PLN signs PPAs for 53 renewable projects, falls short of target

State-owned electricity firm PT PLN signed on Wednesday power purchase agreements (PPAs) with independent power producers (IPPs) for the development of 53 renewable-based power plants with combined capacity of around 400 MW.

PLN initially expected to sign a total of 64 PPAs, but 11 IPPs canceled signing the agreement, possibly due among others to disagreement over the tariff of electricity to be sold to PLN.

PLN Strategic Procurement Director Nicke Widyawati told a press conference that most of the signed PPAs are for micro hydro power plant projects (PLTMH). ?PLTMH around 300 MW, PLTBm (biomass-based power plants) 50 MW, and PLTS (solar) 50 MW,? she said.

Nicke acknowledged that 11 IPPs canceled signing the PPAs, but have yet to provide reason to PLN. She dismissed suggestion that the IPPs have been forced to sign the PPAs.

Earlier reports said that many IPPs wanted to postpone signing the PPAs following reports quoting Deputy Minister of Energy and Mineral Resources Arcandra Tahar that the ministry will revise controversial ministerial regulations in the mining and energy sectors including power that have discouraged new investment. Arcandra made the remarks following criticism from President Joko Widodo of controversial regulations issued by the ministry that move against efforts to lure fresh investment in the energy and mining sectors.

The renewables industry players have particularly protested Ministerial Regulation No 12/2017, which limits the tariff of electricity from most renewable power plant projects at 85 percent of the PLN regional electricity supply cost (or BPP), saying that the limit would make many renewable projects to be less commercially feasible except in the eastern part of the country where the regional BPPs are still higher than the national average. The policy was aimed to gradually help bring down electricity price for consumers. The industry players are also waiting for the revision of Ministerial Regulation No 10/2017 on the basics of electricity sales and purchase agreement. Arcandra made the remarks following criticism from President Joko Widodo of controversial regulations issued by the ministry that move against efforts to lure fresh investment in the energy and mining sectors.

Nicke said that the procurement for the aforementioned small-scale renewable projects started a year ago, and in June (before Arcandra made remarks) the IPPs signed MoU for the projects, meaning they basically have agreed on the tariff system. She added that the projects were proposed to PLN by the IPPs.

Nicke said that PLN has yet to decide whether it would continue to negotiate with the 11 IPPs which failed to sign the PPAs on Wednesday, or would drop their projects.

Earlier reports said that PLN would discontinue the projects of IPPs failing to sign the PPAs.

PLN is seeking to expand renewable projects in the country to help meet the government?s target for renewables to account for up to 23 percent of the country?s energy mix by 2025, and also to increase power supply in remote regions.

Editing by Reiner Simanjuntak