[DISCUSSION REPORT] RENEWABLE INNOVATION FORUM – PANEL DISCUSSION II

A Panel Discussion Moderated by Ir. H. Jarman Sudimo, MSc (Formerly Director General of Electricity of Ministry of Energy and Mineral Resources of Republic of Indonesia 2011-2017)

The second-panel session covered the downstream sector of renewable and was chaired by Mr. Jarman Sudimo as the Director General of Electricity (2011 – 2017). During this session, Mr. Tohari from PT PLN presented the Development of New and Renewable Energy in Indonesia’s Electricity Sector. Mr. Alihuddin Sitompul, as the Director of Electricity Development Program of Directorate General of Electricity, the Ministry of Energy and Mineral Resources had a presentation about Renewable Off-grid Electrification. From IPS partners, Mr. Aria Witoelar, as the founder of PT Arya Watala Capital, gave a presentation about Rural Electrification through Village Grids / Mini-grids and Mr. Fendi Gunawan Lim from PT Selaras Daya Utama had a presentation about Off-grid Renewable Energy.

A Presentation by Tohari Hadiat (The Head of Renewable Energy Division of the State-Owned Electricity Company (PLN))

Mr. Tohari Hadiat started his plenary speech by discussing current conditions of new and renewable energy (NRE) in Indonesia. In 2017, the composition of NRE share in the electricity generation mix was 12%, consisting mainly of hydropower (9%) and geothermal (3%) and smaller contributions from biomass, biogas, waste-to-energy, and solar PV. By December 2017, the development of NRE has exceeded initial target with a total capacity of 38,864 MW of projects which are currently ongoing.

PLN develops its NRE plans based on the projection of 2025 energy demand in line with the Paris Agreement target of achieving 23% of NRE contribution in the total mix. In the next 10 years, PLN is to deploy a total of 15 GW NRE projects consisting primarily of hydropower (50%) and geothermal (31%), followed by a smaller share of biofuel, solar PV, hybrid, wind, and biomass/waste-to-energy.

PLN complies with the Ministry of Energy and Mineral Resources Regulation No. 50 the Year 2017 in developing NRE. It covers issues on energy procurement, cooperation scheme using the Build-Own-Operate-Transfer concept, pricing, and electricity sales and purchase agreement. Energy procurement can be based on 1) direct appointment based on a capacity quota for solar PV and wind power, 2) direct appointment for hydropower, biomass, biogas, and tide/wave power, and 3) as stipulated in the governmental regulation for waste energy and geothermal. Power purchasing for PLN is based on the local cost of electricity as regulated by the Ministry of Energy and Mineral Resources (MEMR), in which some areas have the exception for PLN to buy at 85% local cost. Additionally, PLN has an obligation to locally-operate up to 10 MW power plant in a must-run manner.

PLN strategies to support electrification in remote areas are as follow.

  1. Maximising and prioritizing the use of renewable energy with attention to the economic aspect;
  2. Optimising the development of NRE power plant, particularly on geothermal and hydropower;
  3. Maximising the potential of local NRE sources to increase electrification rate in the eastern part of Indonesia;
  4. Developing a hybrid system for areas that have an existing diesel generator for less than 12 hours a day;
  5. Developing micro-grid to increase NRE penetration in PLN small-scale system;
  6. Shifting diesel fuel to biofuel in existing generators.

A Presentation by Martin Deyanov (The Head of Off-Grid Division of International Power Supply)

Plenary speech by Mr. Martin Deyanov outlined four messages that showcase the nature of IPS’ commitment to entering Indonesian renewable energy market. Firstly, IPS is committed to helping Indonesia to harness their renewable energy potential and meeting the ambitious power mix target while energy demand is rapidly increasing. Being the largest archipelago country with about 70,000 islands, Indonesia is surely treasured of a vast amount of renewable energy which would be more than enough to achieve the national NRE target of 23% by 2025 and 31% by 2050.

Secondly, IPS are confident that a localized power generation in the form of off-grid mini-grid combined with energy storage will be the way forward to fully electrify villages in remote areas where grid extension is simply not feasible and too costly.

Thirdly, IPS believes that electricity should not only be affordable, clean, and sustainable but to also be efficient and reliable. Therefore, IPS offers an advanced technology which can sustain Indonesia’s natural climate of high temperature, high humidity, and the high-dust environment, is reliable and can be custom-scaled to the project requirements. Such benefits enable an efficient energy generation with a minimal energy waste for the better energy future for Indonesian people.

