By Verangika Upananda
Earlier this year, a nationwide blackout was famously triggered when a monkey entered a substation, highlighting the grid’s continued instability. Blackouts, unpredictable supply, and the constant uncertainty of policy decisions demonstrate that Sri Lanka’s energy system is still struggling to keep pace with its ambition to achieve 70% renewable energy by 2030. The question is no longer only whether we can generate clean power. It is whether we can manage, regulate, and govern it effectively with the new policies.
The Electricity Act No. 36 of 2024 and Amendment Act No. 14 of 2025: A Promise of Reform
The Sri Lanka Electricity Act, No. 36 of 2024, promised transformative change. Its primary purpose was to attract new investments into Sri Lanka’s electricity industry by segregating and unbundling the activities of the Ceylon Electricity Board (CEB). The Act sought to legally separate the CEB into distinct state-owned companies, with each entity responsible for specific functions.
Generation, transmission, distribution, trade, supply, and procurement of electricity were to be managed as separate companies with independent accounts, governance, and operational responsibilities. These reforms were intended to improve transparency, attract investment in renewable energy, and establish a wholesale electricity market. In addition, the Act was expected to accelerate the expansion of the industry in line with Sri Lanka’s decarbonization goals, climate change policies, and renewable energy targets.
Subsequently, the Electricity (Amendment) Act, No. 14 of 2025, was introduced (enacted into law in August 2025) primarily to reverse or reshape certain provisions of the 2024 Act and realign power sector reforms with the government’s priorities. Several significant differences can be observed between the two Acts. Most notably, under the 2025 amendment, the “Wholesale Electricity Market” was renamed the “National Electricity Market.” At first glance, this may appear to be a minor change, but it significantly alters the spirit of the 2024 reforms.
The term “Wholesale Electricity Market” implied breaking the existing monopoly and allowing multiple producers to compete within the sector. In contrast, the shift to “National Electricity Market” downplays competition and reinforces a state-controlled platform. The word “National” conveys centralized control and frames electricity as a state-managed national resource rather than a tradable product. “Wholesale,” by contrast, is more of an economic term that emphasizes bulk trading and competition.
The 2024 Act also established the National Electricity Advisory Council (NEAC) to provide independent advice on policy, reforms, and market development. The 2025 amendment, however, replaces the NEAC with a “committee appointed by the Minister,” thereby reducing its autonomous, statutory role. Furthermore, tariff and market reforms envisaged under the 2024 Act, designed to promote transparent, cost-reflective pricing, encourage private sector investment, and expand renewable energy toward the target of 70% renewable electricity by 2030, were curtailed by the 2025 amendment. Under the amendment, tariff setting now requires consultation with the Ministry of Finance, increasing political oversight and limiting regulatory independence.
Despite its initial promise, the reform process now faces challenges. The 2024 Act marked a significant step toward liberalizing Sri Lanka’s electricity industry and offered renewed hope for renewable energy development. However, the 2025 amendment reverses much of this progress, particularly concerning the expansion of renewable energy. Increased government control and regulatory uncertainty have undermined investor confidence, leaving private capital hesitant and threatening much-needed donor support. Without substantial private and multilateral investment, Sri Lanka’s ambitious target of achieving 70% renewable energy by 2030 is unlikely to be realized.
This concern has already been raised by key international financiers, including the Asian Development Bank, the World Bank, and JICA, who have urged the government to reconsider the implications of the amendment. For example, the Asian Development Bank financed the initial infrastructure development of the Mannar Wind Energy Project, which is now being advanced in its second phase by Hayleys Fentons.
Such cases highlight the real concerns of private investors and international donors. When regulatory frameworks shift unpredictably and government control deepens, long-term investments in renewable energy projects become increasingly risky. This uncertainty not only discourages private sector participation but may also deter multilateral institutions from extending further support.
While the technical provisions of the Act may appear abstract to the general public, their practical consequences are significant. The sharp tariff hikes experienced in 2022 and 2023, which reached up to a 75% increase due to IMF bailout conditions, have already imposed substantial burdens on households and businesses. Then it was reduced by 20% in January 2025 and increased again by 15% in June 2025. However, the overall tariff is approximately 8% lower than in 2024.
