Natural potential: Laying plans for the development of renewables

Within its vast territory, Indonesia contains enough renewable energy sources to enable the country to more than quadruple its current power-generating capacity. According to data from the Directorate-General of New and Renewable Energy and Energy Conservation (EBTKE), the combined renewable energy potential of Indonesia’s hydro, geothermal and biomass resources amounts to around 155.28 GW. This is divided into large hydro, with a potential of 57.67 GW, biomass with 49.81 GW, geothermal with 29.04 GW and micro-hydro with 770 MW.

This abundance of natural potential, combined with ambitious renewable power generation targets and incentives set by the government, should provide ample opportunities for potential investors going forward.

AMBITIONS FOR DIVERSIFICATION: In order to bridge the gap between potential and realised renewable power production, the government has outlined a national energy policy (Kebijakan Energi Nasional) setting a series of diversification targets to be achieved by the year 2025. The objectives pertaining to the renewables sector include: reducing the contribution of oil to the country’s primary energy mix to less than 20%; increasing the contribution of gas to more than 30%; and boosting the contributions of both biofuel and geothermal to more than 5% each. Other renewable sources, including biomass, micro-hydro, solar and wind, are also targeted to collectively contribute an additional 5% to the country’s optimal energy mix.

As of 2010, new and renewable energy sources made up just 4.4% of Indonesia’s total primary energy mix. Petroleum was the primary contributor with 43.9%, followed by coal with 30.7% and natural gas with 21%.

In addition to the national energy policy, which was first issued in 2006 and updated in 2009, the EBTKE was created in 2010 by the mandate of Presidential Regulation No. 24 of 2010. The EBTKE has laid out a series of ambitious objectives as well, setting a target for what it calls new and renewable energy sources to make up 25% of the primary energy mix by 2020.

Technology-specific benchmarks include a 2.2% contribution of geothermal power, 5.3% contribution of hydropower and a 9.1% contribution of bioenergy (including biomass electricity production and biofu- els). To make these goals a reality, the government’s Master Plan of Acceleration and Extension of Economic Development (MP3EI) states that some Rp134.6trn ($16.1bn) in investments will be required for new and renewable energy projects over the next 15 years.

These funds would then be channelled into five energy corridors: Sumatra with an allocation of $3bn, Java with $10.4bn, Bali-Nusa Tenggara with $316.8m, Sulawesi with $1.9bn and Papua Maluku with $579.6m.

The government has been especially proactive recently in terms of boosting investment in large geothermal projects, which have so far been underutilised, with just more than 4% of the resource’s potential tapped. These efforts include the 2003 Geothermal Law, which allows private-sector control over geothermal sources, as well as the right to sell baseload electricity directly to electricity transmission system operator PLN.

MAJOR GEOTHERMAL POWER PLANTS: There are currently seven active large-scale (with a capacity greater than 20 MW) geothermal power plants producing electricity in Indonesia with a total combined installed capacity of 815 MW. These power plants are primarily clustered around West Java within a few hundred kilometres of Jakarta and at a second location in North Sulawesi. The West Java geothermal power plants encompass the twin Salak power plants with installed capacities of 165 MW each, as well as the Wayang Windu facility with 220 MW, Kamojang (140 MW), Darajat 3 (110 MW) and Darajat (55 MW). Geothermal production in Sulawesi is produced through the three 20-MW units at the Lahendong power plant.

In addition, there are numerous small localised geothermal projects around the country, such as the Ulumbu Geothermal Plant (PLPT), which began producing power in the testing phase at the small village of Wewo in East Nusa Tenggara in November 2011. The PLPT is powered by two 2.5-MW units operated by PLN. In total, an additional 373 MW of small-scale geothermal projects are operating throughout Indonesia.

