Indonesia's new RUPTL fails to address last year's loopholes: analysts

Mega coal projects such as the Java-3 and PLTU Java-9 have resurfaced despite previous plans to ditch them.

Indonesia added 1.8GW of installed renewable capacity to its 10-year Electricity Supply Business Plan 2019 (RUPTL), raising new renewable capacity to 16.7GW as compared to 14.9GW in the previous RUPTL. Minister of Energy and Mineral Resources (MEMR) Ignasius Jonan also emphasized that the 0.4ppt cut in the demand growth forecast to 6.4% for the 2019 to 2028 period answers critics’ concerns about the reliability of past RUPTL demand estimates.

However, according to IEEFA energy finance consultant Melissa Brown and energy finance analyst Elrika Hamdi, the 6% cut in demand seems to have provided the impetus for much bigger cutbacks in planned grid expenditures for transmission and distribution (T&D) including additions for network and distribution substations.

“Experts study the RUPTL for a reason. It is a document that often hides consequential details in the fine print. The 2019 RUPTL is no exception. IEEFA found that, although the numbers that the Minister highlighted for the press were correct, the official narrative is not,” Brown and Hamdi said.

Whilst the new demand growth forecast is indeed lower, electricity growth in 2018 was only 5.1%. “The fact that demand growth in the last five years (2013-2018) averaged only 4.6% cannot justify the continued use of overly ambitious assumptions used in the RUPTL,” Brown and Hamdi added.

The analysts also pointed out that the projections for T&D and substations show no evidence of a correlation between investment in T&D and in renewables energy generation. “The decision to cut back investments in the system does not appear to reflect any system requirements to cater for more penetration of intermittent renewables in the future,” they said.

The RUPTL’s generation mix is also still dominated by coal, Brown and Hamdi noted. “What is more concerning is the fact that several mega coal power projects that were supposed to be suspended or cancelled by the government due to the depreciation of the rupiah and weakening demand in September 2018, seem to have re-appeared in the 2019 RUPTL. For example, PLTU Java-3, PLTU Java-9 and Java-10, are now back in the document, despite a claim the Minister made last year about not adding any new coal power plants on Java island.”

Mini hydro is now forecast to grow more rapidly from a low base, with a sharp 90% increase compared to last year’s allotment. Meanwhile, solar was cut back by 13% in the current plan. This translates into an expected increase of only 908MW of solar within the next 10 years.

The “final surprise” in the RUPTL was Jonan’s suggestion that small-scale renewables and gas developers would be free to propose projects of less than 10MW directly to PLN despite not being included in the RUPTL. “As long as PLN approves and the grid can dispatch the additional power, these projects could move forward on an as-needed basis. The idea here is to encourage more rapid additions of small-scale capacity,” Brown and Hamdi said.

“Although the nod toward smaller local projects will undoubtedly be well received in an election year, ad hoc negotiations between PLN and small developers will likely lack the much-needed transparency and accountability that are crucial for reforming the Indonesian electricity sector. Instead of encouraging innovative strategies for new capacity additions, this could result in a grab bag of sub-scale projects with the potential to distort the market,” they added.

IEEFA suggested that endorsing ad hoc renewables projects rather than committing to system-level market solutions could lead to a lack of coordination with the T&D investments to provide the needed support for renewables. The organisation urged the Indonesian government to move towards more transparency and accountability through more coordination and integrated national planning that involves not only PLN and MEMR, but other relevant ministries such as the Ministry of Industry, the Ministry for Public Works, Ministry of Finance, and Ministry of National Development Planning.