Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, asks that State electricity company PT PLN to initiate auctions for large-scale renewable energy (EBT) projects this year, suggesting a bundle scheme or project package mechanism in an effort to secure economic viability of these EBT power plant projects by developers.
“Individuals can bid for several projects in one package to achieve economies of scale,” said Fabby when contacted on Thursday, January 4, 2024. According to IESR calculations, PLN needs to start auctioning EBT power plant projects with a capacity ranging from 5 gigawatts (GW) to 6 GW annually to catch up with the project execution backlog from 2021 to 2023 in the Business Plan for Electricty Provision (RUPTL) 2021-2030.
Based on the Ministry of Energy and Mineral Resources records, the realization of the EBT mix in the first half of 2023 only reached 12.5 percent, far from this year’s set target at 17.9 percent. The half-year achievement did not differ significantly from the figures in 2022 and 2021, which were 12.3 percent and 12.2 percent, respectively.
Moreover, the projected additional EBT mix until the end of 2023 is only expected to reach 115 megawatts (MW), falling short of the set target of 2,029 MW. As of April 2023, the realized EBT mix is only at 28.21 MW. In 2021 and 2022, the realization of the EBT mix deviated significantly from the set targets. The EBT realization in 2021 was only at 613 MW with an initial target of 750 MW. On the other hand, the realization of EBT power plants in 2022 dropped to 172 MW from the set target of 649 MW.
Fabby argues that a bundled project scheme in developing EBT power plants would be effective in boosting investment and realizing the clean electricity supply program until the end of 2030. “For example, there are 50 MW, 100 MW, 200 MW power projects. People could bid at five locations, totaling 600 MW. That is better than bidding at one location; it could achieve the economic of scale,” he said.
Previously, the Ministry of State-Owned Enterprises targeted that the auction for large-scale new renewable energy power plants over 1 GW could begin in 2024 by PLN. Deputy Minister of State-Owned Enterprises (BUMN) Kartika Wirjoatmodjo said electricity demand is showing an increasing trend that the PLN’s power plant auctions will be directed towards larger blocks over 1 GW.
“We want the bidding not in small scales of 50 MW, 100 MW, but we want block bids of 1 GW, 2 GW so that the scale to achieve the acceleration of 24 GW of EBT can happen in the next 10 years,” Kartika said at the National Seminar on the National Economic Outlook in Jakarta on December 22, 2023.
However, Kartika mentioned that auctions for large-scale power plant projects would require significant investment or capital, while, PLN’s financial capacity and domestic capital loans are relatively limited at present.
Kartika said these large auction block projects must therefore be supported by international financing offering long-term loans. On the other hand, he said the government is also approaching several EBT companies with sufficient capital capabilities. “Certainly, there is no source of long-term US dollar funding. Indeed, we have to approach international organizations or communities of international banks,” he said.
