The government has already established an energy conservation fund and an office under the country's ministry of power and energy.
It has started making supplementary payments to small bio-mass energy producers to top up the price paid by the Ceylon Electricity Board.
Officials say the activities of the existing unit will be transferred to the new Authority.
The authority would have as its main functions the development renewable energy sources, energy efficiency and conservation, assisting policy formulation and management of the conservation fund.
The government will contribute 500 million rupees as start-up capital. The authority would be charging royalties from areas such as hydro power, in the long term to sustain the fund.
It would also be allowed to issue Sustainable Energ