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Private power firms to play greater role

Jakarta Post - June 23, 2016

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Ina Parlina and Fedina S. Sundaryani, Jakarta – President Joko "Jokowi" Widodo is reiterating the government's intention for private investors to play a greater role in his administration's ambitious 35,000 megawatt (MW) electricity procurement program after state-owned power company PLN declined to work on some of the projects assigned to it.

"To speed up electricity infrastructure development, I am of the view that the private sector needs a greater role [...] especially on new and renewable energy," the President said in a limited Cabinet meeting on Wednesday.

Jokowi mentioned geothermal and micro hydro as the main types of power generators in which private companies can invest, although according to the development plan, hydroelectric plants should be mostly built by PLN for a total capacity of 1,389 MW, while the private sector, independent power producers (IPP), would only be responsible for 582 MW.

His directive came as PLN and the Energy and Mineral Resources Ministry are having disagreements over several projects and pricing policies.

PLN recently said it would not move forward with the construction of inter-island connection lines between Sumatra and Java and a 5x600 MW mine-mouth power plant project in South Sumatra, although those projects have been included in the ministry's electricity procurement business plan.

Moreover, PLN has issued several circulars and tariffs that go against regulations issued by his ministry, such as the 2015 ministerial regulation on the purchase of excess power and the regulation on fees for micro-hydro power plants.

Of the total target for 35,000 MW by 2019, PLN is responsible for procuring 10,000 MW while the remaining 25,000 MW capacity is expected to be supplied by the private sector, or IPPs.

"Because constructing a 35,000 MW power supply is impossible to be done alone. The more parties that are involved there, the better it is," Energy and Mineral Resources Minister Sudirman Said told a press conference after the meeting.

Sudirman took the opportunity to lash out at PLN by saying: "The country is responsible for procuring electricity and PLN is one of the instruments for doing so. Policies cannot be based on commercial calculations, but they have to be the driver of economic development."

PLN president director Sofyan Basir said the reason behind his company's decision not to pursue many of the government's assignments is because they are deemed as not being favorable to the company's business.

For the inter-island connection lines project between Sumatra and Java with 500 kilovolt (kV) high voltage direct current (HVDC), Sofyan said the project was no longer economically feasible and was unnecessary as Java was almost at full electrical capacity.

President Jokowi, however, has a different view. From his visits to a number of power plant development sites across the country, the President found out that even on Java, the most densely populated island and the most developed area, not every family had access to electricity.

In the limited Cabinet meeting, Jokowi said he has received information that there are about 30 to 34 locations that have stalled power plant construction projects. For instance, he said, ones in West Kalimantan and Gorontalo have been postponed for about seven to eight years, as well as one in Lombok. "It needs a decision whether to continue or to terminate it," Jokowi told his ministers.

Source: http://www.thejakartapost.com/news/2016/06/23/private-power-firms-play-greater-role.html.