MHPP Indonesia

Mini Hydro Power as Contribution to Environmental

and Development Goals

Hedi Feibel, entec ag

MHPP IndonesiaASEAN countries: present situation & challenges

SITUATION CHALLENGES

Very limited know-how and production capacities

Lack of local capacity to plan, construct & operate MHP properly

No standardised solutions for key components (turbines, control systems, civil structures)

Lack of know-how and experience in non-technical issues of MHP (e.g. business models, tariff-setting, management, etc.)

Private sector participation only just started: lack of best practice business models; PPAs often negotiated on project-by-project basis, feed-in tariffs often subject to regular re-negotiation

High but largely untapped potentialfor MHP in SE-Asia

potential estimated at approx. 300,000 MW

less than 15% of the potential currently used

Increasing energy demand, particularly in remote rural areas

Increasing fuel prices make renewable energy sources very attractive

BUT: in the ASEAN region each year more old MHP plants are going out of operation than new ones are being commissioned

MHPP IndonesiaThe predominant reality

MHPP IndonesiaThe situation in Indonesia

No access to electricity for approx. 50% of Indonesias 130 million rural inhabitants

Extension of national grid to remote placesgeographically not feasible

Diesel fuel for conventional off-grid electrification increasingly unaffordable

Only about 10% of MHP-potential harnessed

MHPP IndonesiaThe Mini Hydropower Project MHPP

First mini/micro-hydropower activities supported by German Government in Indonesia started in 1980s

MHPP as a cooperation between DGEEU and GTZ:1st phase of MHPP: 1999-20022nd phase of MHPP: originally planned 2002-2005

Objective: Scaling-up access to energy by harnessing vast MHP-resources

Approach: Local capacity development in manufacturing, planning & development, O&M, exemplary implementation of MHP schemes with income generating end-use, supporting access to finance

MHPP IndonesiaTechnology transfer as precondition

for sustainable access to clean energy

MHPP IndonesiaMHPPs focus in early years: technology transfer

Imported turbines in the MHP-size range prohibitively expensive

Locally manufactured equipment of poor quality & reliability

Civil engineering designs for MHP-schemes insufficient

=> Capacity building of local equipment manufactures and engineering consultants:

Providing state-of-the-art solutions for electro-mechanical equipment (turbines etc.) & civil design layouts

Training local experts in mastering the innovative solutions

Technical backstopping on the job to maintain improved quality level

MHPP IndonesiaFocus on crossflow turbine manufacturing

enhanced local content in the Mini Hydro Sector

Turbines can now be produced locally covering a wide range of

sizes suitable for a variety of projects (stand alone, captive, grid

connected)

MHPP IndonesiaSuccess stories

In 2002 a 2 x 125 kW MHP was commissioned featuring 2 T15 turbines with 300mm runner diameters

In 2005 the first locally manufactured T15 Cross Flow turbine with a runner diameter of 500mm was commissioned selling power to the grid.

The introduction of precision jigs for fabrication of the housing etc improved quality considerably

Standardization combined with quality control allowed for: stock production, cost reduction and spare part delivery

MHPP IndonesiaCost reduction & local added value

Costs of locally manufactured cross flow turbines are in the range of 25-30% of imported equivalents

imported Made in Indonesia

Turbine Pelton turbine Austria570 $/kW

T14 turbineIndonesia30 $/kW

Less than 10 % !

Complete electro-mechanical equipment

Turgo turbine Germany 1000 $/kW

T14 and local know how used407 $/kW

Around 40 %

MHPP IndonesiaResults of phase 1 and 2 of MHPP

~ 90% of MHP-schemes (meaning > 100 schemes up to 250 kW) based on designs introduced by the project 40% cost reduction due to local content

> 85% in E/M equipment Supply of > 20.000 rural families & SMEs > 4.000 t/year CO2-avoidance

Export of Indonesian MHP-solutions to 10 countries (in Asia, Africa, Europe) Self-sustaining industry with growing employment established Contribution to rural electrification through isolated MHP systems (including

rural income generation based on productive use) Support for the weak rural electricity system by private power producers (on-

and off-grid systems) Substitution of diesel used in SME and plantations by MHP (captive power)

MHPP IndonesiaScaling up the success of MHPP

In 2006, extension of MHPP project until 12/2008by co-financing of Dutch-German Program Energizing Development

3.4 million EUR for providing additional access to MHP for > 60,000 people in rural areas

MHPP Indonesia

cash flow of PLTMH and RMU

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activities Supporting community preparation and active

participation Facilitating suitable institutional & legal set-up Introducing operation, maintenance and management

procedures Introducing principles of good business

administration: tariff-setting, billing, savings, etc. Promoting productive, income-generating use of

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MHPP IndonesiaAchievements so far (Jan 06 Nov 07)

9 6 local partner organizations (mainly NGOs) are trained in applying methodology and toolkits on sustainable MHP-development

9 25 Master-Trainers of vocational school teachers received training from MHPP

9 Support for elaboration of 57 comprehensive Feasibility Studies

MHPP IndonesiaAchievements so far (Jan 06 Nov 07)

9 Supported sustainable implementation & operation of 28 new MHP-schemes

9 Regulation on MHP village organizationmade obligatory by 4 Provinces

9 Facilitated sustainable energy accessfor 15,000 rural people

MHPP IndonesiaConsider different types of systems

Stand-alone systems for rural electrification Grid-connected schemes selling (surplus) to the national grid Captive schemes, e.g. supplying a tea factory

Important to be clear about the objectives because different types of MHP projects require different:

technology selection institutional arrangements financing implementing institutions capacity building etc.

