Presentation of. Clean Energy Asia 2013: Renewable Energy Policies in Indonesia A Report Card. Mini hydro power plants

Transcription

1 Presentation of Mini hydro power plants Answering Indonesia s power crisis with renewable energy solutions Micro hydro power systems Clean Energy Asia 2013: Renewable Energy Policies in Indonesia A Report Card Terrasys Energy has created a hydro development pipeline that will reduce overall development time and bring the maximum generating capacity on line in the shortest period of time 1

2 Largest economy in ASEAN US$, billions GDP Export s Singapore Malaysia Viet nam Thailand Phillipines Indonesia resilient economy Source : Global Insights Economist June 2009

3 Low per capita consumption of electricity MWh/ Year , , Singapor e Brunei Malaysia Thailand Viet nam Philippines Indonesia Laos Myanmar Cambodia Aust ralia Taiwan Sout h Korea Japan For year 2005 Source: CIA World Factbook

4 Recurring blackouts plague Indonesia Average daily blackout duration (hours), Aceh 3 Padang Medan 4 3 Jambi Bandar Lampung Pekanbaru Banten Palembang 2 3 Jakarta West Kalimantan Madura Central Java 2 3 Central/South Kalimantan 5 Bali Palu East Kalimantan Makassar Manado Note: includes recurring outages due to supply constraints and/or equipment failure A legacy of underinvestment Source: GE Energy region marketing; local media

5 Government agenda in energy sector Capacity Development Rural Electricity Optimal Services Energy Conservation Renewable Energy Assure adequate electricity supply for the medium term. Support new and renewable energy utilization. Increase the capacity of transmission & distribution system. Facilitate the implementation of investment / financing energy infrastructure. Alternative energy utilization in rural areas. Support local government to establish institution for social electricity Allocate subsidy for poor customer Prepare investment services system in the electricity supply business. Prepare electricity tariff setting mechanism and pattern. Carry out dissemination of policy & regulations for electricity supply business. Set policy & regulations for energy conservation Promote energy efficient equipment & technologies. Develop energy efficiency and conservation clearinghouse. Enhance utilization of renewable energy. Review primary energy source potential for electricity generation. Develop energy self-sufficient village. Develop new and renewable energy clearinghouse.

6 Increase in power generation demand GW 60 PG Capacity in GW 8 Additional Power Generation by plant type Hydro GW 8GW 6GW 7GW 5GW 5GW 60 GW GT/CC 1.1 Geo-0.1 Hydro-0.2 CC 0.4 Geo 0.4 Coal Fired 6.4 Coal Fired 4.5 Hydro-0.3 CC 1.1 Geo 0.8 Coal Fired 4.9 Hydro-0.1 Geo 0.7 Coal Fired 4.0 Hydro 1.0 Geo 0.8 Coal Fired BUT there is still more Mini-Hydro potential.

7 Selected Hydro Potential in Indonesia Run of the River Hydro Project Potential Capacity (MW) , , ,511 MW total or 3,826 MW if Papua is excluded 7

8 Investment plan for electricity U$MM 10,146 10,000 9,000 8,000 7, ,431 9, ,050 8,934 1,029 1,408 8,185 1,110 7,890 1,193 Distribution 6,000 5,000 1,867 1,532 Transmission +Sub station 4,000 3,000 2,000 7,672 7,170 6,407 5,111 5,061 Generation 1, Renewable Plan is one thing execution is another story.

9 Government policy the good Electricity law specifically decentralization of authority to district level Definite pricing schedule for IPPs less than 10MW Ministry of Finance Decree on Incentives for Renewable Energy Focus on renewable energy and importance in a national energy mix and REDD policy 9

10 Government policy the not-so-good The Electricity Law leaves many questions and fails to address core regulatory issue Uncertainty on PPA terms Uncoordinated policy between ministries Slow implementation of new law 10

11 Private sector funding gap Risk Developers need Pre-feasibility Feasibility study Amount of funding PPA Operating plant Funders supply Time Most international project funders are looking for larger low-risk projects: - the 100/100 Rule - funds at the PPA stage not before No significant risk-based venture capital for early-stage project development However, projects need $500,000 + to get to the PPA stage 11

12 Project Value Typical stages and value chain of a hydropower project Maximum value uplift CAPEX intensive Steady cash flow Stage 1 is the Pre Feasibility Study ( FS ) stage which entails an initial analysis and obtaining necessary permits (Izin Princip, etc.) Stage 2 involves conducting full- FS, formulation of land acquisition strategies, and obtaining the KKO KKF from PLN Stage 3 entails obtaining final permit (Izin Locasi) from local government), and other remaining permits, detailed engineering, FEED and EPC works, land acquisition, negotiation of PPA, final signing of PPA and financing Stage 1 Stage 2 Stage 3 Stage 4 Production Stage 4 is construction and finally commissioning FS, KKO KKF and other Permits, FEED & EPC plan, Land acquisition, PPA and Financing Construction & Commissioning Production & Maintenance Maximum contribution to the value of the project occurs during Stages 2 and 3 which are relatively high risk compared to Stages 4 and 5 which have lower risk but provide limited upside

13 Hydro Power Risks Legal Local Government permitting process - Not consistent - Local laws and taxes - Multiple licences Land acquisition - Unclear title Forestry permits - Local, regional and national Customary law - Land rights - Water rights 13

14 Hydro Power Risks Financial Local banks still new to hydro project funding - Personal guarantees Feed in tariff uncertainty - Higher hydro tariff expected but not yet out. Interest rates still high 12% to 14% Payment risk from PLN - No defaults since Asian Financial Crisis, but concerns remain. Exchange rate risk 14

15 Hydro Power Risks Environmental Upstream watershed quality - Degradation of upstream forests of greatest concern Seismic Activity - Many of the potential projects are in high seismic activity zones 15

16 Recommendations Private sector Early project development funding needed Project pools to increase size and reduce risk Improved lending practices and understanding of renewable energy risk and funding cycles Integrated projects - REDD - Pico/micro with mini hydro - Community supplied raw materials...take greater early risk mitigate it with more bets. 16

17 Answering Indonesia s power crisis with renewable energy solutions Arian Ardie, CFO arian@terrasysenergy.com 17