Development Boom in Renewable Energy Sector in the Next 5 years?

A new ministerial decree is coming on 13th November 2009 (31/2009). I guess, this is a part of the government’s 100 days program especially from Department of Energy and Mineral Resources. The new ministerial decree is concerning the feed in tariff for renewable energy generators with capacity less than 10 MW or excess power. The new decree automatically cancels the infant ministerial decree number 5/2009 that was just released few months ago.

What’s the main characteristic of this new decree? It is the feed in price. For generators interconnected to medium voltage (I guess it is 20 kV), the averaged feed in price is 656 IDR/kWh for Java Bali area (factor = 1). For generators interconnected to low voltage (I guess it is 400 V), the averaged feed in price is 1004 IDR/kWh for Java Bali area (factor = 1). For islands other than Java Bali there are some multiplication factors (e.g. Sumatera and Sulawesi is 1.2; Kalimantan, Nusa Tenggara (East and West) is 1.3; and Papua is 1.5).

I guess the “staging” concept is still valid. This means in the first 5 or 7 years the developer can get higher feed in price (compared to the averaged price) and in the rest of the contract time, developer will get lower feed in price (compared to the averaged price).

It seems the procedure will be shortened since PLN is obliged to prepare a standardized contract form. This means there is no negotiation (also looking at the set price above). Implementation of projects will hopefully be faster unless PLN applies hard requirements for developers such as for example EBITDA 30% for the last 2 years (maybe PLN itself can not achieve this, although PLN’s move might be based on very rational reason such as preventing PPA holder from being brokers (selling PPA contracts) instead of being serious renewable energy generator developer).

Feed in price problem, that was, some weeks ago, still perceived as problem by some MHP developers is solved. This, according to association of mini hydro developers, is considered as a very good step and it expects a boom of MHP development in the next 3-5 years. The association predicts that the boom can reach 500 MW per year and that will make the industry facing a new problem. How to provide the hardware?

Currently MHP developers are mostly using Chinese or European hardware for their MHP schemes. Chinese products are very much having many varieties of quality. It corresponds with the price. European products usually have consistent quality standard, this means cost is very much fixed (i.e. quite high). There is also new Indonesian manufacturer that has just started into MHP hardware business (turbine) in MW scale. The next challenge to the government is to provide local manufacturers more capacities so that they can benefit from the MHP boom in the next 3-4 years. If local manufacturers can not move fast, all the benefits will go abroad and the overall goal of the new ministerial decree is missed.

The old decree (e.g. 1122/2002) set lower feed in price for interconnection at low voltage (0.6 times marginal cost of production at interconnection point). This new decree sets higher feed in price for interconnection at low voltage. Does this move is a strategy to encourage micro renewable energy generators? I guess this is to encourage such things. However the procedure should be very much shortened for the micro size since, I guess, it will be community based or very small private companies or cooperatives that might not have enough resources to pay the high transaction cost (relative) of interconnection process.

Anyway, although this was quite late (all energy minister should have done this years ago), but this decree is mostly welcomed by players in the sector. They have positive opinion on this and expecting that there will be a boom in the sector. Hydro power might lead the boom since the technology and also resources are already available and assessed so often.

Let's hope for positive development and prepare the necessary actions to tackle possible problems due to this decree.

Micro Hydro Development Roadmap - What to Expect?

Roadmap is basically a schedule for a certain sector to reach certain level. In a roadmap there should be at least time indicator and also milestones for each time indicator. However a roadmap is more complex than just a schedule since all the related milestones bring consequences in all aspects.

For example a roadmap of a bike shop, the main goal is to be the largest bike shop in town in 10 years. The milestones for example are: year one the shop has to sell at least 2 bikes a day; year two the shop has to become authorized distributor for 2 major bike brands and sells 3 bikes a day; year five the store area has to increase from 100 m2 to at least 200 m2 and so on and so on. The consequences that follow that road map can be for example: assess the competitors, develop cycling habits in town, find cheap bicycle supplier, train repair workshops in town, do some cycling activities with local government, increase number of salesmen, develop innovative financial support for bike owners etc.. To be concluded, there are many to do to materialize the roadmap.