MHPP IndonesiaSeloliman an MHP for the benefit of a local community

The environmental education center (PPLH) close to the village Seloliman initiated in 1994 the realisation of an MHP scheme

Although in 1994 PLN grid lines had just been erected, they did not reach all hamlets within the village Seloliman

With a grant provided by the German Embassy and technical support from MHPP a 10kW scheme was built to supply the PPLH center and the hamlet Janjing which was not connected yet.

MHPP IndonesiaCharacteristics of the scheme

10 kW scheme exploiting 14 m natural drop in an existing irrigation channel (sufficient flow all year round)

All equipment (T12 cross flow turbine, induction generator and controller IGC) was manufactured in Bandung by counterparts of MHPP

supply of ~ 40 households in the village and the PPLH center (offices & limited evening lighting); operated and managed by the PPLH utilizing manpower from Janjing

MHPP IndonesiaIdea to upgrade the scheme

6 years of operation power requirements of the PPLH and Janjingincreased

Idea to increase the output (2001) coincided with preparation of the new PSK Tersebar legislation (allows small scale renewable energy producers to inter connect and sell power to the national PLN grid)

proposal for upgrading of the scheme to 30 kW to satisfy the increased demand & to sell excess power to the 20 kV MV grid

Additional end use component(kapok mill) included in proposal

2001 financing secured up grade was started

MHPP IndonesiaFeeding electricity into the PLN grid

project commissioning in Dec 02 proposal approved by PLN first PSK

Tersebar project in Indonesia A mainscom system was installed

in addition to the existing ELC facilitating inter connection with the grid

MHPP IndonesiaFinancing and institutional set-up

Sources of finance

Loan from KOPENINDO (fund was granted to KOPENINDO by MHPP) 15,000 USD

Funds from MHPP for initial construction of civil works and somecomponents of the up-grade

20,000 USD

GEF funds (about 50 % for end-use) 20,000 USD

Various contributors 5,000 USD

TOTAL 60,000 USD

scheme was handed over to this association who operates it now

Janjing with the support from the environmental center PPLH established an

association Paguyuban Kali Maron (PKM)

MHPP IndonesiaProcedure of selling electricity to the grid

PLN reads the meter on a monthly basis and PKM submit an invoice for payment

PLN pays a tariff of 80% of its own electricity production cost in the region, currently approx. 0.05 US$/kWh

The scheme supplies more than half of its output to the grid monthly gross income 700-800 USD

MHPP IndonesiaFinancial viability assessment:

Description Qty Units

Installed Capacity 30 kW

Investment costs - MHP 2,000 US$/kW

Total investment 60,000 US$

Plant factor 0.80 ratio

Annual production 189,216 kWh

Annual O&M costs 3,000 US$

Annual Gross Income 9,700 US$

Production cost 0.03 US$/kWh

Purchase Tariff 0.05 US$/kWh

Financial Internal Rate of Return (FIRR) 9%

MHPP Indonesia

By substituting the equivalent power generated by a diesel genset, the Seloliman scheme reduces CO2emissions by an amount of 190 t/y.

Additional incentive for the protection of the catchment areaand the water resources.

Improved stability of the PLN gridas a result of embedded generation.

Green product image provides an excellent public relations and marketing tool for both the buyer and seller of the renewable energy.

Cost effective solution

Non-economic Benefits:

MHPP Indonesiaconclusion

The scheme has been operating trouble free since this time provides a tangible contribution to rural electrification proves that small power producers can also sell energy on a commercial basis.

MHPP IndonesiaWhy is this model not yet applied everywhere ?

Tariffs are calculated as % of PLNs average production costs for the respective region:

80% of production costs for power at medium voltage (20 kV) 60% of production costs for power at low voltage (380V)

National grid not available at any interesting MHP site

PPA depends on individual negotiations

The way how production cost are calculated is not transparent

In some places, the national grid has frequent outages technical problems when feeding in

No guarantee for several years price newly fixed every year

In case of outage of the PLN grid problem of the seller, simply no payment !

MHPP IndonesiaLinking climate and development

Crucial aspects: technology as such allows for added value

to the local economy O&M affordable to the users (even if

investment costs are subsidised)

assistance for proper management

For significant poverty reduction: 1) productive use of energy2) feeding electricity into the national grid

Avoided CO2 emissions grid connected systems more efficient but often less efficient for poverty reduction Avoided CO2 + benefit/(rural) inhabitantPeople should a) either profit by exploiting the resource on

their own (investment subsidies) orb) by being paid a resource-, profit- or cash

flow-based annuity for conferring the right to use the resource to a third party (private investor, utility)

ASEAN countries: present situation & challengesThe predominant realityThe situation in IndonesiaThe Mini Hydropower Project MHPPTechnology transfer as preconditionMHPPs focus in early years: technology transferFocus on crossflow turbine manufacturingSuccess storiesCost reduction & local added valueResults of phase 1 and 2 of MHPPScaling up the success of MHPPactivities Achievements so far (Jan 06 Nov 07)Achievements so far (Jan 06 Nov 07)Consider different types of systemsSeloliman an MHP for the benefit of a local communityCharacteristics of the scheme Idea to upgrade the schemeFeeding electricity into the PLN gridFinancing and institutional set-upProcedure of selling electricity to the gridNon-economic Benefits: conclusionWhy is this model not yet applied everywhere ?Linking climate and development