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PLN hits pause button on several gas power plants
Slow growth in electricity demand is forcing state-owned electricity firm PLN to adjust its power procurement plans for the next few years
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low growth in electricity demand is forcing state-owned electricity firm PLN to adjust its power procurement plans for the next few years.
PLN president director Sofyan Basir recently revealed that it would postpone the construction of gas-fired power plants totaling 2,000 to 3,000 megawatt in capacity.
The power plants were initially set to start operating by 2019 under the government’s ambitious plan to procure an additional 35,000 MW for the national installed capacity.
The adjustment is primarily due to slower-than-anticipated growth. PLN’s bread and butter business, electricity sales, has not experienced significant growth in the past year. Recent data show that PLN saw just 2.79 percent year-on-year (yoy) growth to 146.37 terawatt hours (Twh) in electricity sales in August, compared to its target of 152.11 Twh.
The weak sales growth was accompanied by unsatisfactory growth in the number of customers. PLN data show that the number of its customers increased by 5.73 percent yoy to 66.6 million in August.
Even so, Sofyan confirmed that the 10,000 MW PLN had been assigned to develop would still be completed, albeit after the 2019 deadline.
“We have not reduced [our target]; we have only adjusted the [commercial operation date]. We will still develop up to 10,000 MW, and it will be listed in next year’s RUPTL,” he said, referring to the firm’s annually updated power procurement business plan.
Sofyan added that gas power plants were the ones put on hold, because of their high cost.
The 35,000 MW program has been on the forefront of President Joko “Jokowi” Widodo’s agenda since the beginning of his tenure. The goal is to achieve a 30 percent surplus in the national electricity reserve margins with more efficient operations.
While the electrification ratio reached 92.8 percent by the end of the first half of the year, data from PLN show that only eight of the firm’s 18 operational regions had a reserve margin above 30 percent at the end of 2016. PLN’s latest RUPTL shows that PLN hopes to raise the reserve margins of 16 operational regions by 2019 and achieve an electrification ratio of 100 percent by 2024.
Both PLN and the government have acknowledged that it is unlikely and unnecessary for the entire 35,000 MW of additional capacity to go on grid by 2019. Instead, PLN has predicted that only 23,000 MW will be procured within the designated time frame, while the remaining capacity is to be procured by 2024.
This is not the first time PLN has revealed a postponement of projects. Its latest RUPTL disclosed that around 9,000 MW worth of coal-fired power plants in Java would be delayed to avoid potential oversupply on the island.
Sofyan said the firm would still attempt to have the remaining power purchase agreements (PPA) signed by the 2019 deadline. He said that contracts for around 30,000 MW worth of projects had been signed so far.
Meanwhile, Energy and Mineral Resources Minister Ignasius Jonan continues to reiterate the government’s stance on ensuring that electricity remains affordable.
During the groundbreaking ceremony of several power plants for East Nusa Tenggara (NTT) and West Nusa Tenggara (NTB), he called on PLN to sign deals for projects with low operational costs.
“I ask that PLN sets an example in upholding efficiency when investing in every MW and in operational costs, so that IPP [independent power producers] can follow suit, so that prices don’t go up, but down,” Jonan said.