Right now the government of Indonesia, especially Ministry of Energy and Mineral Resources wants to create a roadmap for micro hydro power. I have not got my hand on it therefore these will be my expectations towards the roadmap. My expectations are:

• The roadmap must have realistic time frame
• The roadmap must have realistic and achievable targets
• The roadmap must not only considering micro hydro technology but also all related policy, standard, education, supporting activities, capacity of industry etc. that will eventually help to develop the market.

What’s a realistic time frame? To my knowledge, developing micro hydro competence in Indonesia took quite long time. Anyone can argue about the beginning of this, but the real and currently is becoming the mainstream of micro hydro development in Indonesia is the technology transfer of cross flow turbine back in early 90’s or late 80’s. Before that time frame government has tried to import technologies from Germany using BPPT’s capacity, in the late 70’s manufacturing capacities have been developed into state owned companies such as Barata, but all did not sustain (there are many reasons but cheap oil price might played the bigger role in it). They ended up as projects without any internalization of the technology. Right now the cross flow technology has reached its peak in Indonesia. It took almost 20 years to develop from zero to the condition right now (although one has to admit that the advance development is only limited to Bandung manufacturers such as Heksa, Cihanjuang and Kramatraya). So, I would say the realistic time frame is 20 years for the next leap. I might be conservative with this time frame because I consider the availability of academic experts that have the capacity in developing micro hydro technology (as the main motor of change in the sector). Like it or not technology must go beyond current status in the next 20 years. Other aspects will be supporting and creating condition for such advancement.

What should be the realistic and achievable target? I would say there are some achievable targets: simpler, reliable and easier to manufacture micro hydro hardware; more implementations not only for rural off grid but also on grid; more dispersed manufacturers; better sustainability of schemes; and better implementation of schemes. Currently the design for simple, reliable and easy to manufacture micro hydro turbine is available therefore it is realistic and achievable. More implementations means there is a need for better policy especially interconnection policy for micro hydro schemes. It is very realistic and is a must actually. More dispersed manufacturer might be the hardest part. Government has to take risks in order to develop new manufacturers so that they can produce quality hardware. Standard has to be established and government has to be strict and stick on its implementation.

Related to all above, the changes in policy, such as interconnection policy, will certainly give significant impact to the progress of micro hydro hardware technology. If there is a positive attitude in the policy there will be a boost in site implementation and local manufacturers will reap the benefit and if the market needs it, they can improve their technology. Not just that, sustainability of the scheme must also be considered. This means all schemes that have been erected must be monitored and supervised if necessary. Government better to prepare a nation wide program that ensures all erected micro hydro scheme are sustainable. Involving all stakeholders is necessary. Academics as the think tank and the source of technological advancement have to make their position strong by doing researches. All have to do their task in a synergistic way.

Last but not least, the roadmap has to be detail and really based on current strength, weaknesses, opportunity and also threads. The one who develops the roadmap has to have vast knowledge of the sector and should know what IPP stands for (i.e. independent power producer).

Cheers

Lessons learned from Brazilian’s Experience

CBS has reported that some blackouts in Brazil (in 2005 and 2007) were caused by some dirty works of bad hackers (see: http://www.wired.com/threatlevel/2009/11/brazil/). The recent massive blackout in Brazil might also the result of bad hackers. This happened two days after CBS reported the possible cause of blackouts in 2005 and 2007.

This has clearly shown that computerized system is very vulnerable to electronic attack. It has shown that total integration is very risky. The centralized software managed control system might be very efficient and also easy to monitor but it is also easy to be attacked. There is no perfect system made by mankind. There are always trade offs. In the case of Brazil, the trade off is easiness to be hacked.

Luckily the system in Indonesia might still very old and manual. No hacking system can do much harm to the system. A real “terrorist style” attack on transformer stations might do better. Moving to centralized software managed control system surely takes a lot of energy and resources and PLN has none of them.

Right now PLN is struggling to normalize power generation and distribution in Jakarta. Kompas reported that the scheduled blackouts might still happen until December. We are used to blackouts therefore we actually need an independent power source like for example personal solar powered electricity generator or “dreaming mode on” fuel cell powered electricity generator (like the one in Japan shown in Discovery channel) or anything like that.

