Less headwinds for renewables now, says Indonesia pioneer

Historically, the prospects of getting commercial projects up and running in Indonesia’s renewable energy sector were bleak, with the government and state power utility lacking expertise and offering little support.

JAKARTA: The developer of Indonesia’s first commercial-scale wind farm says conditions for renewable energy investors are better now than ever before, but more work is still needed for the country to achieve its wind energy targets.

Historically, the prospects of getting commercial projects up and running in Indonesia’s renewable energy sector were bleak, with the government and state power utility lacking expertise and offering little support.

But over the past three years, technology costs have come down and the government has become more supportive, said Soeripno Martosaputro, project development manager for UPC Renewables Indonesia.

UPC is developing the archipelago’s first wind farm at Sidrap on the island of Sulawesi. The 75-megawatt (MW) site is expected to be operational next month, said Soeripno.

“It was super-duper hard to get a power purchase agreement,” said Soeripno, referring to pricing agreements between independent power operators and the country’s sole power off-taker, state-owned utility Perusahaan Listrik Negara (PLN).

“It used to be take it or leave it. Now there is dialogue,” said Soeripno, “It’s much, much better.”

Online licensing systems have cut processing times, improved transparency and made it far easier for renewable energy developers, who need hundreds of permits for wind farms, Soeripno said.

Indonesia has set targets for renewables to make up nearly one-quarter of its energy mix by 2025 from around 12 percent at present, with around 1,800 MW of wind projects targeted for completion.

Southeast Asia’s largest economy has attractive demographics and surging power demand, but wind energy development has been sluggish compared to its neighbours.

Thailand, for comparison, is targeting 3,000 MW of wind energy by 2036, up from around 615 MW in 2017.

SENSITIVE PRICING

Wind research began at the Sidrap site in 2005, but it was not until 10 years later that UPC obtained a power purchase agreement with PLN.

In January 2017, the company commenced construction of foundations for 30 Siemens Gamesa wind turbines at an estimated cost of $150 million, with funding from the Overseas Private Investment Corporation (OPIC).

UPC is now eyeing a power off-take deal for another 30 turbines at the same site.

“We proposed 75 megawatts, but it’s still in negotiation. It could go bigger or lower,” Soeripno said, noting that pricing was still a “sensitive issue”.

Indonesia has the potential to supply 9.3 gigawatts of power from onshore wind sites, according to the country’s Ministry of Energy and Mineral Resources.

UPC has signed a memorandum of understanding with PLN and the government to develop at least 350 MW of wind farms by 2025.

However, Indonesia will not be able to achieve its renewable energy targets if renewables must compete with fossil fuels on the same basis, Soeripno said.

Indonesia caps the price for renewable electricity projects at 85 percent of the average electricity cost in that region. But renewables developers say this system gives coal and natural gas an unfair advantage and ignores the environmental and social impacts of fossil-fuel projects.

PLN also limits the amount of renewable energy it buys because of strains renewable energy sources can put on ageing infrastructure, Soeripno said.

“We are still left behind with these rules that make things a bit slow to develop.”

Source: Reuters