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Indonesia stumbles on mega power project

The government’s plan to develop an additional 35,000 megawatts (MW) of electricity capacity by 2019 has hit a couple of speed bumps since it was announced last year, prompting President Joko “Jokowi” Widodo to order a review of the feasibility of the ambitious project

Fedina S. Sundaryani (The Jakarta Post)
Jakarta
Mon, May 16, 2016

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Indonesia stumbles on mega power project

The government’s plan to develop an additional 35,000 megawatts (MW) of electricity capacity by 2019 has hit a couple of speed bumps since it was announced last year, prompting President Joko “Jokowi” Widodo to order a review of the feasibility of the ambitious project.

In mid-2015, President Jokowi announced a target of installing 35,000 MW of capacity before 2019, as electricity demand is predicted to increase by 7,000 MW per year.

The latest data from the Energy and Mineral Resources Ministry, however, shows that with only three years left to complete the program, only 10,942 MW, or 30 percent of the target, have secured buyers and completed power-purchase agreements, while only 3,742 MW of capacity, or 10.5 percent, has entered the construction stage.

The sluggish progress has allegedly led to uncertainty from investors about whether the megaproject can be completed in time.

Energy and Mineral Resources Minister Sudirman Said admitted last week that President Jokowi had instructed the ministry to review the problems behind the slow progress.

“He emphasized that there should be a thorough review while the deadline is still a long way off, so we don’t encounter obstacles when we’re already halfway,” he said.

The 35,000 MW program is part of the government’s plans to increase the country’s electrification ratio from 87.35 percent to 97.35 percent by 2019 to further support economic growth.

To date, the country has a total installed power capacity of about 55,500 MW, mainly focused on the island of Java, while other regions continue to experience frequent blackouts as demand is higher than available capacity.

State electricity firm PLN president director Sofyan Basyir, meanwhile, has acknowledged that the construction of 291 power plants, 732 transmission towers and 1,375 main substations have faced delays when acquiring land from local communities, especially in Sumatra, Java and Papua.

The construction of the 2x1,000 MW Batang power plant in Central Java has been held up by a land-acquisition dispute since 2011 when a consortium consisting of Jakarta-listed PT Adaro Energy, J-Power Electric Power Development Co. Ltd. and Itochu Corp. won the tender.

The hold-up was finally cleared in March following a ruling from the Supreme Court that allowed the project — set to be the biggest coal-fired power plant in Southeast Asia — to go ahead. Construction is scheduled to start in June.

Separately, the Institute for Essential Services Reform (IESR) suggested that the problem actually lay beyond land acquisition, which alone could be solved by more involvement of local administrations.

IESR executive director Fabby Tumiwa said that the construction of large power plants with a total capacity of 7,000 MW should start by the middle of this year if the plant was to start operating before 2019. However, PLN’s lack of preparation in looking for investors and preparing tenders led to long delays.

He also criticized the lack of transparency in tenders conducted by PLN, that he said caused investors to gradually lose their trust in the company.

As an example, Fabby pointed out PLN’s recent decision to terminate the tender process for the 2x1,000 MW Jawa 5 steam-fueled power plants in Banten worth up to Rp 30 trillion (US$2.25 billion), because Banten and West Java’s transmission tower capacity was already full and would be unable to support the new plants.

“The Jawa 5 incident has set a bad precedent and has increased distrust,” Fabby said, adding that PLN should have hired an independent procurement agent to conduct bidding for large and sensitive projects.

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