No. Study on the Optimal Electric Power Development in Sumatra Final Report (Volume 2) July 2005 Japan International Cooperation Agency Economic Develoment Department ED JR 05-061 Study on the Optimal Electric Power Development in Sumatra Final Report (Volume 2) July 2005 Japan International Cooperation Agency Economic Develoment Department Preface In response to the request from the Government of the Republic of Indonesia, the Government of Japan decided to conduct the Study on the Optimal Electric Power Development in Sumatra, and entrusted the Study to the Japan International Cooperation Agency (JICA). JICA sent the Study Team, headed by Mr. Yoshitaka SAITO of Chubu Electric Power Co., Inc. and organized by Chubu Electric Power Co., Inc. and the Institute of Energy Economics, Japan, to Indonesia five times from February 2004 to June 2005. The Study Team had a series of discussions with the officials concerned of the Government of the Republic of Indonesia and the provincial governments in Sumatra, and conducted related field surveys. After returning to Japan, the Study Team conducted further studies and compiled the final results in this report. I hope that this report will contribute to the promotion of the plan and to the enhancement of amity between our two countries. I wish to express my sincere appreciation to the officials concerned of the Government of Republic of the Indonesia, PT. PLN (Persero) and the provincial governments in Sumatra for their close cooperation throughout the Study. July 2005 Tadashi IZAWA Vice President Japan International Cooperation Agency July 2005 Mr. Tadashi IZAWA Vice President Japan International Cooperation Agency Tokyo, Japan Letter of Transmittal We are pleased to submit to you the report of “the Study on the Optimal Electric Power Development in Sumatra”. This study was implemented by Chubu Electric Power Co., Inc. and the Institute of Energy Economics, Japan from February 2004 to July 2005 based on the contract with your Agency. This report presents the comprehensive proposal, such as the optimal power development plan considering the characteristics of potential primary energy in Sumatra, and the transmission development plan including an interconnection between the North and South Sumatra systems to secure a stable power supply. In addition, macroeconomic & financial and environmental measures, and also investment promotion schemes for the power sector are proposed in order to realize the plans. We trust that the realization of our proposal will much contribute to sustainable development in the electric power sector, which will contribute to the improvement of the public welfare in Sumatra as well, and recommend that the Government of Republic of the Indonesia priotize the implementation of our proposal by applying results of technology transfer in the Study. We wish to take this opportunity to express our sincere gratitude to your Agency, the Ministry of Foreign Affairs and the Ministry of Economy, Trade and Industry. We also wish to express our deep gratitude to Ministry of Energy and Mineral Resources (MEMR), PT. PLN (Persero), the provincial governments in Sumatra and other authorities concerned for the close cooperation and assistance extended to us throughout the Study. Very truly yours, Yoshitaka SAITO Team Leader The Study on the Optimal Electric Power Development in Sumatra Table of Contents (Volume 1) Chapter 1 Introduction .................................................................................................................... 1-1 1.1 Preface .................................................................................................................................. 1-1 1.2 Background and Objective ................................................................................................... 1-1 1.2.1 Background ................................................................................................................... 1-1 1.2.2 Objective ....................................................................................................................... 1-2 1.3 Work Plan ............................................................................................................................. 1-2 1.3.1 Workflow ....................................................................................................................... 1-2 1.3.2 Study Schedule .............................................................................................................. 1-5 1.4 Counterpart Team, Working Group and JICA Study Team .................................................. 1-6 Chapter 2 Indonesian Economy and Energy Demand .................................................................... 2-1 2.1 Indonesian Economy ............................................................................................................ 2-1 2.1.1 Macroeconomic Aspects ................................................................................................ 2-1 2.1.2 Financial Aspects of PLN and Electric Power Sector in Sumatra ................................. 2-9 2.2 Energy and Power Sector Policy in Indonesia .................................................................... 2-24 2.2.1 Transition of Energy Policy ......................................................................................... 2-24 2.2.2 Electric Power Policy .................................................................................................. 2-27 2.3 Energy Resources and Energy Supply/Demand ................................................................. 2-29 2.3.1 Energy Resources and Reserves .................................................................................. 2-29 2.3.2 Energy Flow ................................................................................................................ 2-33 2.3.3 Energy Supply and Demand ........................................................................................ 2-36 Chapter 3 Power Demand Forecasts in the Sumatra Region .......................................................... 3-1 3.1 Historical Trends for Economy and Power Demand ............................................................ 3-1 3.1.1 Economic Activities (GRDP) ........................................................................................ 3-1 3.1.2 Economic Structure ....................................................................................................... 3-2 3.1.3 Historical Power Demand Trends .................................................................................. 3-3 3.1.4 Power Demand Structure ............................................................................................... 3-4 3.1.5 Power Supply Structure ................................................................................................. 3-5 3.2 Power Demand Forecasting Model ...................................................................................... 3-7 3.2.1 General Approach to Model Building ............................................................................. 3-7 3.2.2 Model Structure ............................................................................................................. 3-8 3.2.3 Data Source and Scenario ............................................................................................. 3-11 3.3 Economic Structure ............................................................................................................ 3-12 3.4 Electric Power Demand Forecasts ...................................................................................... 3-14 3.4.1 System Demand ........................................................................................................... 3-15 3.4.2 Power Demand by North and South-West Sumatra System ........................................ 3-18 3.4.3 Power Demand by Province ........................................................................................ 3-20 Chapter 4 Identification of Short-term Power Deficits and Studies on Short-term Countermeasures against these Deficits in Sumatra Systems ....................................... 4-1 4.1 Identification of Power Deficits in Sumatra System ............................................................ 4-1 4.1.1 Power Plants in Sumatra System ................................................................................... 4-1 4.1.2 Possibility of Power Deficits in the Sumatra System .................................................... 4-8 4.2 Short-Term Countermeasures .............................................................................................. 4-11 4.2.1 Effective Operation of Existing Power Plants .............................................................. 4-11 4.2.2 Operational Control of a Power System under Power Deficit ..................................... 4-19 Chapter 5 Generation Development Plan ....................................................................................... 5-1 5.1 Generation Development Plan Formulation Procedure ........................................................ 5-1 5.2 Reviewing Historical Demand ............................................................................................. 5-3 5.2.1 Daily Load Curve .......................................................................................................... 5-4 5.2.2 Peak Demand ................................................................................................................. 5-5 5.2.3 Generation