, Indonesia

Is Indonesia mature enough to finally take on the grueling challenges of nuclear and geothermal energy?

Indonesia is keen to push for this despite gaping potholes.

It may sound too ambitious to experts, but Indonesia has made it clear that nuclear and geothermal are its concrete energy targets.

Indonesia is planning to produce 6023 MW of geothermal power by 2020, but experts warn that the country may fail to meet its ambitious targets due to regulatory challenges coupled with extremely high exploration costs.

“Cost rises steeply the moment drilling and construction begins. Prior to that, costs are so low it can be funded almost entirely by equity. A single field can cost up to USD 50 million, excluding other costs. Someone has to catch the risk, whether it is the project owner or the government,” said Sugeng Triyono,president director of PT Tangkuban Parahu Geothermal Power, speaking at the Asian Power Utility Forum in Jakarta.

Triyono also argued that Indonesia’s targets may simply be too steep. He pointed out that as of 2016, geothermal energy makes up just 1.1% of the entire renewable energy share; by 2025, Indonesia aims to raise it to 5.8%.

In order to reach these targets, Indonesia will need to add roughly 300 Mw of geothermal energy per year, which translates to drilling around 60 wells per annum.
“Manufacturers cannot support Indonesia’s geothermal development,” Triyono said.

“Indonesian geothermal assets are extremely attractive to the private sector. There are financing solutions for this on a pure non-recourse basis. For instance, ADB can provide funding for exploration, and even IFCs have solutions for these geothermal projects. Soon, financing will be available to geothermal players in Indonesia,” said Gilles Pascual, partner, Ernst & Young, Infrastructure Advisory.

 “Clearly what’s missing is the renewable framework. We still don’t have a solid regulatory framework for geothermal, for instance,” Pascual added.

Peter Wijaya,vice president, Commercial and Business Development at Star Energy, added that risk-sharing for capital-intensive geothermal projects is a key concern for developers and investors.

“Funding for exploration is tough—investors have to take on the full risk,” he noted. As a result, independent power producers like Star Energy have to keep a tight rein on exploration costs, with more budget spared for low-risk, established fields rather than exploring untapped “greenfield” projects.

“First of all, the exploration risk is very similar—though not as high—as oil and gas. However the returns of geothermal are not as high as oil and gas. Geothermal reservoirs are much more complex than O&G. We simply budget the exploration,” he said, adding that exploring a well could cost as much as US$7 million to US$10 million per well.”

“The energy roadmap initially didn’t even include geothermal. Renewable energy is low on the government agenda. If I were the government, I would say the traffic is attractive. If I were a developer, I would also say so. But the problem is implementation. In order to qualify for the tariff, you first need to prove that you have started exploration. That’s the law. The risk is entirely on the developer,” Wijaya noted.

Apart from Indonesia’s geothermal energy prospects, experts at the forum also discussed the best practices to implement efficient maintenance strategies in Indonesian plants.

“Operations should be taken into consideration even during a power plant’s development phase. Thinking about long-term optimisation typically means that capex is 3-5% more, because you need to put long-term equipment in capex,” said Harry Salzwedel, Project Advisor, PT Central Java Power. “Maintenance is not maintenance: it’s asset performance enhancement. We don’t just fix it, we improve it,” he added.

Ari Frantsi, vice president at Bekasi Power, stressed that proper plant maintenance begins with a work culture in which people support disciplined structured processes.

“Operators need uniform key performance indicators (KPIs), and establish a standardised reward system based on these indicators,” he said.

Current state of play

Results can take some time to achieve in mercurial Indonesia, and there are few better examples than in the developing nation’s nuclear industry. Gaining serious traction in the 1980s, Indonesia remains bereft of an operational, commercial nuclear power plant. The feeling amongst experts however, is that the nation’s energy sector may not need to wait much longer before NPPs are rolled out. Challenges remain, of course. The stakeholder matrix, which includes a complex set of relationships between local and central government authorities, local and international investors and international agencies such as the IEAE, is difficult to navigate. But where there’s a will, there’s a way.

