S

tate-owned electricity company PLN will prioritize power plant development outside of Java, in areas with low electrification rates, amid emerging concern that the government’s flagship 35,000 megawatt project will fall short of expectations.

Last week, the National Energy Board (DEN) announced that instead of 35,000 MW as the government initially planned, only 19,700 MW of power plants will begin operating in 2019 due to lower than expected economic growth in the past two years, which will affect electricity demand.

President Joko “Jokowi” Widodo’s office has acknowledged this shortage, which is based on the volume of development contracts for which PLN can financially close by the end of this year. Although, he has yet to officially decrease the original goal.

PLN president director Sofyan Basir said the company expected approximately 26,000 MW to start operating in 2019 as it would not slow down the development of power plants outside of Java.

“There is already a 30 percent surplus in Java,” he said. The International Energy Agency’s (IEA) guidelines on healthy electricity reserve margins — the difference between capacity and peak demand — are between 20 and 35 percent.

Meanwhile, the margins are at a meager 7 and 8 percent in Sumatra and Kalimantan, respectively.

“We need a lot of effort to reach 30 percent in those areas. We cannot stop building outside Java,” Sofyan said.

As of the end of 2015, Indonesia had a total installed power plant capacity of about 55,000 MW, but there are numerous areas, particularly outside Java, with lower ratios and frequent blackouts as the demand is higher than the available capacity.

Java is the most electrified in the archipelago, as 72.6 percent of the country’s electricity is distributed throughout Java as Indonesia’s manufacturing industry, seaports and airports are, for the most part, better developed on Java, according to data from Bank Mandiri’s chief economist’s office.

Focusing on building power plants in areas outside of Java is in accordance with President Jokowi’s Nawacita (nine goal) program, which aims to decentralize national development, PLN corporate planning director Nicke Widyawati said recently.

The 35,000 MW project was initially proposed to avoid a potential power crisis in the country and to maintain healthy electricity reserve margins of above 20 percent, as well as increasing the electrification ratio to 97 percent by 2019 from the current 88 percent.

However, the target was made under the assumption that Indonesia’s economy would grow between 7 and 8 percent this year, while during the past two years of Jokowi’s presidency, economic growth has hovered between 4.7 and 5.5 percent, government officials say.

A large majority of power plants to be completed in 2019 are steam and gas-fired power plants, which are typically the fastest to construct.

Furthermore, some of the megawatt total will come from delayed projects under the fast track program (FTP) I and II pioneered by former President Susilo Bambang Yudhoyono, which preceded the existing electricity program.

Institute of Essential Services Reform (IESR) executive director Fabby Tumiwa was doubtful that the electricity procured by 2019 would even reach 19,700 MW, as projects could be delayed for two or three years depending on a project’s financial closure.

“There is a risk of an electricity crisis occuring in 2018 through the beginning of 2019. The government must implement measures to ensure this does not happen,” he said.

Fabby also noted that the 34 projects in the FTP program had already been stalled for seven years and would not be completed by 2019.

PLN has previously expressed concerns over the government’s slow progress when issuing business feasibility guarantees, which some independent power producers (IPPs) required in order to obtain funds from international banks.

The Finance Ministry is responsible for issuing the guarantee, which provides assurance that PLN has the financial capacity to purchase power produced by IPPs.