BUSINESS INFRASTRUCTURE ON RENEWABLE ENERGY POWER PLANT. Indonesia Clean Energy Development (ICED) Project. Bill Meade 13 March 2013

Transcription

1 BUSINESS INFRASTRUCTURE ON RENEWABLE ENERGY POWER PLANT Indonesia Clean Energy Development (ICED) Project Bill Meade 13 March 2013

2 ICED s approach in developing the Clean Energy Sector in Indonesia Clean Energy Sectors / Market 1 Policy & Coordination Enabling a conducive policy environment to develop CE projects 2 Project Development Provide technical assistance to all stakeholders in developing CE projects Government / Policy Makers PLN (Utilities Company) Private Sectors Capacity Building & Public Outreach Developed capacity to all stakeholders & increase CE awareness Archive number 3 ICED Target 4 million tons CO2e avoided 120 MW installed capacity At least $120 million public and private funding leveraged At least 20 small and medium sized projects implemented 1.2 million persons with increased access to clean energy $250 million in reduced subsidy due to tariff increase and replacement of diesel fuel 3

3 Indonesia has opportunities and challenges in developing small scale CE Projects Indonesia Condition Abundance of renewable energy resources (rivers, ag. waste, solar etc) Electricity capacity shortages, unserved communities Rising cost of oil, natural gas and coal Government targets for RE, EE and GHG emissions reduction CE Development Opportunities Established feed in tariff rate PLN required to off take electricity GOI direct appointment to developer Standard Power Purchase Agreement Reduces subsidy to PLN by reducing use of diesel Banks, FIs and private equity financing ICED Approach Improve policy framework at national and regional level Improve PPAs & other agreements Link financing sources with high quality projects and companies Show case success stories, share lessons learned CE Development Challenges Lack of Project Financing Undercapitalized developers/sponsors with limited track record; Limited operating projects as examples Limited domestic capability in equipment and services 1

4 4 Key Partners Key Activities Key Deliverables Government Private Sectors Others MEMR - DGREEC Ministry of Agriculture Bank of Indonesia Indonesia Investment Agency Bappenas / Bappeda Provincial Governments Regency Governments PLN Headquarter PLN Wilayah 25 Mini Hydro Power Project Developers 3 Mini Biogas/Biomass Power Project Developers 2 Energy Efficiency Project Developers 6 Banks and Financial Institution Development Agencies & Donors NGO Research Institution Policy & Coordination Energy policy review Green Banking PPA Review Provincial Energy Planning Project Development RE Projects technical documents review; RE Projects site visit review; RE Projects advisory; Facilitating access to finance Geo-reference database for RE projects Capacity Building Review Small RE projects for bankers & developers; Energy Planning LEAP Energy Policy Report EE Policy and Program Review Review of current standard PPA PLN Report on RE Development Energy Sector RAD GRK North Sumatera 26 Clean Energy Projects receive full technical assistance in ICED Pipeline 10 Project Memorandum Review on Project Documents 1 Pre-feasibility study for Biogas GIS Mapping North Sumatera 2 RE workshops for developers 3 RE workshops for banks 2 RE workshops for PLN 5 LEAP training for Provinces 3 events on RE and Green Banking

5 The small power market is expected to make a significant contribution over the next years. Installed Capacity from RE Small Power Projects Discovery Phase Growth Phase Maturity Phase Megawatts (MW) ICED 0

6 RE Small Power market is shaped by stakeholders 6 ICED Partners in Small Power Market Business 26 Hydro Developers 4 Biogas Developers 2 Biomass Developers 1 EE Consultant 3 Corporation Financing Bank Indonesia 3 Commercial Banks 2 Syariah Banks 5 Non Bank Financial Institutions Policy Ministry Energy Ministry Agriculture Bappenas PLN Pusat & Wilayah Provincial & Regency Governments Observations Limited number of successful operating grid-connected projects Projects are characterized as small but complex in terms of site, resource and technology Growing interest from both domestic and foreign sources of financing Challenges in raising equity and with bank loan collateral requirements Regulatory uncertainty (Feed in Tariffs) stalling development activities Greater capacity needed in developers, banks/fis, PLN, Provincial/Regional government