Conclusion: since PLN’s financial condition is not yet very healthy, centralized software managed control system might still far from realization. If it were materialized, there should be a manual back up system so that if the software system fails, the manual system can still do the job.

Merdeka…

Renewable energy: is it not attractive enough for higher education institution?

Renewable energy is currently on the upper side of the coin. The support from government for renewable energy projects is quite significant. From policy point of view, there are also some progresses. Private enterprises are also in the sector for example in the mini hydro sector. This has shown a strong growth of renewable energy.

Despite the significant growth, there are some dark sides in the sector. Not all sub sectors are developed from technological point of view. Solar energy systems are still imported either from China, Japan or Europe. Biomass technology, for example gasification, is not yet developed and the application is very low. Biomass conversion to bio fuel is developing quite significantly. Technology is basically in hand, however innovation is still lacking. Hydro energy, especially for bigger size plants are still importing while at micro level, local technology is already used extensively. In general, Indonesia is still depending on foreign technology.

Depending on foreign technology is not inline with the goal to be energy independent country. If one wants to be independent, then he/she must master the subject (in this case the technology). In the worst case, other country is not willing to sell technology to Indonesia that eventually will hamper the utilization of renewable energy sources and making Indonesia dependent on fossil fuel. Economically this scenario is very frightening.

Let us use micro hydro sub sector as an example. Micro hydro turbine manufacturers in Indonesia are generally manufacturing cross flow, propeller and pelton turbine. Cross flow is the most produced turbine due to easiness to manufacture and average characteristic of micro hydro site in Indonesia falls in the head range of cross flow. In Bandung, manufacturers are supervised by foreign expert therefore they are not 100% independent from foreign influences (in this case foreign capacity in designing turbine). The guidance of foreign expert has made Bandung based manufacturers capable in producing high quality hardware.

Producers outside Bandung have to struggle by themselves. They have to play with their own design. They have to live with the fact that their product might not be as good as Bandung’s. The impact of this condition is potential of frequent break downs of their hardware. This will affect the whole process of renewable energy implementation. Bad hardware gives bad name to micro hydro.

Actually to tackle above mentioned issue, universities can play big role. Universities are the place for research. Academics should be able to innovate especially for renewable energy implementation. Using the same case, micro hydro, almost no higher education institutions do research on micro hydro (e.g. turbine design). Turbine design is not simple. It involves many subjects starting from fluid dynamics to mechanics. It is not just welding metal parts together but also optimizing runner design for better performance. This kind of work should not be done by manufacturers. Universities or research institution must do this. If those that suppose to be centre of knowledge and progress do not do anything on that particular subject, then being energy independent is far from reality.

Why the interest is very little interests or even none? I can only assume here. Maybe because the market is not yet very commercial, therefore private industry is still very limited. Universities are inclined to do research on certain subject if there were any driving force from the market. If the industry is not yet developed then the chance for research in certain subject is also limited. I think this way of thinking is not appropriate. Research will attract industry to join in and make the sector grows.

The second possibility is that universities might see renewable energy technology as not as complicated as other kind of technology such as IT or telecommunication or bio technology or other rocket science things. In Indonesia, there is this funny principle: you will look great and advance if you are using complicated things such as complicated words, complicated gadget, complicated lecture materials etc. So, doing research in simple subjects might be considered as below standard and not making someone great. Although actually, doing research for micro hydro turbine is also a complicated matter.

Another possibility is that because there is no communication between universities and industry (renewable energy industry). Since there is no communication, the need of the industry is not known and university can not match their research resources to what the industry needs. Lack of research fund can also make things worse. The worst possibility is if there are no experts in the subject. This is the worst scenario. No one can do anything without expertise.

Since currently government role is very big, they should not limit their involvement in project implementation but also in research. But before doing so, the government should know the current position and future dream. Based on that information government should know who can do what in the sector. Investment in the form of research initiative will be useful for the purpose of energy independency. This will work as long as the money is not for corruption and the researcher is really capable in the particular subject.

Peace