Clean Energy, Cleantech venture capital, Indonesia, Legislation, Renewable Energy, Solar

Government to lift all corners of the country out of the dark (Indonesia)

February 11, 2008 (The Jakarta Post) – The government recently announced a new ambitious plan to make electricity accessible to all Indonesians by 2020. Currently only 63 percent of people enjoy access to electricity across the country, with regular blackouts occurring due to power shortages.

Under the “electricity for all” program, the government is striving to quickly make electricity available to a large number of people.

Recently The Jakarta Post’s Ika Krismantari met with the director of electricity and energy utilization at the Ministry of Energy and Mineral Resources, J. Purwono, to discuss the government’s plans to develop the power sector. The following are excerpts from the interview:

Question: What condition is the country’s power sector in?

Answer: Currently, only 63 percent of our population enjoys access to electricity, while the remaining 37 percent are yet to gain access. With this situation, the government understands we can not rely solely on PLN (the state power firm) to set up access. We need private entities to help.

So, in order to speed up the process, we need to provide a mechanism under which private entities can participate more in the power sector. We are now preparing a set of regulations which will facilitate that process.

Will the new bill on electricity liberalize the sector and allow private entities to join and compete with PLN?

We are now still discussing the bill. It will replace the 1985 Law on Electricity, which has put PLN in dominant control. Under the new bill we will introduce a new system based on competition. But competition here is unlike that in Western countries, where tariffs are based on energy bidding and can be changed every hour.

Another point in the bill is that the generator sector will be opened to everyone, while in the transmission sector, distribution and selling will remain under PLN’s control.

Private power operators will be able to freely submit their bids to PLN for the electricity they produce at their plants. We will also allow private investors to participate in the network system but they will be required to collaborate with the state firm.

Where will the government put PLN under the new system?

In the long run, we expect PLN to focus only on transmission, distribution and selling, while power plants will be operated by other parties.

Talk of restructuring PLN drew protests from the company’s employees, forcing the government to drop the plan. Any comment on the situation?

First of all, it was just an idea from the office of the state minister for state enterprises and has not been finalized yet. However, it has already become an issue.

The basic concept was that the government wanted to improve PLN’s efficiency in its overall operational activities. It did not mean we would reduce the number of employees or turn the firm’s units — Indonesia Power (IP) and Pembangkit Jawa and Bali (PJB) — into new state companies.

I have proposed to the ministry of state enterprises that we do not change the status of IP and PJB as PLN units, but rather set up new subsidiaries that would be responsible for transmission and distribution activities.

How has the 10,000 megawatt (mw) power program progressed?

The key is in financing. With most projects yet to secure loans (currently, only five of a total 35 power plant projects have secured financing), the program will most likely be delayed (from the 2009 deadline set).

But we will try to meet the deadline. I have proposed that PLN provides cash bonuses to companies able to complete their tasks before the deadline.

The cash bonuses will be paid with money PLN saves in fuel expenses after the firm switches from oil-based fuels to coal to propel its plants.

How does the government intend to address the fact 37 percent of Indonesians have no access to electricity?

The lack of electricity is mostly in remote areas. We have two programs aimed at increasing people’s access to electricity.

First, we plan to expand PLN’s distribution network. The second is through the use of renewable energy sources such as hydro and solar power, which are available everywhere.

Those kinds of energy can be used without having to be connected to a power grid. We have been giving solar power panels to people in the eastern part of Indonesia so they have access to power. We distributed 40,000 panels last year and this year we plan to distribute another 33,000 units.

How much will the government spend on electricity this year?

We don’t know the exact figure yet, but according to the ministry’s data, investment increased to US$3.32 billion last year from $3.25 billion in 2006. I think investment this year will be slightly higher because the 10,000 mw program has not yet been completed.

The government will introduce an electricity billing system based on progressive rates to encourage customers to use electricity wisely. When will the government launch the program?

We are still discussing it. We are aiming to achieve a 20-percent reduction in household electricity use.

Customers who cut down their electricity use to 80 percent of the national average will be entitled to bonuses in the form of discounts, while those who consume more than 80 percent of the national average will be progressively billed more.

Progressive rates will make the cost of electricity per kilowatt per hour more expensive than the normal tariff.

PLN is expected to set up the system this month so we can start applying it next month.

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