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‘Blessing in disguise’: Electricity megaproject delay gives PLN breathing space

Various in-the-field problems have delayed completion of Indonesia’s ambitious plan to create all 35 gigawatts (GW) of new power plants by 2025, giving the country’s largest electricity company more time to weather a power oversupply

Norman Harsono (The Jakarta Post)
Jakarta
Tue, February 11, 2020

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‘Blessing in disguise’: Electricity megaproject delay gives PLN breathing space

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arious in-the-field problems have delayed completion of Indonesia’s ambitious plan to create all 35 gigawatts (GW) of new power plants by 2025, giving the country’s largest electricity company more time to weather a power oversupply.

Updated Energy and Mineral Resources Ministry data announced on Wednesday show that only 94.8 percent of the expected power plants are to be completed by 2025. Completion of the remaining 5.2 percent, most of which are coal-fired power plants, is to be delayed by four years from the initial target because of land acquisition, permit and social resistance issues.

Despite the setbacks, the energy ministry’s electrification director general, Rida Mulyana, said the delay was “a blessing in disguise” because Indonesia’s electricity consumption had been falling behind the growth expectations imbued in the 35 GW project.

“It’s fortunate the project is lagging behind. If not, things will be messed up,” he said.

President Joko “Jokowi” Widodo inaugurated the 35 GW program in 2015 to support industrial growth. At that time, the country’s economic growth was expected to reach about 7 percent over the coming years. Instead, the country’s GDP has been growing an average of 5 percent, leaving behind an electricity surplus.

Bearing the brunt of the program is state-owned electricity company PLN, which is tasked with contributing 8.8 GW of power plants and offtaking power from the remaining 26.2 GW. The company’s own plant projects include those that are operational (31 percent), under construction (51 percent) and still under planning (18 percent).

PLN's Sulawesi and Kalimantan regional director, Syamsul Huda, said on Thursday that finding new markets for the 20,168 megawatts (MW) of under-construction plants, slated for completion in 2020 or 2021, was of particular concern for the company.

“We don’t have an estimate of potential losses but we have anticipatory measures so we don’t get hit by the take-or-pay policy,” he said.

Syamsul was referring to the take-or-pay policy that guarantees PLN will buy electricity from power producers or pay a fine. The policy was introduced to incentivize new plant projects but it now haunts the company amid the oversupply.

For PLN, the most lucrative new markets for its electricity are tourist hot spots, wholesale fish markets, special economic zones (SEZ) and, particularly, industrial zones, where the utility is expecting a crop of new mineral smelters to come online over the next two years.

Indonesia will also require 2,476 MW of power for 15 SEZ, four of which are not yet operational. PLN and private-owned plants currently provide 436.7 MW, according to data from the National SEZ Board.

The board’s head of development and management, Bambang Wijanarko, told The Jakarta Post that SEZ developers tended to mix using PLN electricity and building their own power plants to ensure a constant supply. He noted there was an oleochemical factory using PLN electricity in Sei Mangkei that experienced electrical flickering.

“It’s the synchrony, really. Companies build plants themselves when they have matured development plans and want to ensure their power needs are met,” he said.

Meanwhile, official estimates say that Indonesia would require 4,204 MW of electricity production capacity to power 68 new mineral smelters slated to for operation by 2022, by which time the government is to ban all nickel ore exports. Out of the total demand, only 841 MW could be supplied by PLN’s existing system.

The energy ministry’s mineral business development director, Yunus Saefulhak, who oversees smelter development, told reporters in December that his office advised mining companies to prioritize buying PLN electricity.

“But since the mining companies have commercial operation deadlines, only if PLN cannot supply the electricity would they be advised to build their own power plants,” he noted.

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