Lastly, the technology created by IPS is readily available and easy for people to install and to use. Such requirements were highlighted earlier by Mr. Ignasius Jonan who stated that any energy project in Indonesia has to be able to be implemented quickly. By signing three MoUs with University of Defence (UNHAN), ITB, and PT LEN Industri, IPS shows its commitment to the Indonesian Government in bringing in the technology and committing to the off-grid electrification development in Indonesia. The speaker closed his speech by delivering a grateful note to Mrs. Sri Astari and Mr. Purnomo Yusgiantoro for the tremendous support in building the foundation of cooperation between IPS and Indonesian institutions.

A Presentation by Alihuddin Sitompul, M.M. (The Director of Electricity Development Program of the Directorate of Electricity of Ministry of Energy and Mineral Resources of Republic of Indonesia)

Mr. Alihudin Sitompul delivers a quite emotional message on his plenary speech to drive the spirit among the attendees to push renewable energy development in Indonesia. The goal of electricity development in Indonesia is to have enough quantity to meet demand, to have it in good quality, and to ensure affordability of electricity for all Indonesian people. As complicated as it is to build a renewable energy project in rural areas, everyone should be working hand in hand to pursue 100% electrification target, especially for the eastern part where the electrification ratio is the lowest. At least capital, technology, human resources, and supportive regulations are among other things that can enable a successful delivery. Any businesses who enter the energy market need to do its best to comply with the dynamics of governmental regulation and be tenacious in starting the seemingly challenging project. The good business intention that is driven by social goal rather than economics return might be the key to ensure sustainability, especially in electrifying the underdeveloped or outer regions. As a closing remark, the speaker invites Ms. Elena and other IPS delegations to come to Papua, to observe, and to propose a solution to electrify the currently poorest region in terms of electricity in the country.

A Presentation by Fendi Liem (Managing Director of PT Selaras Daya Utama)

PT Selaras Daya Utama is an Engineering, Procurement, and Construction (EPC) company specialized in solar power. The company was established back in 2009 by a group of young engineers whose sole purpose is to electrify Indonesia, and since then, the team has been growing in numbers. To date, their off-grid projects have been presented in about 100 locations. One of them is a solar farm located in Raja Ampat, Papua. The project received the Asian Power Award in 2017 for its role in providing a complete off-grid electricity system in a challenging area. Even so, Raja Ampat is surely one of the best spots for tourism in the country. It is then, only reasonable that such an initiative is much supported by the government.

While Papua might be a hot topic mentioned in today’s forum, it is to be understood that even some areas next to Jakarta are yet to be electrified because of either the absence of transmission line or inaccessible geographic condition. Talking about a good business model, to learn from and to invite local people to chip-in funding is a good strategy to inflict a sense of ownership. When talking about the opportunity of building off-grid hybrid power system in rural areas, the popular challenges will always be logistics, transportation, and infrastructure. Moreover, it is important to make sure that the solution offered is durable and affordable for the local people. In this business, one has to be versatile in its system design which is custom-tailored according to local condition and specific government regulations. Mr. Fendi closes his plenary speech by stating the fact that many exciting opportunities for electrification in Indonesia are even located in the potentially great tourism sites, therefore attractive for strong government support and private investment.

A Presentation by Aria Witoelar (Founder and CEO of PT Arya Watala Capital)

Mr. Aria opens his plenary speech by defining an off-grid mini-grid system as a less than 5 MW energy system not connected to the power grid. Many of the hundreds of off-grid systems in Indonesia are owned and managed by PLN but most are in the form of diesel generators. Unfortunately, they are such a weak business case as the levelized cost of electricity can be very expensive at about 17 cents/kWh. Transforming diesel generator into a hybrid system is an easy task but to ensure affordability of the tariff in remote areas is another thing. Moreover, PLN’s selling price is sealed at 11 cents/kWh, even in the case of an off-grid system, through a cross-subsidy strategy. When the generating cost is cheaper, the profit is saved to compensate for the loss from the higher-cost generation in some other areas. Consequently, a private sector whose Levelized Cost of Electricity (LCOE) is higher than the normal PLN’s selling price cannot directly sell the electricity to the end consumer as it is just not attractive and affordable. Therefore, the private sector will sell the electricity to PLN at about 14.5 cents/kWh and re-sell to consumers at 11 cents/kWh. While a loss, PLN can still afford the price as diesel generators they are currently using are much more expensive at 16-28.2 cents/kWh. In other words, private sector’s initiative in using renewable sources for off-grid system helps PLN to improve the financial portfolio.

