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lectricity consumption continues to slow in the first semester of the year as industries demand less against the backdrop of sluggish domestic economic growth.

Nationwide electricity consumption grew 1.78 percent to 98.27 terrawatt hour (TWh) in the first six months of the year from 96.56 TWh in the same period last year, figures from state electricity firm PT PLN show.

Lower demand was seen from the steel industry, according to PLN marketing division head Benny Marbun. '€œDemand from other industries, such as cement, petrochemical, big textile and food, are relatively stable,'€ he said.

Overall production capacity utilization of Indonesia'€™s businesses dropped to 73.06 percent in the first quarter of the year, a level unseen since the end of 2013, from 79.78 percent in the previous quarter, according to a Bank Indonesia (BI) business activity survey.

Electricity demand from the steel industry is low, particularly because some producers have shut down their furnaces, according to the Indonesian Iron and Steel Industry Association (IISIA).

Economic growth shrank to the lowest level since 2009 in the first quarter the year, exacerbated by rising competition with cheaper imported steel products from China as well as unfavorable regulations.

'€œRight now we are battered. Many companies have already closed down, some reducing the number of workers, some halting the operation of furnaces,'€ IISIA co-chairman Ismail Mandry said.

The country'€™s steel industry is currently running at only 30 to 40 percent of its total capacity of producing 13 million tons of steel per year.

The slowing growth in the first semester follows declining growth in the first quarter of the year, when PLN reported a 2.6 percent annual increase in electricity consumption on the back of a weakening global market, which has affected industries in the country.

PLN has set an optimistic target of booking 216.39 TWh in electricity sales this year, or around a 9 percent increase compared with the total consumption of 198.6 TWh last year.

Demand from the Java area would become the main driver for the power firm to achieve the target, PLN director Nasri Sebayang previously said. Electricity consumption growth in the Java area is expected to be 7 to 8 percent, according to Nasri.

'€œThere are other areas outside Java with more than 10 percent growth. However, given that demand from Java constitutes around 70 percent of electricity consumption, it will drive national growth,'€ Nasri said.

Last year, PLN recorded a 5.9 percent increase in electricity consumption, lower than its target of 9 percent.

The weak demand for electricity, however, has not stopped the government from boosting supply as it is currently speeding up the development of numerous power plants to provide an additional capacity of 35,000 megawatt (MW) by 2019 with an estimated total investment of Rp 814 trillion. The ambitious project will be an addition to the country'€™s existing 53,000 MW total power capacity.

Out of the total 35,000 MW projects, PLN plans to develop on its own power plant projects with total capacity of 10,000 MW. Meanwhile, the remaining 25,000 MW power plants are expected to be developed by independent power producers (IPPs). IPP projects will cost Rp 615 trillion while PLN'€™s projects are in need of Rp 199 trillion in investment.

Out of the total 35,000 MW planned, as many as around 20,000 MW power plants will be coal-fired.