Tower of Power - Photo by PLN

JAKARTA (TheInsiderStories) – In May 2015, the Joko Widodo government unveiled an ambitious program to develop 35,000 MW installed capacity of power plants in the period of 2015-2019. The program was launched in Bantul, Jogyakarta, marked by the groundbreaking of a number of power plant projects to be developed by the government in the following years.

The program was aimed at meeting the growing demand for electricity of the households as well as the business sector. The program was launched assuming the electricity demand was projected to grow at an average of 8.7 per cent per year through to 2019 and the fact the country’s electrification ratio was only 84 per cent. Meaning that millions of people, in particular in rural and remote areas have to get access to electricity.

Under the plan, as many as 109 power plants will be developed within the five-year plan. Of the 35,000 capacity, 35 power plants with a capacity of 10,681 MW will be developed by the state-owned electricity company PT Perusahaan Listrik Negara (PLN) and 74 projects with a capacity of 25,904 MW will be developed independent power producers.

Most business players welcome the decision, stating that it is important for the government to aim high, although the road to achieving the goal is quite bumpy. There are a lot of obstacles that are encountered along the way, including lengthy process of clearing the land, longer-than-expected negotiations between the independent power products (IPPs) and the state-owned electricity company PLN on electricity tariff purchase, longer time to reach financial close to kick off construction, and other problems.

To smoothen the program, the government and the Energy and Mineral Resources Ministry issued a number of policies and regulations to simplify investment procedures and permits.

Data source : Energy and Mineral Resources Ministry

Two years after the program was launched, some officials and business players began to cast doubt that the program will be attained within the five-year period. They do said the 35GW program is important to support the country’s economic growth, however, it is unrealistic to complete the projects by the end of 2019 due to unanticipated problems on the ground.

Former Coordinating Minister for the Maritime Affairs Rizal Ramli was the first government senior official who made a call to revise the program, as he argues that given the progress in two years, the 35,000 MW installed capacity is unlikely to be completed in 5 years. Ramli said it is more realistic Indonesia complete 16,000 MW of power plant within five years, given the current slow down the economy.

Vice President Jusuf Kalla disagreed with Ramli saying that the 35,000 MW power plant program would move ahead as Indonesia would suffer power shortages if Indonesia failed to embark on the massive power plant development program. Months later, President Joko Widodo reshuffled his cabinet, with both Energy and Mineral Resources Minister Sudirman Said and the Coordinating Minister for the Maritime Affairs Rizal Ramli were replaced. Sudirman Said was replaced Ignasius Jonan, former Transportation Minister.

Minister Jonan appeared to be more realistic. He stated that the government will continue to stick with the 35GW program although the completion of the program may not be as projected earlier. According to him, only 20,000 MW of the power plants would be completed by 2019 and the remaining 15,000 MW would be completed in around 2024.

As of early March 2018, the energy ministry claimed that around 4 per cent of the power plants program has started commercial operation, 48 per cent are under construction, 35 per cent have signed power purchase agreement (PPA) with PLN, but yet to start construction, 10 per cent is still conducting procurements and the remaining 35 are still under preparation process.

In total around 87 per cent of the projects have already signed power purchase agreement and the remaining 13 projects have yet to sign power purchase deal. The progress shows that around 20,000 MW of installed capacity is likely to be completed by end of 2019. This means that more works are needed to be done to complete the power plant development program.

Most of the projects that have entered commercial operation phase are gas power plants (PLTG), PLTM and solar power plants (PLTS). Those projects that are still under construction are comprising of PLTGU, coal-fired power plant (PLTU), geothermal power plant (PLTP) and hydropower plant (PLTA).

According to Jonan, 20 GW installed capacity should be enough as the country’s economy has been growing relatively slow at just over 5 per cent, therefore there is no urgency to complete all the projects by 2019.

Compared to the previous government, developing 20 GW in five years certainly is an achievement. During the previous government, under president Susilo Bambang Yudhoyono, there was a crash program to develop 10,000 MW installed capacity of power plants in his term. However, the program fell short of the target.

President Joko Widodo certainly has set a high standard and wants his government to lay down the basic infrastructure needed for the country’s future economic development, in particular, electricity. This requires the support of all stakeholders. Furthermore, better coordination is needed to avoid confusion among investors.

Written by Roffie Kurniawan, email: roffien@theinsiderstories.com

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