President Joko “Jokowi” Widodo has ordered Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan to develop two biggest hydropower plants in Indonesia in Kayan River, North Kalimantan, and Membramo River, Papua, to help smelter industry in both areas. However, the project has yet to attract foreign investors.
“Indonesia has 4,400 rivers, some of them are major rivers. We can use the rivers for hydropower plants. However, the investment is very huge. So, I talked to Coordinating Minister for Maritime Affairs and Investment. And we’ll try these two projects on Kayan River and Membramo River,” Widodo said in his opening speech at the 10th Indonesia EBTKE (New, Renewable Energy and Energy Conservation) ConEx on November 22, 2021.
According to the president, the Membramo hydropower plant has a potential capacity of 24,000 MW (MegaWatts), while the Kayan hydropower plant has 13,000 MW in capacity.
“Please look for investors. If they invested there, please do not supply the electricity to [state-owned electricity firm] PLN’s grid. Construct separate grid for the industry,” Widodo said.
Waiting for investors
Head of Papua Energy and Mineral Resources Agency, Fred James Boray, said the early investment of Membramo hydropower plant would cost around IDR50 trillion for a capacity between 10,000 MW and 20,000 MW.
Papua administration is waiting for potential investors in the development of the power plant after an Australian company Fortescue Metals Group (FMG) withdrew from the project. The withdrawal was due to strong protests from local people, rejecting the plan to develop the hydropower plant due to environmental concerns.
“So far, there is no investor. PLN has a plan also to establish the power plant but we do not know the progress of the plan,” Boray said.
According to Boray, investors who show interest in developing the Membramo hydropower plant have to also establish industry such as smelters and metal processing and refineries based on existing mineral resources and potential in the area.
“There are iron sands and nickel potential in the area but they are not in production and operation phase,” he said, adding that the local administration also opens opportunities for mineral mining companies and investors from other areas to build smelters for their raw minerals processing in Papua.
Boray said there was a plan by the Mimika regency administration to build a copper smelter to process copper concentrates from gold and copper mining giant PT Freeport Indonesia. “But so far, there is no real action for the project.”
Papua administration also has a master plan to establish several special economic zones and industrial estates. “In Papua, we have industrial estates in Sorong, because there are several procedures that we requested to develop special economic zones. Since we want to develop the industry, we need a special economic zones in the highland areas,” he added.
Persuading Chinese investors
On December 4, 2019, Investment Minister/Head of the Investment Coordinating Board (BKPM) Bahlil Lahadalia, Papua Governor Lukas Enembe and several Papuan officials visited China in an efforts to attract investors. Lahadalia said that his ministry offered investment opportunity on downstream industry to several investors.
“Papua has mineral potentials in gold, nickel, coal and iron. It also has power potential and 23,000 hydropower plant (Mamberamo River) as well as industrial estates,” he told the management of Huafon Group and Tsingshan Holding Group CEO Xiang Giuanda in Wenzhou, China.
Papua is also strategic for the development of manufacture industry or center of processing industry. “Ores from Australia, the Philippines and Indonesia’s Morowali [Central Sulawesi] can be processed in Papua,” Lahadalia added.
During the visit, the delegation also visited industrial cities of Shanghai, Wenzhou and Tongxiang. The delegation also met with investors and visited petrochemical and battery plants. They also visited Shan Du hydropower plant, which is owned by Tsingtuo Group Co. ltd., and STS Compex research center.
Boray said there was no follow up after the visit to China. “The plan was not running well,” he said, adding that the BKPM fully supported the investment plan.
Looking for high demand
PLN former director Bambang Praptono said the Membramo hydropower plant has a very high capacity but no demand. The local administration hopes that the potential investors will not only build the power plant but also the industry to absorb the produced energy.
“The concept is Renewable Energy Based Industrial Development (REBID), which is an integration of the supply from renewable power plant and the demands. So, the local administration should bring also investors for the industry,” he said.
The would be investors will not only invest in the power plant but also in natural resources or raw material industry to produce intermediate and finished products. For examples Freeport needs energy to process copper concentrates into copper cathodes.
“Since it is a big project that integrate the supply and demand as well as power and industry, the government through the National Development Planning Agency (Bappenas), the Ministry of Energy and Mineral Resources and the Industry Ministry should intervene under the coordination of Bappenas,” Praptono said.
It is not easy to develop the REBID as it needs an integration of investor at the time when every industries have their owned investors. Building a hydropower plant with all its environmental aspects takes long time while at the same time it is faster to establish an industry.
“What would happen if the industries were ready and the power plant has not finished yet? What if there were environmental issues, design and transportation because it was located far from the seaport that may cause delay in schedule?” Praptono said. On the contrary, who would be responsible if the power plant was built and there were no industries to buy the electricity?
He added that lenders, who financed this project, would demand a guarantee that the industries would absorb the electricity.
According to Praptono, electricity produced by hydropower plant is cheaper compared to other power plants. The cheaper electricity price should be balanced by cheap raw materials and transportation.
“In my opinion it is not easy to develop this project. Only very big investors who have the experience in REBID project can develop it,” he said.
Environmental Issue
One of the obstacle in the development of the Membramo hydropower plant is environmental issue. Executive Director of the Indonesian Forum for the Environment (Walhi) Papua chapter, Maikel Primus Peuki, said the construction of the Membramo hydropower plant has incited controversy and rejection from the local people and NGOs. He said the people worried on the environmental impacts of the project.
“We know that the construction will cause impacts that potentially destroy the environment because it is a large scale project,” he said, adding that the hydropower plant project is a gate for mineral processing industry.
