FINANCIAL CHRONICLE – The Federation of Renewable Energy Developers (FRED) has issued a stark warning regarding the future of Sri Lanka’s renewable energy sector, indicating that it is nearing a state of collapse due to a suspension of payments from the National System Operator (NSO) since December 2025.
As of April, the total outstanding payments owed to small and medium-sized renewable energy developers have surged to 10 billion rupees, with an average of approximately 2.5 billion rupees accruing each month. This financial crisis affects 389 renewable energy facilities, including ground-mounted solar, wind, mini-hydro, and dendro plants, which collectively generate 1,073.9 megawatts (MW) of power, excluding rooftop solar installations.
Industry representatives attribute the financial strain to the government’s choice to prioritize payments for costly fossil fuels. This situation has been exacerbated by inadequate coal procurement, forcing the government to rely on diesel to fill a daily shortfall of 100MW to 150MW in coal power supply.
Amid rising geopolitical tensions in oil-producing regions of West Asia, the price of thermal power has surged, reportedly exceeding 100 rupees per kilowatt-hour, according to FRED. Developers have expressed concerns that it is “fundamentally unfair” for traditional power generators to receive preferential treatment while more economical energy sources are overlooked.
In addition to the issue of unpaid debts, renewable energy developers are also facing “scheduled curtailment,” which involves the NSO shutting down renewable facilities during weekends and public holidays without providing any compensation. This situation has left nearly 400 companies struggling to meet their financial obligations, including servicing loans and paying employees.
FRED President Manjula Perera pointed out the irony of the current circumstances, emphasizing that renewable energy sources typically satisfy over 70% of the daytime energy demands for both industrial and domestic use. “We shield the government from foreign exchange risks by providing a significant portion of energy, yet the actions taken to safeguard our interests remain questionable,” Perera remarked. “If we do not receive payment, it raises concerns about the feasibility of future implementations.”
The federation is urging the government to provide an immediate grant of 10 billion rupees from the Treasury to clear the outstanding debts and to issue a Cabinet directive to enable emergency financial measures. FRED cautions that without prompt intervention, the banking sector could face a significant rise in non-performing loans (NPLs) and a lasting decline in investor trust.
