ENERGY NEWS

Java Drought Raises Power Blackout Fears

Summary: Drought conditions have sharply reduced Java's hydropower production, lowering power reserves to dangerously thin levels. October will be the tightest month for power, with Java's rainy season not predicted to begin until the end of the month. State power utility PLN believes it can avoid blackouts by shifting demand to off-peak hours and purchasing captive power from industry. While such quick fixes may delay major power outages, the GOI must act decisively to boost power generation. Absent stronger action, next year's presidential elections could be taking place in the dark. End summary.

Drought Could Cut Hydropower By 75% 

Drier than normal conditions since May have dramatically reduced dam water levels and affected power production at Java's three largest hydropower plants. According to the Meteorology and Geophysics Agency (BMG), water levels at the Cirata, Saguling and Jatiluhur dams are near historic lows. Normally, hydropower plants at those three dams can generate 1880 megawatts (MW) of Java's 2550 MW installed hydropower capacity. However, state power utility PLN told us that the prolonged drought decreased hydropower generation by 1000 MW during the month of September. PLN estimates that hydropower losses would peak in October at about 1800 MW per day, a 75 percent drop. If the rainy season begins in late October as BMG predicts, PLN expects the hydropower picture to slowly improve, approaching full capacity by year's end.

Power Reserves Are Razor Thin 

Scant peak power reserves make the hydropower losses more keenly felt than would normally be the case. Although hydropower only accounts for 14 percent of the Java-Bali grid's total installed capacity, most of its use occurs during peak power periods. Java-Bali's peak power reserve margin averages 800 MW, or 6 percent, well below the industry-standard of 25 percent. PLN has confirmed that if hydropower generation declines by 1800 MW in October as predicted, the grid's power reserves could dip as low as 150-450 MW. With such a thin margin, unplanned power outages (e.g., mechanical failure) at even the smaller power plants would cause power interruptions. Such interruptions could range from controlled, limited power outages to more serious rolling blackouts throughout the grid.

Demand Management Creates Some Breathing Room... 

PLN is reducing power consumption and delaying maintenance schedules in order to avoid such a scenario. On September 7, the power utility announced it would offer discounts up to 25 percent for industrial users who reduce power consumption or shift electricity use away from the 6-10 p.m. peak demand period. West Java's largest industrial power consumer, Krakatau Steel, signed on to the plan and agreed to change its production schedule in order to shift 150 MW from peak to off-peak periods. The company also agreed to sell between 80-150 MW of captive power back to PLN, as needed. In another power-saving move, PLN will also delay maintenance on one of Suralaya's 600-MW coal-fired units from September to November (or later).

...But Quick Fixes Are Not Enough 

Such quick fixes could be enough to prevent major power outages, but small-scale, rolling blackouts have become a frustrating part of life in some areas of the country. PLN's Cirebon office in West Java plans to disconnect power to over 24,000 households that have refused to pay their bills for three consecutive months. Residents are withholding nearly $2.5 million in electric bills to protest PLN's frequent outages and poor customer service. In Lampung, South Sumatra, PLN disconnected power to 30,000 households last month for similar protests over rotating blackouts that affected businesses and home appliances. In an effort to improve the situation in Lampung, PLN is buying 12 MW of captive power each month from a private shrimp breeding company in South Sumatra.

Power Supplies Must Increase Too 

With the power demand expected to increase by seven percent annually through the rest of the decade, however, the GOI must take big steps to increase the supply side of the equation. A recent study by Cambridge Energy Research Associates (CERA) outlined four steps the GOI could take over the next three years to stabilize the power picture:

- Refurbish PLN's more aging plants to lift 600 MW from unreliable to reliable status by 2005;

- Complete the 600 MW gas turbine plant at Muara Tawar, West Java, for use in 2004;

- Free up 600 - 1200 MW of stranded capacity by finishing the 500 kilovolt (kV) southern transmission line in 2005;

- Complete a power purchase agreement with the Japanese on the 1320 MW Tanjung Jati B coal-fired plant and bring it online in 2006.

Of note, the GOI mentions three of these four recommendations in its post-IMF White Paper. As we report septel, however, the paper promises a lot and provides few details on how it will meet its targets.

Comment 

The drought and its effect on hydropower is only the latest issue to plague Indonesia's precarious power sector. As we have reported earlier, the GOI is moving slowly to correct industry deficiencies in areas such as pricing and tariffs. Absent stronger action to erase the cumulative effect of growing demand and lagging power generation, however, Indonesia moves closer to the brink each year. A senior energy official startled his audience earlier this week by admitting the lights would probably have to go out in order to generate real action. With a potential second round presidential runoff scheduled for September next year, the current administration may want to practice its rain dance and hope for a short dry season.

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