “So far, we have concentrated on solar power being available to rural homes that are not connected to national grid power and where power lines don’t exist or are unlikely to,” he said. “But this funding facility will help us take solar power to a new level.”

The $40 million soft loan from the Bank, announced last week, will help boost grid-connecting capacity by 50 megawatts and extend off-grid electricity services to 60,000 more households and 500 rural micro-and small-scale enterprises. Solar power has so far been a better option in rural areas where grid power is not possible, says Jayantha Nagendran, vice president at DFCC Bank, the World Bank’s credit agency.

The World Bank loan would allow the extension of an ongoing project ending in December 2007 to 2010. The main aim of the first project is to bring electricity to remote communities and individual households through village-led electricity societies and provide solar energy services. At present, almost half the total energy consumption in this South Asian island nation comes from imported petroleum products. The balance comes from biomass (47%) and hydroelectricity (8%). From this, electricity generation comes from imported fuel (slightly below 50%) and hydropower (49%). Renewable energy resources still account for a marginal percentage, though this component is quietly growing.

However, unlike other renewable energy resources, the local solar industry, which has grown in leaps and bounds since 1996, has one key problem: the government still does not allow solar power to be connected to the national grid. Other private power sources like hydro, wind energy, biomass and dendro are permitted to connect to the national grid, although the main state power supplier, the Ceylon Electricity Board (CEB), is running out of grid capacity. Jayewardene stressed that the new loan scheme is important to the solar power because it is coming of age and will soon be able to reach industrial power and urban homes.

Tilak Siyambalapitiya, an energy specialist, reckons that even with the new hydro and thermal projects raising power generation by 2011, “we would still be short of power with annual demand rising by 8 to 10%”. Two mega power projects involving coal and hydro power, stalled for periods of over 10 years for a combination of reasons, including protests by residents and environmentalists and political bickering, got underway last year. Reforms at the state-owned CEB are also underway in an ADB-aided project that aims to improve usage. — IPS