Mr. Aria encourages the development of NRE to include more solar PV as it is readily available throughout the year across all region in Indonesia. Moreover, the construction period is only less than a year, faster than any other NRE sources. In relation to this, PT Arya Watala Capital is developing 12 utility-scale solar PV-hybrid projects in the Nusa Tenggara Islands. With the power purchase agreement with PLN, financing the project without a soft loan or any grants will not be a problem, thus enhancing the prospect of scalability and repeatability. As a recommendation, Mr. Aria suggests that PLN and the private sectors invest in advanced technology for renewable energy as it presents higher economic benefits in the longer term.

A Presentation by Miroslav Dijakovic (The Director of Business Development of Contained Energy)

The speaker primarily discussed Contained Energy’s ventures on developing about 150 off-grid micro-grid projects in the Pacific Islands, both remote and private islands. The recent biggest project was ongoing for 2 years back in 20 Micronesian Islands to replace diesel generators with 400 kWp each of solar PV and batteries. It was indeed challenging to execute projects in small islands with the climate and weather being the main challenges in transporting logistics.

In Indonesia, Contained Energy is developing 200kWp solar PV in 3 islands in Karimun Java, funded by the European grant. Before the local community only receive 6-hours a day of electricity, but with a hybrid solution, they can now enjoy 24/7 of electricity supply. Even in Java, it is still challenging as the access to the island can be blocked for days while the project completion was not as quick as predicted considering the sea weather. While there is so many potential off-grid micro-grid in rural areas, private sectors still need some security to be comfortable to invest and execute projects. For this, the government plays a great deal by creating attractive investment atmosphere through supportive regulations.

Discussions

ModeratorPanelistFloor
JS – Ir. H. Jarman Sudimo, MScTH – Mr. Thohari Hidayat

MDV – Mr. Martin Deyanov

Floor 1 – Mr. Budi (Ministry of Maritime Affairs and Fisheries)
AS – Ir. Alihuddin Sitompul, M.M.Floor 2 – Mr. Hilman
FL – Mr. Fendi Liem 
 AW – Mr. Aria Witoelar 
 MDC – Mr. Miroslav Dijakovic 

 

MDVFor areas that are currently supported by diesel generators, what would be PLN’s strategy for hybridization implementation?
THPLN’s typical strategy is to identify local energy resources available in the area. If there are not enough renewable sources, the hybridization with diesel generator is the way forward as it reduces the cost, extends the operational hours, and achieves the target of renewable use.
2  MDVWhat are the practical challenges you are currently facing in improving reliability, versatility, and cost efficiency of the energy products?
FLThe challenges are rarely related to the specification of the product itself, but on delivering the product safely and cost-efficient to the designated area. For instance, some products cannot withstand more than 100 angles when delivery, which is hard to guarantee considering the challenging physical condition. Most of the time, the delivery is more complex so to need a traditional mode of transport. Therefore, the product should also be scalable and modular for it to be easy to transport to remote areas. Lastly, the product should be reliable and durable to avoid a costly-maintenance.
MDVAgree, the total cost of ownership is to be looked at to achieve cost-efficiency in the long run. It takes into account all the technical aspect such as reliability, durability, eases to operate, and ease of maintenance. Technologies requiring slightly higher capital may end up being a more cost-efficient solution considering all the factors mentioned.
Floor 1The Ministry of Maritime Affairs and Fisheries (MAMF) has a national strategic policy in developing integrated maritime and fisheries community in 12 remote or outer areas in which some facilities are revoked and built to pursue the vision. Could this policy can be integrated with the MEMR’s plan on electrifying the community with renewables?
ASOf course, it could. It is very much aligned with the embodiment of the MEMR Regulation No 38 the Year 2016. In fact, it will be a great business model of an off-grid system as the MAMF team already understand the needs and the nature of development in the area. If necessary, either local or international businesses such as IPS can be invited to join and support the project as the technology provider or investor.
Floor 2Based on observation, there is still some lack of understanding within local governmental bodies of the MEMR Regulation No 38 the Year 2016. Some village-owned enterprises and local government still yet to comprehend that PLN is not the regulator of electricity but the executor instead. The downfall will be when private businesses came into the community and did not receive a good support. How will your approach to this situation?
ASIt is most likely not the case of regional government not being aware of the regulation, but of them trust PLN better to supply the electricity. Therefore, MEMR Regulation No 38 the Year 2016 should not be used to take over PLN’s business area, but to support development in remote areas where PLN has yet to present. Therefore, the real business strategy should be to connect with other businesses to invest in the infrastructure. A case in point will be the telecommunication business.

 

As a closing remark, the moderator identifies three urgent problems to be solved in the country:

  1. 5% of Indonesian people still lives in the darkness and require access to electricity;
  2. Some other receives unreliable electricity while the demand is for a steady and 24/7 electricity supply;
  3. Some rely on diesel generators that are way too costly for them to afford without government subsidy.
 

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