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Bickering threatens Jokowi’s signature power project
A brouhaha implicating state power company PLN has exacerbated the already complicated environment for investors participating in the government’s 35,000 megawatt (MW) power-generation project, intended as the signature legacy of President Joko “Jokowi” Widodo
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A brouhaha implicating state power company PLN has exacerbated the already complicated environment for investors participating in the government’s 35,000 megawatt (MW) power-generation project, intended as the signature legacy of President Joko “Jokowi” Widodo.
The development of renewable energy and greater participation of private contractors in the project, amid PLN’s already strained financial capabilities, will be particularly impacted by the row between Energy and Mineral Resources Minister Sudirman Said and PLN president director Sofyan Basir.
Sudirman once again vented his frustration at Sofyan last week, accusing him of ignoring ministerial instructions.
Earlier this year, Sofyan rejected the ministry’s regulation on the floor price for electricity produced by micro-hydro power plants, which are owned by many politically wired businessmen.
Sofyan argued the company would suffer huge losses unless the government allocated the necessary subsidies because PLN was required to buy the electricity at a price of Rp 1,560 (12 US cents)-Rp 2,080/kWh but to sell it to consumers at between Rp 450 and Rp 1,350/kWh.
The opposition came as the company, Indonesia’s biggest state company by assets, is in the process of offering the micro-hydro projects to private investors.
Micro-hydro accounts for around 1,971 MW of the 35,000 MW project. Although it remains small, the project is required to cover remote locations throughout the country.
Sofyan said the company would soon meet with several economic ministers to discuss an economically viable price for the renewable energy. He said the company would comply if there was a compromise in terms of getting subsidies.
“We will specifically meet with the new and renewable energy director general to discuss the subsidy budget. This is something that we must have or else PLN could be under pressure from the lack of subsidies,” he said in a hearing at the House of Representatives late on Monday.
Sofyan denied allegations that PLN would pull out from its commitment to develop renewable energy-based power plants as it was merely trying to improve company efficiency and profitability as demanded by the State-Owned Enterprises (SOE) Ministry.
By regulation, the PLN president director has two direct superiors: the energy and mineral resources minister for policy and the SOE minister for performance, with the latter having the authority to dismiss or retain the boards of directors and commissioners.
The government has issued several regulations to increase the sale of electricity in order to lure independent power producers (IPPs), who are in total set to develop 25,068 MW of the program.
Despite opposing the price for micro-hydro, PLN has agreed to the prices for solar electricity recently issued by the ministry of $0.14 to $0.25 per kWh as the government agreed to provide subsidies of up to Rp 1.5 trillion for the purchase of 5,000 MW.
“We’ve agreed with the price but we will still need to regulate the electricity capacity of the solar power plants as they are intermittent and won’t be operating all day,” PLN corporate planning director Nicke Widyawati said.
Aside from the micro-hydro issue, the ministry and PLN have been at odds over the complicated bidding for IPPs, causing investors to question whether the government was serious about the 35,000 MW project.
Sofyan unilaterally terminated in April the tender for the coal-fired 2 x 1,000 MW Jawa 5 power plant in Serang, Banten, the biggest project of the wider 35.000 MW project, citing problems of “good governance”.
Several IPPs have also protested at the obligation to deposit 10 percent of the project value, as stipulated by PLN, because not many private electricity companies have full investment funds prior to financial closure.
The Association of Private Electricity Producers (APLSI) has concluded that the complicated procedures and land-acquisition issues make it impossible for the project’s target to be reached by 2019.
“It is easy to say the program will be completed by 2019. How many of the signed 10,000 MW power purchase agreements [PPAs] will reach financial closure this year? The construction of a 10,000 MW plant takes 4.5 years. Just calculate it yourself; if it goes past 2019 then maybe we can reach it in 2020,” APLSI advisory board member Heru Dewanto said.
According to PLN data, only 170 MW worth of power plants in the program had started operation by mid-July. The remainder are still under construction or in the procurement and planning stage.
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