“Indonesia has been preparing the infrastructure for nuclear power plants since the 1980s,” says Yarianto S Budi Susilo, the director of the Center for Nuclear Energy Systems (PKSEN) at BATAN, the national research and development agency which guides and recommends stakeholders (government, private sector and public) on how to best provide reliable nuclear technology. Yarianto is tasked with nuclear power plant energy planning and plant infrastructure preparation in Indonesia. “In terms of human resources, I believe the nation is ready. We have been safely running three research reactors for more than 40 years and have the necessary technical experience in reactor operation and its supporting facilities such as fuel fabrication, spent fuel handling and radioactive material management.” Yarianto adds that comprehensive feasibility studies were conducted during the period 1991 to 1996 for the Muria NPP site and 2011 to 2013 for the Bangka Island NPP site.

Experts agree that with relatively limited fossil energy resources, and an enormous and growing population, the development of the nuclear energy sector will secure and ensure energy sustainability and economic development (of course improving the quality of human life),and this will require alternative energy to replace a part of fossil energy role. In terms of the environment, alternative energy is expected to reduce the environmental impact (greenhouse effect, pollutants) due to the current use of fossil energy on a large scale.

Yarianto’s chairman, Dr Djarot S. Wisnubroto, agrees. Speaking exclusively with NFA, Indonesia’s nuclear industry elder statesman says that the fundamental challenges confronting the republic are the twin pressures of population and economic growth of 1.2% and 5% respectively. “At the same time, decreasing fossil fuel sources, and environmental aspects, specifically, reducing carbon emissions, are leaving us with only one choice: to reduce the dependency on the fossil fuel (oil, coal, and gas) sector, in favour of new and renewable energy options (including nuclear).”

Political challenges

While both men unequivocally agree that by most measures Indonesia is ready, the IEAE concurs with a few exceptions, and the Indonesian public agrees. Over the past six years, BATAN has conducted public surveys, and in 2014 and 2015 the survey results showed that more than 70% of the public supported the use of nuclear energy. But the political and bureaucratic machine must move in the right direction before the nuclear machine can. “The challenge for Indonesia remains garnering a positive political decision from the President to declare to ‘go nuclear’. Unfortunately, we still have to wait for that declaration. So without that decision, it is difficult for us to move forward, but this may be the final piece, the government has made significant investments, we have candidate sites for the location of nuclear power plants, we have competent human resources, a choice of financial schemes, and huge support from the public.”

Apart from achieving political assent, experts suggest that Indonesia must first establish an NEPIO (Nuclear Energy Program Implementation Organisation), a national team that can make policies decision concerning the ownership system of nuclear power plants, the share, if any, the Indonesian Government will enjoy, the financial schemes, etc. According to Dr Djarot, the establishment of an NEPIO is the penultimate step before the elusive decree of Presidential ‘go nuclear’ status.

Experienced vendor buy-in

Presidential assent, research preparation, HR development, and even public opinion aside, securing the experience and know-how of first class vendors is vital. But what do a great vendor and a great partner look like. In Yarianto’s opinion, vendors with extremely good safety records are vital, “Good vendors will make safety, safeguards and security a top priority, taking into account Indonesia’s geography and paying attention to potential general and specific external hazards, population, and the like. The design provided by vendor should address these conditions to ensure the safe operation of nuclear power plants.”

Taking these considerations into account, a new project, 10 MW HTGR, is one strategy to introduce operational and commercial nuclear energy to Indonesia. One of the goals of this project is to deploy Generation 4 nuclear technology with a view to primarily providing electricity but also for other purposes (heat application for desalination and coal liquefaction, amongst others). East Indonesia is slated for Generation 4 technology.

For Dr Djarot, vendor communication is the key. “In Indonesia, as a developing country, our first consideration is to ensure that our vendors have great channels of communication with our government, and can work together with the Indonesian private sector, every step of the journey, and enjoy great knowledge transfer.”

The road ahead

While there is no doubt that nuclear energy is the future for Indonesian energy sustainability, the nation needs all stakeholders, bodies, agencies and policy-makers to align. This is perhaps the greatest challenge: harnessing political will and ensuring that an indisputable case is placed before investors at the right time. All elements of the national nuclear framework must be in place before the first sod of earth is turned for the first commercial plant. Once political will is secured and the top echelon of power commits, the nuclear industry can expect local and foreign investors and expertise to quickly join the party. Consequently the domestic nuclear energy industry will develop relatively rapidly due to a relatively long and historic, if sometimes stagnant, consideration period.

With reports from Marianne Estioco and Simon Hyett

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