October 5, 2017 Read More →

On the Blogs: Indonesia’s Coal-Overbuild Problem

Mongabay.com:

Signs that Indonesia is heading for an oversupply of electricity have prompted renewed calls from activists for the government to cut back plans to build more coal-fired power plants.

Electricity sales by state-owned power utility PLN  grew less than 3 percent to 146,366 gigawatt hours (Gwh) in the first eight months of this year, compared to 7.45 percent growth in the same period of last year, according to company director Ahmad Rofiq.

Government officials and environmental activists alike point to sluggish economic growth as the cause of the low demand.

Flagging demand means PLN currently has a glut of idle electricity capacity. Experts have warned this situation could cause serious financial damage to the company, and by extension to the state. Under so-called capacity agreements signed by PLN and Indonesian energy providers, the government is committed to paying private power-plant developers a fixed fee based on generating capacity rather than actual production.

In a letter leaked to the media in late September, Finance Minister Sri Mulyani Indrawati warned of mounting risk and debt at PLN, calling for plans to expand the country’s electricity infrastructure to be scaled back.

However, problems with financing coal will not necessarily compel the government to focus more on renewable energy, said Yulanda Chung, an energy financing expert from the Institute for Energy Economics and Financial Analysis (IEEFA), in August.

Because PLN is already obliged to pay for idle electricity generated by coal-fired power plants, the company would prefer to recoup costs by offering it to customers rather than investing in developing renewable-energy plants, said Chung.

More: Activists spy silver lining as officials warn of financial clouds over coal-fueled grid

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