Sri Lanka’s domestic renewable energy industry is on the brink of “natural death” after the state-owned National System Operator (NSO) halted payments to small and medium-scale developers since December 2025, the Federation of Renewable Energy Developers (FRED) warned on Thursday.
Total unpaid dues have ballooned to Rs. 10 billion as of April 2026, with roughly Rs. 2.5 billion accruing each month. The crisis impacts 389 plants — ground-mounted solar, wind, mini hydro and dendro — with a combined installed capacity of 1,073.9 MW, excluding rooftop solar.
FRED says the liquidity drain is being driven by the government’s decision to prioritise payments for fossil-fuel generation. A shortfall in coal power, caused by the procurement of substandard coal at Norochcholai, has forced reliance on diesel to bridge a daily 100–150 MW supply gap. Thermal generation costs have exceeded Rs. 100 per kWh as the West Asia conflict keeps oil prices elevated.
“We keep government away from exposing to the forex risk by supplying a major component of the energy… but what steps they have taken to protect us is a big question,” FRED President Manjula Perera said. “If we are not paid, how do we expect the proposed implementation will go through?”
Developers also face “scheduled curtailment” — the NSO shuts down renewable plants during weekends and holidays without compensation, leaving nearly 400 companies unable to service bank loans or pay staff.
FRED is calling for an immediate Rs. 10 billion Treasury grant to settle outstanding debts and a Cabinet directive authorising emergency financial measures. Without intervention, the federation warns of a wave of non-performing loans across the banking sector and a permanent loss of investor confidence in the renewable sector.
NSO Chairman Dr. B.L. Pradeep Priyadarshana Perera, contacted by The Island on Thursday, acknowledged the delays in payments and said discussions were under way with the Ministry of Finance to resolve the issue promptly. The acknowledgement is the first on-record government confirmation of the arrears since the dispute went public. FRED Vice President Prabath Wickramasinghe, speaking to the same paper, framed the crisis as the result of authorities prioritising diesel and furnace oil generation to offset a daily 150 MW shortfall caused by inefficiencies in coal power, with thermal generation now costing close to or above Rs. 10 per unit.
The dispute lands as the PUCSL public consultation on a new tariff revision opens in Colombo, and as Cabinet has just approved a 150 MW Kondachchi wind plus battery-storage project backed by an ADB grant — both of which assume continued private-sector renewable investment to deliver on Sri Lanka’s 70% renewables-by-2030 target.
Sources: EconomyNext, The Island.
