Sri Lanka’s renewable energy strategy revisited: From exporting electricity to powering an AI-driven economy

The renewable energy strategy of Sri Lanka is being reevaluated, shifting focus from exporting electricity to supporting an AI-driven economy. This perspective was first raised in a 2024 opinion piece by environmentalist Dilum Alagiyawanna, who questioned the long-term economic implications of exporting wind-generated electricity to India without considering domestic energy needs, industrial development, and environmental sustainability.

Two years later, the importance of this question has increased due to advancements in AI, digital infrastructure, household electricity pricing, industrial competitiveness, and the migration of skilled workers.

While Sri Lanka should not abandon electricity exports, the strategy must now encompass creating an economic environment where domestic enterprises can thrive and households can afford essential services. Skilled professionals should also be able to prosper, and Sri Lankan products and services must compete internationally. The fundamental challenge lies in how effectively the electricity generated can contribute to national economic prosperity.

Dr Hans Wijayasuriya, President's Chief Advisor on Digital Economy, highlighted the existing data centre capacity in Sri Lanka, which stands at approximately 5 megawatts (MW), compared to around 1,500 MW in Malaysia. He suggested that Sri Lanka needs around 25–50 MW of AI-capable cloud infrastructure in the short term, initially targeting 25 MW. Wijayasuriya cautioned against investing heavily in data centres primarily serving overseas markets, as they could serve as a means of exporting electricity.

Sri Lanka's economy should not only focus on attracting foreign direct investment (FDI) but also consider its broader economic structure. Micro, small, and medium-sized enterprises (MSMEs) make up approximately 99.8% of non-agricultural business establishments. These smaller enterprises play a crucial role in employment, productivity, export earnings, technology transfer, domestic procurement, and tax revenues.

The discussion surrounding Sri Lanka's energy strategy must weigh the net national economic benefits of various uses of electricity, considering production costs, domestic value addition, employment, investment requirements, and environmental consequences. Gross export earnings alone cannot provide a comprehensive answer to this question.