Indonesia's power shortage: Challenges to a lasting solution<\/p>\n
John McBeth
\nThe Straits Times
\nAsia News Network\/Singapore<\/p>\n
Given the constraints it has been working under, Indonesia's
\nstate-run power utility, Perusahaan Listrik Negara (PLN), has
\ndone a remarkable job keeping the lights on over the past few
\nyears.<\/p>\n
But time is fast running out. The Aug. 18 electricity blackout
\nacross much of Java has underlined the increasingly precarious
\nsupply situation on the Java-Bali grid and the urgent need for an
\nenergy road map to avoid a crisis in the next decade.<\/p>\n
Unless more private investment can be pumped into the power
\nsector, PLN will never be able to meet the 2,400MW in new
\ncapacity that planners say must be brought on line yearly to keep
\npace with demand as the country strives to return to 6-7 percent
\ngrowth rates.<\/p>\n
Says one worried power executive: \"What happened on Aug. 18
\nwill happen again, there's no doubt about that.\"<\/p>\n
In a delicate balancing act, PLN has already curtailed supply
\nto the industrial sector and refused new connections to private
\nhomes in a losing effort to maintain a tiny reserve on a grid
\nthat has an installed capacity of 18,500MW, but never gets beyond
\n14,500MW.<\/p>\n
In fact, the company's own website has forecast peak demand
\nthis year at 16,965MW. And even then, that represents a growth
\nrate of only 7.3 percent, well below the 11.5 percent recorded in
\n2001 before it began reining in demand.<\/p>\n
PLN even calls Jakarta's industrial estates most weekdays and
\ninstructs them to use their own generators between 5 p.m. and
\n8 p.m., just to ensure there is sufficient power during the peak-
\nload period.<\/p>\n
Exacerbating the situation has been the seven-year delay in
\ncompleting the 800km-long southern transmission line to bring
\nmuch-needed electricity from East Java's giant 3,200MW Paiton
\ncomplex to the power-starved area of West Java.<\/p>\n
Buffeted by contractual, financial and land disputes, the line
\nis finally expected to be completed by the end of the year,
\nhelped by new legislation which allows the government to override
\nthe opposition of property owners standing in the way.<\/p>\n
PLN can currently transfer only 1,600MW from east to west,
\nalong its existing northern transmission line; Paiton and other
\nEast Java power stations generate 5,800MW between them -- much
\nmore than is needed in the east.<\/p>\n
Experts say that besides bringing additional power into West
\nJava, the southern line will add stability to the grid,
\npreventing the sort of massive outages that occurred on Aug. 18
\nwhen units at Paiton and the Suralaya complex at the opposite end
\nof Java tripped together.<\/p>\n
It is not at all clear where the country's future power will
\ncome from. Sumitomo's 1,320MW Tanjung Jati B station in Central
\nJava, a second Japanese-financed 730MW station at Cilegon in West
\nJava and a Chinese-funded 600MW station at Cilacap on the
\nsouthern coast are all due to be commissioned in mid-2006.<\/p>\n
But there are still questions over whether Sumitomo, in
\nparticular, has secured a domestic coal contract at a time when
\nmuch of Indonesia's production has been diverted to exports.<\/p>\n
With China reducing exports to meet rising domestic demand,
\nIndonesia is now the world's second-biggest coal exporter after
\nAustralia. Analysts say more than 70 percent of this year's
\nproduction of 157 million ton will be exported as big companies
\nlike Arutmin and Kaltim Prima Coal ramp up output and foreign
\nbuyers seek long-term contracts as a hedge against soaring oil
\nprices. World thermal coal prices have risen sharply from US$24
\n(S$40) to as high as $43 a tonne over the past three years.<\/p>\n
The three new power stations to be opened next year are all
\nbeing built with public money. But the government's debt burden
\nmeans it must start attracting more private producers. That will
\nnot be easy after what happened during the 1997-1998 financial
\ncrisis when 18 power projects were either scrapped or companies
\nwere forced to re-negotiate their contracts at lower rates of
\nreturn.<\/p>\n
In the meantime, more thought has to be given to drastically
\nreducing PLN's dependence on fuel oil and diesel, which adds up
\nto 29 percent of the grid's operating capacity and absorbs 60-70
\npercent of the utility's spending. Oil costs 10 U.S. cents per
\nkilowatt hour against 1.5 to 2 U.S. cents for coal and natural
\ngas -- the main reason why PLN is carrying a $5 billion debt.<\/p>\n
In a country rich in natural resources, many of PLN's problems
\nstem from Indonesia's failure to boost refinery capacity, end
\nmarket-distorting subsidies and develop other energy substitutes.
\nWith total reserves of 183 trillion cu ft, natural gas is an
\nobvious choice. Yet, while about 35 percent of its plants are
\ndesigned for gas operation, only 20 percent are actually using
\nthe fuel. The rest are still burning oil, either because of
\nflagging gas supplies or because the projects have not been
\nmarried to a gas supply.<\/p>\n
There are also other factors at play. With gas from offshore
\nfields to Jakarta's two main power stations running out, PLN
\nsprang a surprise last year by electing to build a $400 million
\nliquid natural gas (LNG) terminal, instead of taking gas from a
\n660km pipeline, now being laid from South Sumatra to Jakarta.
\nMostly it was about securing a measure of operational
\nindependence it has never had. But while the plan may make sense
\nin the longer term, LNG costs 30 percent more than piped gas --
\nand that is drawing strong government resistance.<\/p>\n
Pipeline operator Perusahaan Gas Negara (PGN) is adding 180
\nnew customers to its existing base of 670-strong industrial
\ncustomers around Jakarta, many of whom are likely to go back to
\nusing PLN as a back-up -- just as they did when using private
\ngenerators guzzling subsidized diesel made more sense than
\nhooking up to the power grid. That may relieve some of the
\npressure on PLN, but it will also put a dent in the most
\nprofitable side of its business.<\/p>\n
Signs now are that PLN may have been forced to have a rethink.
\nIndustry sources say the utility and PGN are planning to form a
\nconsortium to build a new 1,100km, $1.7 billion pipeline from
\ngas-rich Kalimantan to Central Java.<\/p>\n
Where it goes from there -- west to Jakarta or east to
\nSurabaya -- is still under discussion.<\/p>",
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