Natural Gas for electric power generation in Indonesia 2011

INDONESIAN COMMERCIAL NEWSLETTER

May 2011

GAS MORE EFFICIENT ALTERNATIVE FUEL TO GENERATE ELECTRICITY

PLN still needs to improve its efficiency in the generation of electricity. Inefficiency in power generation is not only a problem to be faced by PLN but also by the government that has to provide growing amount of energy subsidy from year to year. Inefficiency is largely caused by the fact that PLN still uses the expensive oil energy, while cheaper resources of energy available in abundance in the country remain largely untapped.

PT Perusahaan Listrik Negara (PLN) produces electricity using a number of energy sources including water, coal, geothermal, gasified coal, oil fuel (BBM), bio-fuel, and natural gas. PLN, therefore, has various types of power plants including PLTA, PLTD, PLTGU, and Geothermal power plant.

The price of electricity generated by each of the types of power plant, therefore, is different. The power produced by oil-fired power plants is more expensive that the use of the power plants is less efficient.

BBM used by PLN is subsidized by the government and the subsidy is growing from year to year to be set aside from the state budget. The use of alternative and cheaper sources of energy, therefore, is pressing. In addition, oil resource is not renewable. The reserves will be depleted some time in the future.

Therefore, generation of electricity has to be more efficient by utilizing cheaper sources of energy like coal. In the first phase of the program to produce 10,000 MW of electricity, PLN chose to use coal as the only source of energy.

In the second phase of his program, however, other sources of energy including gas, and renewable sources of energy like geothermal and water will be utilized. The role of gas in power generation in Indonesia is quite strategic as it more flexible compared to water and geothermal.

Gas is a potential source of energy in Indonesia as the country is one of largest gas producers in the world.

Generation of electricity with BBM less efficient

BBM including HSD and MFO is much less efficient compared to other sources of energy such as gas, coal and gasified coal.

Based on data at PLN, the production cost of electricity generated with High Speed Diesel (HSD) was the highest estimated at Rp 1,667.24/KWh in 2010. In 2011, it is estimated to rise to Rp 1,727.57 /KWh

The cost of producing power using MFO (Marine Fuel Oil) was estimated at Rp 1,279.05/KWh in 2010, down slightly to Rp 1,262.43/KWh in 2011. The production cost of diesel oil generated electricity was estimated at Rp 1,272.52 /KWh in 2010 and Rp 1,267.03 /KWh in 2011. MFO and diesel oil are only slightly cheaper than bio-fuel proportionally.

The difference in the electricity production cost is quite high - Rp 1,100/kWh between BBM and coal generated power. The difference higher oil between BBM and gasified coal generated power. Gasified coal is the cheapest source of energy.

PLN burdened by high production cost of BBM-generated electricity

BBM is still the largest contributor to the total production cost of energy for PLN. BBM accounts for 60% of the total cost of electricity generation by PLN.

In 2010, BBM cost for electricity generation was Rp 53.6Trillion or 64.5 percent of the total production cost. In 2011, the BBM cost declined to Rp 51.3 trillion or 57.1 percent because of a cut in the portion of BBM used as fuel.

HSD is the largest contributor to the BBM cost reaching Rp 42.5 trillion or 51.1 percent in 2010 and Rp 38.5 trillion or 42.8 percent in 2011. MFO contributed Rp 11.1 trillion to the production cost in 2010 or 13.4 percent of the total and in 2011, the contribution rose to Rp 12.8 trillion or 14.3 percent of the total cost.

Though contributing the largest or 70 percent to the production, the portion of power generating cost by non BBM energy was small - around 35.5 percent in 2010 up to 42.9 percent in 2011. The increase followed the rise in power production share by non BBM energy.

The production cost of power by non BBM energy in 2010 was estimated at Rp 29.5 trillion - up to Rp 38.5 trillion in 2011 to follow the increase in electric production by non BBM energy

The cost of generating electricity with BPM caused a heavy burden for PLN as the cost is not proportional with the portion of power produced. In 2010, electric production by BBM energy made up only 25% of the total production.