Widely dispersed through the country from Central Sulawesi to North Sumatra, there are currently 17 large-scale hydropower plants (greater than 20 MW) operating in Indonesia with a combined installed capacity of 3330 MW. Of these, 15 are operated by PLN and range in installed capacity from 30 MW to 1008 MW, while the two privately run independent power production (IPP) plants have installed capacities of 150 MW and 180 MW. In addition to these large projects, 2593.18 MW of capacity has been installed in smaller projects throughout the country. To date, only around 8% of the country’s hydropower resources have been tapped.

With a number of relatively cheap and easily implemented geothermal and hydropower generation projects under way, more expensive technologies such as solar and wind have not been exploited. According to EBTKE data, the country has just 13.5 MW of total installed solar power capacity (mostly rooftop residential and utility scale installations) and 1.87 MW in wind capacity as of 2010.

While large-scale power projects for these technologies are still economically challenging compared to other alternative sources, the dispersed geography of Indonesia with its hundreds of isolated island communities makes small-scale solar power generation a viable option to conventional diesel-powered generators traditionally used in remote areas. In this vein, national electricity company PLN has embarked on a plan to construct more than 100 small-scale photovoltaic solar power plants across the country. According to the company, six of these solar power stations were operating as of November 2011 and another 100 were slated to come on-line by the first quarter of 2012.

The project will supply power to an estimated 370,000 households when complete. If the initial plants are successful, the company is considering expanding the scale of the project tenfold. Potential solar energy in the country averages approximately 4.8 KWh per sq metre of solar radiation per day.

Relatively low wind speeds have so far limited the application of wind power generation, although significant wind mapping in order to more accurately determine the country’s true potential has yet to be carried out. Despite this, the Ministry of Energy and Mineral Resources has stated that it intends to install 270 small-scale wind turbines with a combined total installed capacity of 21.67 MW.

ON THE RIGHT TRACK: As part of the governments drive to create 54 GW of new generation capacity by 2019, it has instituted two series of 10,000-MW “fast track” power generation portfolios. The first of these, which relied heavily on coal-powered generation projects, was being wrapped up by the end of 2011. The second fast-track plan favours renewable energy generation to a much larger extent than its predecessor, with more than half of the power projects receiving energy from renewable sources.

Geothermal power production is the single largest primary energy source of the programme, accounting for 3977 MW (39%) of the total initiative’s 10,153 MW. Private investors will be heavily involved in this sector going forward with 3097 MW representing investments of $8.51bn designated for development by IPPs. The remaining 880 MW will be developed by PLN at a total investment cost of $522m.

OPPORTUNITIES FOR IPP DEVELOPMENT: The 33 geothermal power projects allocated for IPP development range in size from 5 MW at the Songa Wayaua facility in North Maluku to the 330-MW Sarulla 1 power plant in North Sumatra. Of the 10,153-MW total, 1204 MW (12%) are to be generated from hydropower. But unlike the geothermal projects, the majority of these projects will be carried out by PLN and account for 1174 MW of the 1204-MW total. This output is dominated primarily by the Upper Cisokan hydropower plant in West Java with a total installed capacity of 1000 MW. This leaves just 30 MW for IPP development at a total investment cost of $45m.

In addition to these projects, this is a large hydropower project held over from the previous round of IPP projects still awaiting investors. The Karama Hydropower Plant in West Sulawesi consists of three separate dams with a total installed capacity of 4400 MW. Estimated to cost $1bn, the project is expected to tender in 2012 and come on-line by 2019.

ROOM FOR DEVELOPMENT: Despite the priority position that has been given to renewable energy, there are still substantial roadblocks along the way to creating a truly attractive framework that would entice investors into the sector. Some of these include the lack of a uniform renewable energy incentive scheme, which could take the form of a feed-in tariff, green certificate system or tax breaks for using renewable energy.

The continued subsidisation of petroleum is a further hindrance that could prevent greater investment in the development of renewables. As such, large-scale renewable energy projects can be difficult to develop in terms of producing competitively priced electricity.