July 1, 2020 Read More →

Sumatra hydropower investors discouraged by PLN power cap

The Jakarta Post:

Hydropower plants developers have expressed their concerns over the decision of state-owned PLN, their plants’ offtaker, to place a cap on power production amid weak electricity demand in Sumatra, saying it might deter investments.

They had received a letter from PLN, the nation’s sole power distributor, on Feb. 4, ordering them to lower their production to the minimum levels set in their respective Power Purchase Agreements (PPA) with PLN.

With the limit in place, the plants can produce no more than 260,391 megawatt hours (MWh) of electricity each year, 13 percent lower than actual production levels last year, according to documents obtained by The Jakarta Post. 

“Legally, PLN only needs to comply with the minimum production written in the contracts,” said energy analyst Elrika Hamdi of the Institute for Energy Economics and Financial Analysis (IEEFA).

IEEFA estimated in a recent report that payments to IPPs will become PLN’s largest operating expense by 2021, exceeding the company’s own spending on fossil fuels.

Elrika also pointed out that according to the 2009 Electrification Law, PLN was obligated to prioritize buying electricity from renewable energy plants over fossil fuel-fired plants.

“But in a situation with low demand and an oversupply, it makes sense if PLN prioritizes contract-bound obligations first,” she noted. 

[Norman Harsono]

More: ‘It sends a negative message’: Hydropower players lament PLN power cap in Sumatra

Posted in: IEEFA In the News

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