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ig power projects require very complex, multi-stage processes involving a long supply chain with so many players, including the developers, the state power monopoly (PLN in Indonesia’s case), off-takers, contractors, fuel suppliers, insurance providers, lawyers, banks and other lenders.

Moreover, the current investment environment remains cautious amid the uncertainties looming over oil and other commodity prices and exchange rate fluctuations. Without the various engineering, procurement and construction (EPC) contracts in place and without firm power purchase and fuel supply agreements, financial closing cannot be done and construction cannot begin.

With so many moving parts, experience is most imperative. This fundamental need for experience applies across multiple stages and at multiple levels. Given this complexity, PLN and independent power analysts have doubted the 35,000 megawatt (MW) target for new power generation capacity can be achieved by 2019 because of bureaucratic inertia and inadequate EPC capacity.

As some analysts noted, 35 GW is about three times the total capacity of Singapore or half that of all of Australia. Building such a huge generation capacity should also consider the other facilities associated with the power program such as the fuel and water supply, the transmission and distribution networks.

As described in the special reportage on page 10 of this issue, as of last month only 195 MW, 1 percent of the 35,000 MW program, had begun operations, while 22 percent was still under construction, 29 percent was in the procurement stage and 21 percent was still in the planning phase. Around 27 percent of the project has yet to start construction, although the contractors have signed power purchase agreements with PLN.

But both PLN and independent energy analysts seem not to be worried that failing to meet the target would cause a power crisis, as President Joko ”Jokowi” Widodo forewarned when announcing the ambitious program at the outset of his term in late 2014. The ambitious 35,000 MW program was based on an annual economic expansion of 6 percent and an annual increase of 7 percent in power demand from 2015 to 2019. However, the economy grew by only 4.79 percent last year, generating a mere 2 percent growth in demand. Next year, the economy is estimated to grow by 5.1 percent.

Hence, even the PLN CEO saw the estimated 10,000 MW shortfall of the target as a possible blessing in disguise because PLN will not see a big oversupply that could cause big losses to PLN, which would have to take over the output of all independent power producers already in operation.

We therefore suggest that PLN reexamine the hundreds of power projects, realign their completion schedules and make it their top priority to construct new power stations in the provinces where the reserve margin is still below 30 percent, as recommended by the International Energy Agency.

Despite the time pressures for completing EPC contracts for many greenfield projects, PLN is well advised to always be careful and thorough in selecting contractors by applying a deeper understanding of the technical and local construction factors and adequately taking into account the management of the plant delivery and other engineering risks.