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The government made a big push in 2006 to lure new foreign investors to
Indonesia, but a number of urgent problems continue to keep investors away.
One of these problems is a serious shortage of electricity.
As the growth in demand outstrips supply, the country has experienced frequent
power blackouts, particularly in Java, Bali and Sumatra, since early this year.
Last month, Java and Bali, where about 80 percent of the electricity is used,
experienced electricity shortages of 250 MW when state-owned power firm PT PLN
had to cut power due to malfunctions at a number of power plants, including the
gas-fired Paiton unit 8 and gas-fired Suralaya unit 6.
The power cuts not only inconvenienced the public, but also had a negative
impact on business circles.
Indonesian Employers Association (Apindo) chairman Sofjan said the power
shortages caused financial losses to companies because of production cuts, lost
work hours and the late delivery of goods to customers.
The power shortages also hindered existing industries' expansion plans and
dissuaded new investors from starting businesses here.
PLN says the power shortages result from a lack of new investment in power
plants between the period of 2000 and 2005.
According to data from last year, Indonesia's installed electricity capacity
reached about 25,000 megawatts, most produced in Java and Bali, with about 5,700
MW produced in regions outside of Java and Bali.
With the electricity supply growing by just an average of 7 percent a year, much
lower compared to the demand growth of 9 percent a year, the demand-supply gap
will continue to widen without new investments in power plants.
PLN predicts that to meet surging demand, Indonesia will need additional
electricity production of 10,000 megawatts until 2009. Failing this, the country
will face a serious power crisis, meaning more frequent blackouts.
To ward off the looming crisis, the government has taken a number of steps. It
has launched a crash program to provide an additional supply of 10,000 MW until
2009. Some 8,000 MW of that will be produced by private companies, while the
rest will be produced by PLN with financing to be sourced by issuing new bonds.
The government has secured a number of deals with four companies from China to
produce 8,000 megawatts of electricity with coal-fired power plants in Java and
Sumatra.
The government said that in the next few years, about 85 percent of power demand
would be generated by coal and gas-fired power plants.
It is also preparing the construction of a US$4.8 billion nuclear power plant in
Gunung Muria, Central Java, which would have the capacity to produce about 4,000
MW, enough to meet the total power demand in Java, Madura and Bali.
Gorontalo Governor Fadel Muhammad said his administration had secured a
cooperation agreement with Russia to build a nuclear power plant in the region.
It is expected to start operation late next year.
The government is also promoting alternative energy sources such as geothermal,
wind and water power. But still it has indicated that it will prioritize gas and
coal-fired power plants and nuclear plants, which are relatively cheaper and
faster to construct.
The cost of producing electricity using coal, gas and nuclear power averages
more than Rp 100 per kilowatt hour (KWH), compared to more than Rp 600 using
oil. While relying on gas and coal-fired plants could close the
electricity demand-supply gap in the near future, analysts have warned it could
worsen the country's environmental problems.
Despite a new technology called fly ash to reduce pollution, coal-fired plants
still pose an environmental danger.
And considering that Indonesia is one of the world's most corrupt countries,
combined with a lack of qualified human resources in the nuclear technology
field, there is a risk of a major catastrophe with nuclear plants. One only need
look at what happened in Chernobyl, where almost 100,000 people died and
thousands more experienced serious health problems after a nuclear accident.
The government must encourage the development of new power plants, which is
vital for supporting efforts to attract foreign investors to the country.
But in doing, Jakarta should focus on energy sources that are more
environmentally friendly and will benefit the people.
Analysts have said hydroelectric plants should be considered, as their dams
could also benefit local people through, among other things, fishery and tourism
activities.
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