According to the Advocata Institute (2025), one of the main reasons electricity costs are high is due to outdated grid infrastructure. The upgrade of grid infrastructure requires massive investments, which again necessitate the support of private investors and international financiers. In this context, the introduction of a more transparent framework, anchored in the legal unbundling of the CEB and the establishment of independent regulatory oversight, holds the potential to moderate tariff volatility and create a more predictable pricing environment over time.
The NPP came to power on an explicit promise of driving Sri Lanka toward a sustainable, renewable energy future. Its manifesto emphasized accelerating the transition to clean energy, unbundling monopolistic structures, and establishing transparent regulatory frameworks to encourage private and public investment in solar, wind, and other renewable sources.
However, the recent amendments to the Electricity Act indicate a significant departure from these commitments. Instead of creating the institutional and regulatory conditions envisioned in their manifesto, the reforms effectively recentralize control over electricity generation and distribution, weakening competition and reducing incentives for renewable energy development. What was promised as a bold roadmap for a sustainable energy transition now appears constrained, with the Amendment Act of 2025 contradicting the very objectives the current regime pledged to achieve.
The contrast between manifesto commitments and policy implementation highlights a critical gap: the government’s stated vision of an inclusive, renewable-driven energy future is undermined by legislative changes that prioritize centralization over transparency, stability over innovation, and short-term control over long-term sustainability.
A Historic Crossroads
The history of Sri Lanka’s energy policy reflects broader patterns in our political economy—strikes between centralization and liberalization, determination and inertia. A key objective of the Electricity Reform Act, 28 of 2002, was to facilitate private sector involvement in the electricity industry. And its 2009 amendments aimed to introduce private participation as well. However, CEB remained a monopoly, thereby limiting competition and innovation. The 2024 Electricity Act represents a decisive break from that pattern, a legal framework for modernization, efficiency, and renewable integration.
Sri Lanka stands at a crossroads. It can stick with the old system, a single, powerful CEB, opaque finances, and tariffs shaped by politics, or it can take the difficult step of reform. Though challenging, reform promises a more transparent, efficient, and sustainable energy sector that strengthens reliability, attracts investment, and positions the country as a credible player on the global stage. Yet, with the new Electricity Amendment Act of 2025, these ambitions now risk remaining just those ‘ambitions’ for the foreseeable future.
Sri Lanka is exceptionally rich in renewable energy resources, including abundant sunlight year-round, wind, tidal waves, and a continuous hydro power source. These natural advantages give the country the potential to stabilize electricity supply, attract global investment, and demonstrate how a resource-constrained nation can transition to renewable energy while modernizing governance and infrastructure.
The consequences of inaction are tangible: failure to pursue reform will prolong blackouts, discourage investment, and leave households burdened with high electricity tariffs. Achieving ambitious reforms requires consistency, credible institutions, and public trust. Without these, Sri Lanka cannot unlock its renewable energy potential. Equally, when policies shift too quickly or erratically, they undermine long-term goals, creating uncertainty for investors and slowing the country’s progress toward energy security.
Building this consistency also depends on securing the right foundations. Financial and technical support for infrastructure development is essential, and the current regime must take responsibility for ensuring these investments occur. This will provide the backbone for a reliable, modern, and sustainable energy system. Even with the rollback of the Electricity Act of 2024 through the 2025 Amendment, Sri Lanka can still hold hope for a brighter, sustainable energy future. Realizing this potential will require difficult decisions, honest governance, and the courage to move beyond the comfort of centralized control.
Verangika Upananda is a researcher specialising in resource politics and sustainable energy
transitions. She holds dual Master’s degrees in Development Studies from the University of Colombo,
Sri Lanka, and the University of Bayreuth, Germany, and a BA in Social Sciences from the Open
University of Sri Lanka. Verangika has conducted field research in the Democratic Republic of Congo,
India, and Sri Lanka, combining on-the-ground insights with policy-oriented analysis. She has worked
in development consultancy and served as a Visiting Lecturer in Economics at the Open University of
Sri Lanka. She is a current Research Specialist for Factum.
Factum is an Asia-Pacific-focused think tank on International Relations, Tech Cooperation, and Strategic Communications accessible via www.factum.lk.
The views expressed here are the author’s own and do not necessarily reflect the organizations.
