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Indonesia raises tariff for hydro power output

Publication Date : 06-05-2014

 

A higher tariff for electricity purchased from mini-hydropower plants has been set by the Energy and Mineral Resources Ministry to make the sector more attractive for industry players.

The new tariff has been set at 1,075 rupiah (9 US cents) per kilowatt hour (kWh) from the previous level of 656 rupiah, nearly a 64-per cent increase, according to a new regulation signed by Energy and Mineral Resources Minister Jero Wacik.

Mini-hydro plants are those considered to have less than a 10-megawatt (MW) capacity.

“We hope the price will support mini-hydro plant development,” Jero said during the signing of a cooperation agreement in hydro power plant development with the Austrian transportation, innovation and technology minister on Monday.

The new price will be applicable for the first year until the eighth year, while after the power tariff will be reduced to 775 rupiah per kWh until the 20th year starting this year, according to the ministry’s director general for renewable energy, Rida Mulyana.

The new tariff is expected to speed up the breakeven point for developers that invest in mini-hydro power plant projects.

“I’m hoping that the quicker the breakeven point, the more investors are interested to look for other locations for more [mini-hydro] development,” Rida said, adding

that it would also ease requirements for banks to disburse lending to the sector.

Indonesia is trying to diversify its electricity sources, which remain dominated by power produced by fossil sources, particularly oil-fueled and coal-fired power plants.

Electricity demand in the country is estimated to grow around 8.4 per cent per year from 2013 to 2022.

To meet demand, the country will have to have an additional capacity of 60 gigawatts during this period.

Under the long term plan, around 6.5 gigawatts are expected from hydro and mini-hydro power plants.

Business players welcomed the new tariff.

“It will make mini-hydro plant projects more economical and players will expand to other projects, particularly the smaller plants in remote areas,” said Fazil Alfitri, the president director of Medco Power, which is developing five mini-hydro projects.

The new tariff will be applicable for new projects.

Meanwhile, mini-hydro projects already established but that have yet to sign power purchase agreements are allowed to negotiate with an average tariff of 880  rupiah per kWh, according to Rida.

Indonesia is estimated to have a 75,000-MW hydropower potential, but the utilisation of resources remained low, with a total 3,935-MW hydropower plant capacity in operation as of the end of last year.

Of the total hydro plant capacity, 67.6 MW mini-hydropower plants operate in the country, according to figures from the ministry.

As many as 37 mini-hydro projects, with a combined capacity of 172 MW, are being constructed.

Meanwhile, 55 projects with a total capacity of 286.5 MW are still at the funding stage.

While business players will benefit from the new feed-in-tariff, concerns are growing over the higher cost that must be paid by the off-taker of the electricity,

particularly state-owned PT Perusahaan Listrik Negara (PLN), which will likely suffer from the higher price.

However, PLN president director Nur Pamudji toned down the worries.

“It doesn’t matter whether the price is high or low. The most important thing is that the plants are completed. So, pick a price that will make the [mini-hydro development] programmes work,” Pamudji said.

 

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