Profile of power generation by PLN

Currently, most power production of PLN is generated by non BBM energy. In 2010, electric production by non-BBM energy reached 101,002 Giga Watt Hour (GWh) or 74.7 percent of the total electric production of PLN that reached 135,179 GWh.

Meanwhile, electric production generated by BBM energy in 2010 reached 34,177 GWh or 25.3 percent of PLN's total electric production. According to PLN's working plan, the production with BBM energy is to be reduced to 32,450 GWh in 2011 or 21.7 percent of the total production of 149,465 GWh. On the contrary the power production generated by non-BBM energy is to be increased to 117,015 GWh or 78.3 percent of PLN's total electric production in 2011.

High Speed Diesel (HSD) is the main type of BBM used for power generation accounting for 25,469 GWh or 18.8 percent of PLN's total production of electricity in 2010. In 2011, the production with HSD dropped to 22,271 GWh or 14.9 percent of the total production.

Among non-BBM sources of energy used to generate electricity is coal. In 2010, coal generated power reached 57,616 GWh or 42.6 percent of PLN's total power output .In 2011 the production rose to 70,845 GWh or 47.4 percent of the total production that year.

Meanwhile, natural gas is also a major source of energy used in power production by PLN. In 2010, PLN's electric production generated by natural gas reached 29,421 GWh or 21.8 percent of PLN's power production. In 2011, the production rose to 32,898 GWh or 22 percent of the total.

Power output of PLN is dominated by electricity generated by non BBM energy, but most of electric plants rented by PLN are powered with BBM.

PLN rents a number of power plants in various areas in Indonesia. In 2011, PLN rented 43 units of power plant and 30 of which are fueled with BBM including High Speed Diesel (HSD) and MFO (Marine Fuel Oil). The rest are fueled with Coal; natural gas and gasified coal.

Total electric production from rented power plants reached 11986114 MWh, with a total rental cost of Rp 4.6 trillion. Most of the electric output is produced with BBM fuel.

Electric production from power plants fueled with BBM including High Speed Diesel (HSD) and Marine Fuel Oil (MFO) reached 8867234 MWh or 79 percent with cost totaling Rp 3.25 trillion or 70 percent. Meanwhile, electric production from power plants using non BBM fuels including Coal; Natural Gas and Gasified Coal reached 3118880 MWh or 26 percent with a rental cost of Rp 1.36 trillion or 29.5 percent of the total cost.

Rented power plants using non-BBM fuels such as natural gas and gasified coal are located mainly in Sumatra, Kalimantan, Maluku and Papua. Those in Java, Bali, Sulawesi, and Nusa Tenggara are powered by BBM

Number of rented power plants using non BBM fuels is expected to continue to increase. There are a number of power plants to be rented out to PLN this year. Seven of the projects are in the process of auction. They are PLTU Tarahan, in Lampung with a capacity of 2 x (120-150) MW; PLTU NTB in West Nusa Tenggara with a capacity of 4 x (25-30) MW; PLTU Timika, Papua 2 x 15 MW, PLTU Riau in Riau 2 x (120-150) MW; PLTU Kuala Tanjung, North Sumatra 3 x (120-150) MW; PLTU Teluk Balikpapan, East Kalimantan 2 x (120-150) MW; and PLTU Asam-Asam, South Kalimantan 3 x (50-65) MW. Three more PLTU projects will follow PLTU Air Anyer, Bangka 2 x 30 MW; PLTU Barru, South Sulawesi 2 x (120-150) MW; PLTU Amurang, North Sulawesi 2 x (25-30).

Under the rental scheme the investors will provide machines for power plants and they will be the operators. PLN will provide land for project location, supply fuels, provide transmission lines and buy the power they produce.

HSD accounts for highest rentals for power plants in 2011

HSD accounted for the largest production of power from power plants rented by PLN and the highest cost it's paid for rented power plants. In 2011, HSD accounted for 43.9% in power production and 41.6 percent in cost

MFO accounted for the second largest - 30.1 percent in power production and 28.9 percent in cost, followed by natural gas accounting for 21.7 percent in cost and 23 percent in production.

Coal and gasified coal accounted for only 1.8 percent and 1.3 percent respectively for power production from rented power plants and for 3.7 percent and 4.1 percent respectively for cost PLN paid for power from rented power plants....

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