7 Characteristics of the Small Power Market Hundreds of small scale (< 10 MW) projects under development throughout Indonesia Utilizing distributed, indigenous renewable energy resources such as run-of-river hydro, biomass, biogas, city waste, solar and wind Sponsored by entrepreneurs, small business, industries, agribusinesses and technology providers Mobilizing many new sources of debt and equity for financing Collectively resulting privately-financed infrastructure, reduced energy sector emissions, reduced subsidy for electricity, and greater energy security for Indonesia

8 ICED project inventory status as of December 2012 ICED Project Inventory By Provinces (Number of Projects) Total 158 Projects ICED Project Inventory By Provinces (In Megawatt Equivalent) Total 1,240 Megawatts ACEH NORTH SUMATERA RIAU OTHER PROV ACEH NORTH SUMATERA RIAU OTHER PROV BIOGAS BIOMASS EE HYDRO WIND BIOGAS BIOMASS EE HYDRO WIND

9 ICED project Pipeline status as of December 2012 ICED Project Pipeline (Number of Projects) Total 57 Projects ICED Project Pipeline (In Megawatt Equivalent) Total 337 Megawatts 254,2 23,3 39,4 17,5 42, ,8 34,4 30,0 4,0 26,0 131,5 BIOGAS BIOMASS EE HYDRO BIOGAS BIOMASS EE HYDRO CONSTRUCTION OPERATING PROPOSAL CONSTRUCTION OPERATING PROPOSAL MOU PPA MOU PPA

10 ICED project pipeline status as of December 2012 ICED Project Pipeline By Provinces (Number of Projects) Total 57 Projects ICED Project Pipeline By Provinces (In Megawatt Equivalent) Total 337 Megawatts ACEH 24 NORTH SUMATERA RIAU OTHER PROV ACEH NORTH SUMATERA RIAU OTHER PROV BIOGAS BIOMASS EE HYDRO BIOGAS BIOMASS EE HYDRO

11 Underlying Laws/Regulations: Electricity Law 30 of 2009 Electricity Law 30/2009 was enacted to replace Law 15/1985. Law 30/2009 incorporates the principal changes in Indonesian infrastructure regulation that have occurred since the period of reformasi that began in the late 1990s including sector liberalization and regional autonomy. Among other things, the Law: No longer designates a special role for a state-owned enterprise (BUMN, Badan Usaha Milik Negara) to carry out electricity supply apart from being given priority to serve an area. Other entities that may carry out electricity supply include Regional government-owned enterprises (BUMD, Badan Usaha Milik Daerah), private enterprises, cooperatives and self-reliant communities (through a legal establishment). Devolves authority for tariff setting and licensing to regional governments under certain conditions, i.e., where the electricity business activity is entirely within a province or a kabupaten/city, and does not entail the sale of electricity to an entity licensed by the GOI. Gives preference to the use of new and renewable energy resources, taking into account economic considerations. Obliges the GOI to create national electricity policies and a national electricity plan that incorporates inputs from regional government. Requires the GOI and regional government to provide funds for the supply of electricity in poor areas, areas not already served, rural electrification, etc. P11

12 Underlying Laws/Regulations: RE Pricing Regulation Feed in Tariff (Rp/kWh) Biomass/Biogas - Rp 975/kWh (medium voltage) - Rp 1325/kWh (low voltage) Zero waste (garbage to energy) - Rp 1050/kWh (medium voltage) - Rp 1398/kWh (low voltage) Landfill gas (methane to energy) - Rp 850/kWh (medium voltage) - Rp 1198/kWh (low voltage) All other RE technologies - Rp 656/kWh (medium voltage) - RP 1004/kWh (low voltage) MEMR Regulation 4/2012 Implementing Law 30/2009 on Feed-In Tariff for RE Regional Adjustment Java, Madura, Bali, Sumatera (F=1), Sulawesi, Kalimantan, NTB, NTT (F=1.2), Maluku and Papua (F=1.3) No regional adjustment No regional adjustment Java and Bali (F=1), Sumatera and Sulawesi (F=1.2), Kalimantan, NTB, NTT (F=1.3), Maluku and Papua (F=1.5) Factor (F): geographic multiplier The regulation allow for higher negotiated PPA price, but subject to approval from MEMR For excess power, contracted capacity can be larger than own use P12

