INDONESIA

1
INDONESIAS CRASH PROGRAM FOR
ELECTRICITYGOVERNANCE IMPLICATIONS FOR SECURITY
AND SUSTAINABILITY

• Friday, December,7 2007
• Melia Bali Hotel, Batur Room, Nusa Dua Bali
• Indonesian Institute for Energy Economics (IIEE)

2
Agenda

1. Background
2. The Crash Program
3. Viability
4. Security of Supply for Power Generation
5. Other Issues
6. Summary

3
Background

• High dependency on oil fuels, decreasing oil
  reserves and production, and stagnant refinery
  capacity lead to increasing oil fuels import to
  meet the demand growth
• Power generation also depends on petroleum fuels
• Geographic condition, lack of infrastructure,
  small scale electricity demand
• Substitute for gas unavailability
• Load peaker
• Increasing international crude oil prices
• Prices of non subsidized fuels follows
• Government spending on fuel subsidy ballooned
  since 86 of petroleum products consumption is
  highly subsidized
• Government policy to reduce subsidy burden
• Fuel price adjustments
• Substituting kerosene with LPG for household
• Crash program of coal power plant development

4
The Crash Program

• Program description
• Coal power capacity expansion of 8900-11500 MW
  during 2006-2009
• Around 78 are located in Java
• Interdepartmental team to produce necessary
  policy and arrangements and supervise
  implementation
• PLN to develop the power plants and related
  transmission-distribution requirement
• Objectives
• Meet the energy needs of 9 economic growth
• Address existing shortages and unreliability
• Allow for increase in energy access
• Alleviate dependence on imported oil fuels and
  subsidy burden on the state budget

5
Viability

• National capacity share of coal power plant
• Planned 52 by 2010
• Estimated 64 by 2015
• National capacity factor average 67 in 2015
• Prone to international coal price changes
• Differential of domestic and international coal
  prices
• Existing export orientation
• Higher share of domestic coal electricity
  generation has a
• significant impact to generation costs
• Around 3000 MW gas power plants to be mothballed,
  but assumption of limited gas supply may not
  hold
• Additional gas supply is possible surrounding
  fields, LNG terminal
• Successful demand side management
• Delayed in construction of power plants T/D
• Potential excess capacity if the above happens

6
Security of Coal Supply for Power Generation

• Crash program relies on low grade coal
• Gap between domestic and international coal
  price, especially for high and medium grade coal
  makes export market more attractive
• Large deposits of low grade coal
• New fiscal incentive for low grade coal fields
• No recent addition in coal reserves
• Regulatory conflicts
• Forestry protected areas, conservation forests
• Spatial Arrangement Plan mining areas not
  included
• Central and sub-national government regulations
  overlapping permits and work areas
• New mining law is under process

7
Other Issues

• Extending access
• More than 40 population without electricity
  access, mostly at Outside Java
• The Program puts a higher emphasis on Java
• Project Affected People
• Plant sites on highly populated areas
• Impact of local pollutions from the plants
• Land acquisition none or fake ownership
  certificates, multiple ownerships
• Environmental Impact Assessment (AMDAL)
• Air pollution, health impacts, water needs of
  coal plants
• Learn from the past
• Impact analysis has been limited, AMDAL reduced
  to bureaucratic formality
• Public hearings and consultation were poorly
  structured

8
Summary (1)
9
Summary (2)

• Many issues to be resolved and anticipated
• Availability, Accessibility, Affordability,
  Acceptability
• Economic, social, and environmental issues
• Good governance of the process is crucial

10
Fuel Subsidy
Sources www.migas.esdm.go.id Ministry of
Finance National Development Planning Body
11
Crash Program Sites and Coal Sources
12
Impact of the Crash Program on Java-Bali
Generating Capacity
13
Average Capacity Factor in 2015
14
Impact of Coal Price Increase inGenerating Cost
15
Coal Reserves by Quality 2005
Source Pusat Sumber Daya Geologi, Badan Geologi
DESDM
16
Coal Prices Differentials
Sumber Handbook Statistics Energy Economics
Indonesia 2006
17
Coal Consumption, Export and Production
Sources Handbook Statistics of Energy Economics
Indonesia 2006
18
CO2 Emission from Coal Power Plant
Sources Electricity production 2006-2010 are
from RUPTL 2006-2015 revision Electricity
production 2004-2005 are from PLN Statistics
2005 CO2 emission 2004 data is from Handbook
Statistics of Energy Economics 2006
19
Implikasi Governance terhadap Energy Security dan
Sustainability
Isu Governance Isu Ketahanan Energi Isu Keberlanjutan
Keputusan yang bersifat ad hoc Perubahan kondisi mendadak karena external shock (harga minyak dunia tinggi, ketergantungan terhadap BBM, beban subsidi) Implikasi jangka panjang dari emisi GRK dan limbah lain yang dihasilkan
Keputusan yang bersifat ad hoc Pembangunan pembangkit tanpa kejelasan sumber dan skema pendanaan Meningkatnya liabilitas
Keputusan yang bersifat ad hoc Pembangunan pembangkit tidak diikuti dengan kesiapan pasokan batubara Persoalan LULUCF dan green mining
Transparansi dan prinsip keadilan dalam proses tender Pemilihan teknologi yang terkonsentrasi, pemasok, dan sumber pendanaan Meningkatkan ketergantungan
Transparansi dan prinsip keadilan dalam proses tender kemngkinan keandalan yang rendah di bandingkan dengan best pactice Meningkatnya ketidak pastian sistem penyediaan
Pengaturan Institusi Ketidakpastian rantai pasok dari hulu sampai hilir Meningkatnya ketidak pastian sistem penyediaan
- Sinkronisasi kerangka hukum Gangguan terhadap ketersediaan energi, menghambat investasi, aksesibilitas (menghambat akses terhadap sumber dayatambang diatas lahan hutan lindung) Menghambat pertumbuhan ekonomi
- Jangka waktu penugasan Keandalan Meningkatnya liabilitas
- Kurangnya partisipasi publik Kurangnya dukungan publik, rendahnya aksesibilitas Meningkatnya liabilitas
- Akuntabilitas Siapa yang akan bertanggung jawab jika Meningkatnya liabilitas
- Akuntabilitas Program gagal dijalankan Meningkatnya liabilitas
- Akuntabilitas Menurunnya kinerja sistem Meningkatnya liabilitas
- Akuntabilitas Kinerja finansial PLN melemah Meningkatnya liabilitas
20
Kesimpulan

• Disatu sisi crash program coal power plant
  diperlukan dengan pertimbangan secara ekonomi
  lebih terjangkau. Disisi lain laju pertambahan
  GHG emisi menjadi lebih cepat.
• Resiko finansial dapat muncul dari sumber dan
  persyaratan pendanaan, perubahan harga batubara
  internasional, harga jual listrik dan kebijakan
  subsidi
• Dengan pola governance process seperti saat ini
  dapat menimbulkan kerentanan terhadap energy
  security dan keseimbangan ekonomi, sosial dan
  lingkungan
• Tidak ada solusi generik dalam menyeimbangkan
  berbagai elemen governance, security, dan
  sustainability sehingga perlu dialog, konsensus
  building, komitmen, inovasi dan leadership dari
  semua elemen bangsa
• Transparansi dan peningkatan partisipasi publik
  dapat meningkatkan dukungan dalam pelaksanaan
  program