ENERGY NEWS

Medan's Power Situation Mirrors Jakarta's, Only Worse

(Date of Report: December 19, 2001)

SUMMARY:

North Sumatra has no electric power reserves, meaning that a turbine failure would lead to a blackout over a large area. North Sumatra and Aceh, which experienced such a blackout for a four-hour period in November, will see more frequent and longer blackouts in the future unless new generating capacity is added. The provincial government has commissioned a study to justify raising the tariff, something permitted under newly devolved powers. In the meantime, North Sumatra's governor is pressing the GOI to resuscitate suspended Independent Power Projects (IPPs). New power infrastructure investment, however, will not flow into North Sumatra until the tariff is raised to an economic level. End summary.

A Current Snapshot

North Sumatra's 1232 megawatts (MW) of installed capacity come from four main power generation plants (Belawan, Paya Pasir, Glugur, and Titi Kuning) and 9 MW of micro-hydroelectric power. The Belawan power plant runs a mix of conventional fuel oil-fired turbines and combined cycle gas turbines. Pertamina's Pangkalan Susu field supplies the natural gas for the combined cycle generators. Belawan has 1,077 MW of installed capacity but puts out 900 MW of actual power. The Paya Pasir, Glugur, and Titi Kuning plants, which use high-speed diesel fuel, add another 146 MW. The Sipansihaporas hydroelectric plant is scheduled to add 17 MW in 2002 and an additional 33 MW in 2003, while the Renun hydroelectric plant will come on line in 2005 with a total of 82 MW from two 41-MW turbines.

Dire Straits

Power demand on the Java-Bali grid is growing at a rate that could bring the reserve margin to eight percent by 2004. This is dangerously low, since the reserve margin needs to be around 30 percent to compensate for breakdowns of generating equipment, transmission interruptions, and necessary maintenance. In North Sumatra and the Medan provincial capital, however, the reserve margin is already zero. The breakdown of a single turbine would plunge a large area into darkness, an event which already happened in November for a four-hour period over North Sumatra and Aceh.

Table: Power supply (MW) -- 9% average demand growth (negative numbers in parentheses): 

IPPs Could be a Big Help

The picture could potentially be much better if Independent Power Projects (IPPs) planned for North Sumatra could be completed. State utility company PLN's projections forecast a greatly improved power situation if the Sarulla and Sibayak geothermal projects were completed in 2004 and the hydropower Asahan 1 and steam-powered Sibolga 2 projects in 2005. Sarulla is capable of adding 300 to 400 MW of which 165 MW is currently included in PLN's system planning. Sibayak's additional generator would add another 30 MW for 195 MW total. In 2005, Sibolga's two 100-MW generators and Asahan's single 90-MW generator would add another 190 MW total.

Table: 9% average demand growth scenario with IPPs (negative numbers in parentheses): 

We stress that PLN provided the above projection for illustrative purposes only and that there is no realistic possibility that the IPPs would be completed according to the above schedule. Presidential decree No. 5/1998 postponed many IPPs or put them under "review," including Sarulla and Asahan I. PLN and a subsidiary of U.S.-based Unocal Corporation are working to resuscitate the Sarulla geothermal project, but substantial progress cannot be made until other IPP issues have been resolved. Pertamina has the legal authority to complete the Sibayak geothermal project, but, like PLN and other state-owned enterprises, it is struggling to find capital for other higher priority needs. The Asahan hydro project and Sibolga are even further from any restart.

Local Government's Response

The local PLN office is struggling to find short-term solutions to add power generation, but has few prospective work-arounds. North Sumatra governor HT Rizal Nurdin made a well-publicized visit on November 29 to Jakarta to discuss North Sumatra's power situation with Energy Minister Purnomo. The governor pressed Purnomo for a modification of the presidential decree postponing completion of Unocal's Sarulla IPP. His visit followed lobbying efforts by other Medan and provincial representatives. The provincial government is already aware of lost investments, most notably a foundry, because of an insufficient electricity supply. North Sumatra has commissioned a Bandung Institute of Technology study to determine an appropriate regional tariff, allowed under new decentralization legislation, which should be completed in mid-2002.

COMMENT

The power shortage problem in Medan and North Sumatra is another lingering effect of Indonesia's economic crisis. The rupiah, once Rp 2,500/$, is now at about Rp 10,000/$, but many prices with large imported inputs, particularly for government or SOE-provided services, have not risen the fourfold needed to compensate for the decline. The average electricity tariff is now about Rp 350/KwH or about 3.5 cent/KwH, still short of the 5-6 cents/KwH electric-production costs of even the most efficient utility in developing countries. New investment to add generating infrastructure will not flow into North Sumatra, no matter how accommodating the provincial government, until the electricity tariff rises sufficiently to provide a reasonable return on investment. The North Sumatra government needs to move quickly to implement a higher regional electricity tariff.

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