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15 Typical Project Structure Construction Contractors (civil, M&E, or turnkey) Fuel (feedstock, waste, etc) Supplier EPC Contract FSA Project Sponsor Equipment Suppliers Project Company Equity LTSA PPA Debt Lenders (Banks/Financial Institutions) An off-grid project uses the output for its own purpose or sell it to the local communities PLN Unless the Project Company is a captive power producer (i.e. use the generated electricity to serve its own base load, and sell the excess to PLN), PLN will not allow project company to sell power to any other third party; Project Stakeholders Small scale renewable energy project may connect to PLN grid and sells its electricity output to PLN as the sole off-taker; Project sponsor provided equity to the Project, typically 20-35% of total investment cost; Lenders provided debt financing to the Project, typically 65-80% of total investment cost; RE project may have fuel supply arrangement with a third party (e.g. palm-oil shell/rice husk in biomass power plant, or water levy charged by local government in case hydro power plant) Project Company may hire several contractors for construction, covering civil and mechanical & electrical (M&E) works, or if it wants to shift construction risks to the contractor, hire a single turnkey engineeringprocurement-construction (EPC). For project with larger capacity, Project Company may want to enter into a long-term service agreement (LTSA) with Equipment Suppliers to shift equipment operation and maintenance risks to the Suppliers P15

16 Overview of Hydro Power Plant: Layout and Components Typical Hydro Power consists of some components as follows: 1. Pond: an area of water 2. Weir: a wall built to deviate water from river into channel in a controlled way 3. Channel: a passage for water to flow along 4. Tunnel: a long passage of water under the ground 5. Surge tank (forebay): a small reservoir at the head of the pipeline to limit water flow oscillation 6. Penstock: an enclosed pipe that delivers water into hydraulic turbine 7. Powerhouse: a structure where potential energy is converted into electricity 8. Tailrace: waterway that carries the water from the turbine (or draft tube) to the natural watercourse Catchment area is the area of land bounded by watersheds draining into a river/basin/reservoir, or the area that absorbs water that contributes to the supply of a river. Catchment area of the river that supply water for a hydro power plant should be maintained to ensure continuous supply of water into the river, hence secure the continuous power generated from the power plant. Tailrace Diagram of small scale hydro power system Source: sq-one.co.uk P16

17 Hydro Power Classification Category Output/Unit Type Generation Type Investment Cost (US$ thousands/kw) 1 Micro < 100 kw Run-of-river Base load Mini 100 kw 1 MW Run-of-river Base load Small < 10 MW Run of river Base load (wet)/ intermittent (dry) 4 Medium MW Run of river Base load (wet)/ intermittent (dry) 5 Medium MW Dam and reservoir 6 Large > 300 MW Dam and reservoir Base and peak 2 3 Base and peak 2 3 Operation: Generation cost 5 10 cent USD/kWh Life time years, Many hydropower plants built 50 to 100 years ago are still operating today. Hydropower is the most proven, efficient, flexible and reliable source of electricity based on more than a hundred years of experience. Upgrades and refurbishment can readily extend lifetime of plants which contribute to the low cost of electricity from hydropower. P17

18 Biomass Technology and Equipment: Technology Status Source: IEA Bioenergy 2009 P18

19 Choice of Technology and Equipment Generating electricity by burning biomass to produce steam to turn turbine and generate electricity Electricity Biomass Boiler Steam Dust Bag Ash Direct biomass combustion for steam power plant is a mature and proven technology Power plant efficiency is quite small (for size of 5-15 Mwe): 20% to 27% Technical issues: Choice of equipment vendor/supplier Choice of site Choice of fuel Source: Takuma P19

20 Biomass Gasification Power Plant Generating electricity by converting solid fuels into combustible gas mixture of CO + H 2 + CH 4 to be burned in a gas engine Source: Nexterra Composition of Gas From Commercial Wood and Charcoal Gasifier Component Wood gas (volume percent) Charcoal gas (volume percent) Nitrogen Carbon monoxide Carbon dioxide Hydrogen Methane Gas Heating value (kj/m3) 5,000 5,900 4,500-5,600 Source: FAO (1986) P20

