Project implementation of small and medium power producers under

This section presents findings from interviews with stakeholders and secondary data obtained during field work from 2011–2012. Thus, the material perceptions and views on the effectiveness of the renewable FIT regulations until 2012. It focuses specifically on the effectiveness of MR No. 1122/2002, MR No. 2/2006 and MR No. 31/2009, as most of the SMPPs interviewed for this research and the case studies from the literature operated during this period.

3.5.1Data sources and limitations

Several caveats need to be noted when discussing the data on SMPPs. One is that the

Annual PLN Statistics,the main source for data in the power sector, does not contain

25 _{See ASEAN Centre for Energy at http://www.aseanenergy.org/blog/will-new-feed-in-tariffs-allow-indonesian-}

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detailed figures on how many SMPPs have connected to the PLN grid. The reason is that power projects with less than 10 MW do not have to be reported in the national planning process (RUPTL). Thus, realised numbers of SMPP projects tend to be added on an ad hoc basis and sometimes with differing dates on commercial operation dates (CODs).

Given the lack of reported statistics, not all of the SMPPs could be captured in this research. As noted in Chapter 1, which summarises all the RE programs in Indonesia, many small hydropower or biomass projects in the Green PNPM or DME programs might have connected to the PLN grid or might sell their excess power to other parties, but reliable data on this were not available at the time of the research.

The data compiled for this chapter represents the number of projects which have been confirmed as having connected to the PLN grid, either in presentations by PLN, MEMR and industry representatives or interviews with stakeholders (see Tables A1–A3 in Appendix 3.1). Data on two major groups are presented. SMPPs are grouped into those with smaller than 1 MW capacity (SMPPS < 1 MW) or those with between 1 and 10 MW (SMPPs = 1–10 MW). This allows for matching the trends with the FIT regulations.

3.5.2Small and medium power producers (< 1 MW)

The data for SMPPs (< 1MW) are based mainly on information provided by IBEKA. The reason is that many of the small and medium hydropower projects with less than 1 MW capacity (SMHPPs < 1 MW) have been implemented with the help of IBEKA, an award- winning CSO devoted to grassroots empowerment using mini hydropower schemes. Thus, the statistics of SMHPPs below 1 MW are heavily skewed towards one major developer and do not characterise a multitude of players in the mini hydropower market. In total, 61 projects have been realised by 2011, but only eight non-IBEKA projects are among them (see Table A1 in Appendix 3.3).

IBEKA is a CSO specialising in community development by financing and implementing small hydropower projects (Interview 6). It has pioneered small hydropower development as a tool for rural economic development in Indonesia.26 _{IBEKA managed}

to implement 53 projects generating 3.8 MW in the period 1992–2010. The generation

26 _{Mrs Tri Mumpuni received the prestigious Ramon Mansasay Award, an Asian equivalent to the Noble}

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capacity of individual projects is small, ranging from a minimum of 5 kW to a maximum of 224 kW and with one larger project of 2 MW (see Table A1 in Appendix 3.3).

Most of these projects operate on a non-commercial basis aimed at widening the resource base of villages and expanding economic development. IBEKA helps to provide initial feasibility studies based on the community’s inputs and then tries to obtain the funds to finance the MHP plant. Most of these funds are grants, either from private or external donors, as this ensures that the community does not depend on loan arrangements and can manage the plant on its own in the longer-term (Interview 6).

Out of 53 projects, by 2011 only six were reported to have a PPA with PLN.27 _Tariffs

agreed for these projects were in the range of 432 IDR/kWh to 1000 IDR/kWh (4.8–11 cents/kWh at 9000 IDR/USD).28 _{They had to be negotiated individually with PLN, once it}

became clear in each case that the community wanted to sell the excess power to PLN. Usually, IBEKA would take the lead in those negotiations, as they have already established a good working relationship with PLN, despite their differing development approaches (Interview 6).29

3.5.3Small and medium power producers (1–10 MW)

There are two main groups of realised projects—SMHPPs and biomass/WTE SMPPs.

