6 days ago
Jakarta's energy plan may sideline renewables
JAKARTA: The long-awaited 2025-2034 electricity business plan (RUPTL) could sideline renewable energy despite containing a huge amount of planned green power, as experts suggested the new power procurement plan was leaning toward repeating past mistakes and undermining energy transition commitments.
Dody Setiawan, senior analyst for climate and energy at think tank Ember, told The Jakarta Post on May 28 that the new RUPTL backloaded 72% of the planned 42.6 gigawatt (GW) of new and renewable energy projects to the second half of the 10-year procurement period.
Instead, the government and state-utility company PT Perusahaan Listrik Negara (PLN) designed it to frontload 12.7GW of coal and gas plants in the first half of the 10-year period, which is 76% of the planned fossil fuel powered generation in the RUPTL.
'We observed a strong energy security focus in the (new) RUPTL, with large capacity additions to support economic growth and rising demand from downstream industries.
'On the other hand, decarbonisation efforts remain (a) secondary (priority),' Dody said.
He added that increased reliance on gas-powered plants would also come with supply risks, given the consistent decline in domestic natural gas production, which could translate into more costly power generation.
BMI Research, a unit of Fitch, dubbed the newly launched electricity business procurement plan a 'step back' from Indonesia's energy transition and climate commitment.
It pointed out that the 6.3GW of new coal-fired capacity indicates a 'persistent reliance on coal' as a baseload power source despite a 2040 coal phase-target announced by President Prabowo Subianto during the Group of 20 Summit in Rio De Janeiro late last year.
Mutya Yustika, an energy economist at the Institute for Energy Economics and Financial Analysis (IEEFA), expected that placing most renewable energy projects in the second half of the RUPTL's 10-year period would raise investors' concerns over risks of shifting policy priorities, regulatory inconsistencies and PLN's capacity to support renewable projects.
Despite spanning a decade, the government has a history of revising the long-term business plan midway, which occurred four times from 2015 to 2019 and two times in the past five years.
Mutya also pointed out that the previous RUPTL launched in 2021 included 21GW of renewable capacity, half of which was slated for 2025, but it saw far slower-than-expected progress in renewable energy procurement, which may cloud investors' confidence in projects offered by the government and PLN in the future.
Instead of the required 2.1GW per year, PLN has only added around 0.6GW annually, highlighting a significant gap between targets and execution.
'Without clearer policies, streamlined procurement and tools like joint transmission networks, investor confidence in Indonesia's renewables will remain low,' she told the Post.
This lagging progress has also prompted the government to slash its projections on renewable energy contributions to the national energy mix from initially 23% by the end of 2025 to between 17% and 19% in the same period.
The new RUPTL was designed with the assumption that the economy could grow by 8% by the end of 2029, which officials hoped would translate to a surge in power demand roughly at the same pace.
However, experts warned this could lead to overestimations, repeating the mistakes of the past administration that resulted in PLN generating more power than the country could consume.
In 2015, former President Joko 'Jokowi' Widodo launched a plan to add 35GW of electricity to the grid in the next decade, as the administration expected the country's economic growth to reach about 7% over the coming years.
Instead, the country's gross domestic product has been growing at an average of 5%, leaving behind an electricity oversupply, mostly from coal-powered plants, with consequences extending to delays and postponement of renewable energy projects.
Experts have suggested it is unlikely the country could see the 8% economic growth envisioned by Prabowo as this year's growth is projected to expand below the usual 5% rate.
Ember's Dody said if the ambitious projected demand growth fails to materialise, PLN would face another oversupply that would limit access for renewable projects to supply the grid already saturated with power from thermal plants.
IEEFA's Mutya warned PLN could face similar pressure as in the past when it was locked into costly coal contracts for excess power that ended up straining its finances.
Most power purchasing agreements contained take-or-pay stipulations that obligated PLN to either take delivery of electricity generated by independent power producers or pay a penalty if it chooses not to do so, which guaranteed minimum revenue for investors. — The Jakarta Post/ANN
