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Second phase of 10,000 MW power project sluggish

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Raras Cahyafitri, The Jakarta Post – The second phase of the country’s ambitious 10,000 megawatt (MW) electricity procurement fast-track program (FTP-2) is progressing slowly due to financing and environmental considerations, raising concerns as the country’s demand for power is on the rise.

The FTP-2 — which follows on from the first stage FTP-1 that is due to be completed next year — comprises 76 power plants with a combined capacity to produce 17,918 MW of electricity. The FTP-2 was initially scheduled for completion next year, but the deadline has been extended to 2020 to allow other plants with greater capacity to be built first.

Unlike the first stage, the FTP-2 involves the private sector, which is expected to develop 59 plants with a total capacity of 12,169 MW, or 68 percent of the program’s overall capacity. Meanwhile, state-owned electricity company PT PLN will be developing 17 power plants with a combined capacity of 5,749 MW, or 32 percent of the total.

However, the completion of all the power plants is likely to go beyond the extended time line because, as of now, only a few of the plants are under way.

Of PLN’s 17 plants, only five are in the pre-construction stage, while the remainder are still at various stages of development, ranging from the preparation of feasibility studies to processing engineering, procurement and construction (EPC) tenders, according to a report from the Energy and Mineral Resources Ministry’s directorate general for electricity.

Meanwhile, of the 59 projects to be developed by private companies, only two are already undergoing construction and one is in the pre-construction stage. Most of the others remain at an early stage, including 13 geothermal plants that are still in the tender process to determine which developer will work with the companies to develop the plants.

In addition, the FTP-2 has seen only one plant completed this year, namely the 55 MW Patuha geothermal plant in West Java. Next year, the 140 MW Bangkanai gas-fired power plant is likely to be completed by PLN.

  • FTP-2 comprises 76 power plants with 17,918 MW total capacity
  • 59 plants will be built by private firms, the remainder by PLN
  • Only 5 of PLN’s 17 plants and 3 of the private sector’s 59 are in pre- or construction stage

“Bangkanai is ready to enter the electricity system next year; the transmission has also being worked on,” PLN president director Nur Pamudji said.

PLN’s director for construction, Nasri Sebayang, previously said some of the company’s projects under the FTP-2 program, including geothermal plants in Sungai Penuh in Jambi and Hululais in Bengkulu, remained at the steam exploration stage.

Around 28 percent or 4,965 MW of the FTP-2 will be generated by geothermal plants, most of which will be developed by private firms. The domination of private players has raised concerns, particularly regarding financing, as the development of geothermal power plants carries significant risk due to its high costs.

“The financing of the FTP-2 plants needs extra attention and the government needs to develop financial instruments to support the program, particularly on the renewable energy plants,” said Fabby Tumiwa, executive director for the Institute for Essential Services Reform (IESR).

“To date, only five geothermal power plants have received offtake agreements from the Finance Ministry,” he added. The government’s guarantee is necessary to help developers secure funding for their geothermal projects.

Apart from the financial issues, the environment is also a concern as most of the geothermal potential in Indonesia is located in conservation areas.

In a recent development, the House of Representatives passed a new Geothermal Energy Law, which eliminates legal barriers in the development of geothermal energy-powered plants. Under the new law, the exploration for geothermal reserves is no longer considered a mining activity so that it can be conducted in conservation areas. However, the new law will likely take five years to have an impact as it needs additional technical regulations, according to Fabby.

The Energy and Mineral Resources Ministry’s director general for renewable energy, Rida Mulyana, admitted that the new law could not be directly implemented.

“While pursuing further regulations to implement the law, we are working with stalled geothermal plants and we recently made the developers enter power purchase agreements. We expect them to start drilling and if everything goes well, we should see a number of geothermal plants completed between 2018 and 2022,” Rida said.

The FTP-2 is necessary for Indonesia, which has seen a growing demand for power. Electricity consumption in the country is expected to double in 10 years, from 189 terawatt hours (TWh) in 2013 to 386 TWh by 2022, while the average annual growth between 2013 and 2022 is predicted to reach 8.4 percent per year. In the first nine months of the year, electricity consumption reached 145.19 TWh, increasing by 6.23 percent compared to the same period last year, figures from PLN show.

As of July this year, the first phase of the program — the FTP-1 — had completed power plants to generate 7,258 MW of electricity, or around 73 percent of the targeted 7,258 MW for the period, according to PLN figures. The electricity generated by the completed power plants is expected to reach 8,444.5 MW by year-end, while all the plants are expected to be finished next year.

Source: The Jakarta Post.

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