Appendix 3.3 shows that within the SMHPPs there are 12 IPP projects, and 10 projects run by PLN under a loan program of the ADB. The data on the private IPPs has been compiled from various reports and interviews. Data on four SMHPPs and two biomass/WTE SMPPs have been obtained from field interviews and reports. The data on the remaining six IPPs have been obtained from secondary literature.

27 _{These projects included Waikilosawah in West Sumatra in 1999; Ulu Danau in South Sumatera in 2005; Cinta}

Mekar in West Java in 2004; Curug Agung, West Java in 1995; Trawas in West Java in 2003; Krueng Kala in Aceh in 2006; Banyubiru Salatiga in Central Java in 2010 (Interview with Mr Iskandar, IBEKA and Ms Tri Mumpuni, Director of IBEKA).

28 _{The highest tariff was 1000.4 IDR/kWh for the mini hydropower plant in Krueng Kalla, Aceh. This power plant}

was constructed in the aftermath of the Tsunami in 2005 and PLN was reportedly willing to pay a higher price in the wake of the reconstruction process (Interview with Mr Iskandar, IBEKA and Ms Tri Mumpuni, Director of IBEKA).

29 _{In some cases, communities also presented an explicit interest to be connected to the grid, because PLN can}

help in maintaining their power plants (Interview with Mr Iskandar, IBEKA and Ms Tri Mumpuni, Director of IBEKA).

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The ADB-sponsored PLN SMHPPs have been obtained from ADB data, UNFCCC reports on CDM project preparations and interviews. The PLN projects are included to show some comparison of tariffs and costs between IPPs and PLN.

Table A3 shows 12 realised biomass/WTE projects. These were mainly reported in recent PLN and industry presentations, complemented by detailed information from interviews with two IPPs. The majority of those (seven) constitute projects that sell excess power to PLN and are, therefore, not long-term projects. Five projects are IPs with PPAs.

3.5.4Main trends

Table 3.2 shows the quantitative trends grouped into the three periods in which the FIT regulations were valid.30 _{The first policy period marks the regime under MR No.}

1895/1995. The second period is dominated by MR No. 1122/2002 and MR No. 2/2006. The third period starts with MR No. 32/2009 and the subsequent revised MRs, which have all mandated specific tariffs.

First, in terms of both number of projects (units of plants) and generation capacity, the third policy period has seen the bulk of the increase of SMPP investment. This suggests that investors responded well to the more detailed regulations that specified tariffs and were also differentiated across technologies and regions. Second, SMHPPs with less than 1 MW capacity represent the majority of projects in terms of numbers. Third, SMPPs (1–10 MW) in both hydropower and biomass sectors were barely existent in the first policy period (1995–2002) but increased markedly in the later periods. This suggests that the FIT regulations of 2006 and 2009 have provided incentives to investors. Fourth, the bulk of the SMPPs in the biomass/WTE sector have been implemented since 2010 and signed excess power contracts with PLN. These contracts are only limited to one year, per MR No. 4/2012. This suggests that PLN wants to be more flexible in its purchasing of excess power from IPPs and prevent being locked into long-term contracts. Fifth, given that the electricity generation sector has been open to IPPs and non-commercial private entities since the beginning of the 1990s, the market for SMPPs

30 _{See Appendix 3.3 which shows the detailed numbers. These represent the number of projects which}

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in RE is still fairly small and relies heavily on external financing mechanisms (see Tables A1–A2 in Appendix 3.3).

The next section will investigate the experience in project implementation and the perceptions of SMPPs and policymakers to shed some light on the factors explaining the above trends. Table 3.2: Realised SMPPs (1995–2013) 1995–2002 2003–2008 2009–2013 1995–2013 SMHPPs < 1 MW Units 24 21 16 61 MW 0.7 2.6 1.4 6.7 SMHPPs 1–10 MW Units 5 15 20 MW 25 79 104 Total SMHPP Units 24 26 31 81 MW 0.7 27.6 80.4 110.7 Biomass/WTE SMPPs 1–10 MW Units 1 3 8 12 MW 5 13 45 63 Total SMPPs Units 25 29 39 93 MW 5.7 40.6 125.4 173.7

Notes: SMHPP = small and medium hydro power producer, WTE = waste to energy, SMPP = small and medium power producer,

Source: Tables A1 and A2, Appendix 3.3.