21 Biogas Process & Production System A variety of feedstock can be used: animal manure, agro-industrial wastes, etc. The effluent can be used for irrigation; the settled solids can be used as fertilizer Different technologies are available depending on feedstock characteristics, climate, cost, etc. Biogas uses include: electricity generation, heating, lighting, cooking gas, etc. Source: Agstar manual, 2002 P21

22 Importance of RE PPA with PLN Why is the PLN Power Purchase Agreement important? 1. The PPA constitutes the basis for defining the revenue stream for the Small Scale RE Project in terms of sales (kwh), price (Rp/kWh), payment stream, and duration (years). 2. PLN is the sole off-taker purchaser of the RE IPPs output. Note that it is also possible to have a captive IPP that is inside the fence of an agricultural or industrial facility. 3. Signing the PPA is an important milestone in the RE IPP development process. The PPA defines the Project Implementation schedule (financing, construction, commissioning, COD deadlines), operating conditions, and RE IPP responsibilities. 4. The PPA will cite all applicable permits and approvals as condition precedent for the PPA to become effective. 5. By signing a PPA, PLN DOES NOT assume any responsibilities for the technical or financial feasibility of the Project. Therefore, it is the Sponsor and its financiers that assume all risks associated with the design, construction and operation of the Project. Note: Analysis based on Draft Power Purchase Agreement, April 2012 P22

23 Project Development Stages 6-12months 7-8 months Max 1 Year 1-2 Years Project Initiation Feasibility Study PPA Financing Constructi on COD Small-scale renewable energy Independent Power Project (IPP) may take 3 to 5 years from the project initiation to commercial operation date (COD), during which Project Sponsor would have to identify project opportunity, conduct feasibility study, obtain all relevant permits, enter into a Power Purchase Agreement (PPA) with PLN as the traditional off-taker, reach financial closure, and implement the construction work. Under the MEMR Regulation No. 14/2012, Project Sponsor may enter into a PPA with PLN through a direct appointment process, using a standard renewable energy Power Purchase Agreement (PPA) for a fixed term (period) and at power purchase prices set by regulated feed in tariff (FIT) under MEMR Regulation No. 4/2012. While purchase price is fixed, it can be levelized or front loaded per guidance from PLN Director Decree. The PPA process has been standardized, and includes interaction with PLN and Ministry of Energy and Mineral Resources (see diagram at the next page) P23

24 PPA Process for Small-Scale RE Projects DIRECT APPOINTMENT METHOD PLTM IPP < 10 MW DEVELOPER PLN UNIT CENTRAL PLN MEMR DIV EBT MAXIMUM TIME PROPOSAL - KKO, KKF, AR - CANDIDATE EVALUATION proposal submission is 45 days after receiving the RFP PROPOSAL DIRECT APPOINTMENT DOCUMENTATIONS DUE DILIGENCE proposal submission is 45 days after receiving the RFP PROPOSAL DIRECT APPOINTMENT APPROVAL FOR DIRECT APPOINTMENT 90 DAYS PROSES TEMPORARY IUPTL TO MEMR AWARD (WINNER) SUBMISSION TO PLN UNIT A Source: PLN Presentation on Kontrak Pembelian Listrik PLN Untuk Pembangkit Listrik Skala Menengah dan Kecil APPROVAL OF TEMPORARY IUPTL 30 DAYS Approval for IUKUS/IUPTLS P24

25 ICED is assisting its partners in realize the potential of RE small power Identifying potential projects, reviewing feasibility studies, training in assessing project viability and due diligence GIS mapping of resources, projects, substations and 20 kv network Maintaining an inventory of proposed RE projects under development, sharing with interested banks and investors Supporting the development of standardized PPA(s) and interconnection procedures, guidelines and agreements Facilitating meeting between ICED partner RE developers and Banks/FIs Calculating the contribution of RE projects in terms of capacity, investment, subsidy reduction, access, and GHG emissions

26 For more information, contact: Bill Meade, Chief of Party ICED Project