Regulatory uncertainty Impedes 35,000 Program: APLSI Survey

Thursday, 08 June 2017 , 12:00:00 WIB - Economy

Employees are seen at the PLTU Sumbawa steam power plant in Kertasari Village, West Nusa Tenggara, Thursday (1/6).(ANTARA)

JAKARTA, GRES.NEWS – The Indonesian Independent Power Producers Association (APLSI) revealed three challenges faced by the government in developing the electricity sector: Regulatory uncertainty, lack of coordination between ministries and management issues in the 35,000 MW Program, according to the association’s survey held in cooperation with PwC Indonesia, recently.

The respondents in the survey included people from Independent Power Producers (IPP) operator companies, power plant contractors, state-run companies and in the government.

Investors are beginning to notice the government’s seriousness in dealing with issues in the electricity sector.

Investors we surveyed say they have noticed how the government is supporting investments in the electricity sector and is working hard to improve the country’s investment climate, said Yanto Komarudin from Power & Utilities Partner PwC Indonesia, in the press release on the survey results.

However, the government revises regulations too often. Therefore, investors are hoping for better planning, certainty in procurements and certainty from the government.

"The respondents say that positive polices, such as improved risk allocations in Power Purchase Agreements (PPA), would support the electricity ratio expansion effort and electricity supply reliability," Yantos said.

The survey also revealed that 67 percent respondents are worried about electricity supply in the next five years. Their worry is consistent with news about progress of the 35,000 MW Program, which may not be completed on time.

Some respondents mentioned three global megatrends influencing Indonesia’s electricity sector, namely population growth, emerging megapolitan cities and disruptive technologies. Indonesia’s economy continues to grow and the population has already reached 250 million.

"As a result, demand for electricity is climbing every year. Indonesia is faced with huge electricity demand, " Yanto said.

STILL RELYING ON COAL – Looking at the fact that the government is mostly building steam power plants, Indonesia will likely continue to rely on coal, according to APLSI. Coal reserves are abundant in Indonesia and the commodity is available at cheap rate price. Up to 60 percent of the power plant projects included in the in the 35,000 MW Program are steam power plants.

However, respondents in the survey expect sustainability to take over supply as the main issue. Hence, shift to renewable energy can be expected in the next decade.

Sixty-nine percent of the respondents say there have been improvements in policies on cooperation between the government and the private sector.

Although numerous challenges still exist, the respondents remain confident that more improvements will come that will open more opportunities.

However, the electricity sector will continue to progress sluggishly until the government can introduce a more attractive investment model for investors and provide regulatory certainty.

APLSI acting chairman Arthur Simatupang hopes the survey report can provide inputs for the government in developing its electricity sector.

"We see many improvements are urgently needed to accelerate the expansion of Indonesia’s electricity sector," Arthur said.