Velcan puts on hold Sukarame power project
Monday, March 14 2016 - 12:14 PM WIB
EPA-listed Velcan S.A. announced on Monday that it had put on hold the pre-construction activities of its Sukarame hydropower project in Lampung because until now public utility PT Perusahaan Listrik Negara (PLN) (Persero) still refuse to sign a power purchasing agreement (PPA) for the project.
In September last year, the firm announced that it had started the pre-construction activities of the power project, after an increase in tariff for small power plants (with a capacity under 10MW) was issued by the Ministry of Energy and Mineral Resources under Government Regulation No. 19/2015 dated June 29, 2015.
PLN, as the sole authorized buyer in Indonesia, was assigned as per the regulation to purchase electricity produced by any small power plant at a fixed, non-negotiable price per kWh.
As per the regulation, PLN had 30 days to issue the corresponding PPA standard contract. However, as of today, PLN has not proposed such contract. According to the ministry, PLN is refusing to comply with this regulation and to buy the power, claiming that the tariff is too high. This situation results in 119 small hydropower projects being stalled.
A possible solution, according to the ministry, would be the creation of a dedicated subsidiary of PLN which would purchase electricity from the small hydropower plants.
This entity would be financed by an ?Energy Security Fund?, which has yet to be created, depending on a new governmental regulation that the ministry is currently studying. This fund would be designed to promote two activities: first, for further exploration of oil and gas fields in Indonesia to improve/decrease the depletion rate of Indonesia?s reserves; and secondly to support the development of new & renewable energy.
Given the uncertainty of the overall administrative procedure and without any visibility as to when this yet to be created administrative entity will issue the PPA, Velcan has to put on hold the construction of the Sukarame project.
Velcan Energy is also discussing with the local authorities the potential impact of this delay on the validity timeframe of the permits and authorizations granted to the project.
Jean-Luc Rivoire and Antoine Decitre, Co-CEOs of the group said: ?It is a very disappointing and difficult situation, because a lot of efforts and money have been invested into this project. We share the frustration of the local population and authorities, who like us, believed that after all these years the adequate conditions to invest in small hydropower plants in Indonesia were here. Unfortunately it is not the case?.
Suka Rame is located on Semangka River in Lampung Barat Regency. The closest town is Liwa (10 km), the capital of the Lampung Barat regency. Project GPS coordinates are: S 5?01?54?/ E 104?11?57?.
Editing by Johannes Simbolon