A significant increase in electricity capacity planned for procurement by 2025 is expected to entice more independent power producers (IPP) to invest in the country’s electricity market.

In the final version of its electricity procurement business plan (RUPTL), state-owned electricity company PLN has decided to procure an additional 80.5 gigawatts (GW) of electricity within the next nine years, up from 70.4 GW in a previous draft.

PLN director for corporate planning, Nicke Widyawati, said the company had decided to expand the figure due to several factors, including the need to support local industry growth and accommodate the country’s new and renewable energy target.

“The increased capacity is mostly due to the fact that we have to fulfil the target of 19.6 percent of electricity produced by new and renewable sources by 2025,” she said on Friday.

According to the RUPTL, electricity produced by hydro power plants in 2025 is expected to reach 14.5 GW and electricity produced by geothermal power plants must reach 6.1 GW. Electricity sourced from other new and renewable sources is also expected to increase to 1.9 GW.

The remainder consists mostly of coal and natural gas, with the latter still taking up a whopping 43 percent of the electricity procurement plan at 34.8 GW.

Due to the large proportion of coal-fired power plants, demand for the fossil fuel will increase every year until it reaches a peak of 165 million tons in 2024, before dropping slightly to 148 million tons the following year. Gas demand for power plants is also expected to increase every year, and will reach a high of 1,311 billion cubic feet of gas in 2025.

With the new target in place, Nicke explained that total investment from both PLN and IPPs would reach approximately US$153.8 billion until 2025, with around a half targeted to come from the latter.

The government has long tried to make inroads to increase the countries electrification rate from the current 88.3 percent with several ambitious programs. This includes the failed first 10,000 megawatt (MW) project called FTP-1, commenced in 2006, and its follow-up FTP-2, resulting in 7,000 MW worth of projects still under construction a decade later.

However, this has not discouraged the latest administration from initiating the new 35,000 MW electricity project, which seeks to boost the national electrification rate to 97.35 percent by 2019.

The nation’s electrification rate reached 55,528 MW by the end of 2015, 70 percent of which was developed by PLN, while the remainder was developed by IPP and private power utilities.

Following a series of disagreements about the RUPTL, President Joko “Jokowi” ordered PLN to allow more involvement from the private sector and to develop new and renewable energy sources.

Meanwhile, Institute for Essential Services Reform (IESR) executive director Fabby Tumiwa agreed that the larger electricity capacity would certainly attract more private investors, especially since new and renewable energy technologies were becoming much cheaper and more competitive.

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