Widodo energy policy flounders

Coal provides the bulk of Indonesia’s energy. Source: Wikimedia

After taking office, Indonesia President Joko Widodo pledged to boost electricity capacity by two-thirds by 2019 to end persistent power shortages and blackouts but now the target is in doubt.

Postponed and cancelled tenders are hampering the proposal along with reversals on planned projects and confusion after Widodo backed the use of renewable energy.

This week Widodo signed off the financial closing for the Batang coal-fired power plant in Jakarta, as he insisted on investors’ commitment to complete the scheme by 2019.

It had been postponed several times over the past four years due to land procurement and licensing issues. When Widodo officiated the continuation of the project last year, he expressed his commitment to resolve the various issues hampering completion of existing projects.

“The financial closing has been signed, meaning the project is continuing despite being slightly later than I promised,” Widodo said in a statement. “Currently the government has resolved the existing issues. I call on investors not to postpone the project. It should be completed in 2019, according to the promises. I will follow through and surely will inspect it several times. I will follow up on such crucial issues.”

Uncertainty in government policy has angered the coal industry and project developers, and threatens to weaken Jakarta’s ability to attract finance for the US$132 billion of projects being proposed, say sources.

Indonesia is the world’s largest thermal coal exporter.

Government-owned Perusahaan Listrik Negara (PLN), was charged with implementing the planned 35-gigawatt programme by 2019 and Indonesia’s annual 10-year energy plan.

PLN last month controversially cancelled the 2,000-megawatt Java 5 power station in Serang, after seven multimillion-dollar bids had been submitted.

“It sends a very bad signal to the market. Investors want legal certainty,” Arthur Simatupang of the Association of Indonesian Independent Power Producers said.

State-owned mine owner PT Bukit Asam protested about a US$1.6-billion power station project and a high-voltage line which gained financing but which were omitted from a draft version of the new 10-year energy plan.

“Investor confidence has declined,” Bukit Asam CEO Arviyan Arpin explained. “It will become more difficult for other projects for companies, the government or businessmen or whoever wants to bring in foreign investors.”

The energy ministry announced that 16GW of power station schemes had been postponed. Widodo previously said that no infrastructure projects should be abandoned during his administration, as investors must be encouraged to provide capital to assist ventures.

Widodo controversially upped the contribution from renewable sources at last year’s Paris climate talks.

“We have submitted the draft twice or three times to the government but some changes have come from the government,” said PLN coal director, Harlen.

Coal was set to make up two-thirds of the energy demand by 2024 but Widodo cut that to 50 per cent after the climate-change talks.

“Developers and equipment suppliers have a tendency to bite their tongues. But if it happens three times or more, they will probably run for the exits,” said Bart Lucarelli, a coal expert Roleva Energy consultancy.