The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) has chosen Indonesia as the location for a pilot micro hydroelectric power scheme intended to act as a model for similar developments throughout the rest of the Asia-Pacific region, where micro hydro schemes can be developed to benefit low income rural populations.

It is one of four schemes being launched by UNESCAP across the region as part of a programme to establish demonstration projects to increase rural income that can then be copied by other countries. While Indonesia has been chosen for the energy part of the programme, a model water supply scheme will be built in Pakistan and a model health care scheme will be implemented in Thailand. The other country participating in the programme is Sri Lanka where UNESCAP is funding the cost of a model environmental biodiversity project.

Micro potential

Indonesia, with a total hydro power potential of 75,000MW, has one of the largest hydroelectric reserves in Asia. Much of this potential is spread across 1315 possible locations, where different size and types of schemes could be built. Although about 50% of Indonesia’s hydro power potential could be exploited by building large-scale hydroelectric schemes exceeding 100MW installed capacity, a large amount of potential capacity could also be developed by building smaller schemes including mini and micro hydro projects.

According to figures published by Perusahaan Listrik Negara (PLN), the state-run power utility, Indonesia’s micro hydro potential for schemes between 250kW and 500kW in size is about 493MW. By 2000, only about 4% of this potential had been exploited by various schemes, totalling 21MW that were then in service.

A potential development figure for micro hydro schemes less than 250kW in size has not been published as many of these are built to supply power to local communities. Most schemes over 250kW, on the other hand, usually sell their power output to the grid. However, the potential for micro hydro schemes less than 250kW in size is thought to be considerable and could easily exceed PLN’s estimate for larger micro hydro schemes.

Most micro hydro schemes have been built in Java and Sumatra. In terms of installed capacity, about 50% of micro hydro projects have been built in the latter, with about two thirds of all projects located in northern Sumatra.In addition, about 40% of micro hydro projects are found in Java, mainly in the mountainous central region. Other schemes are scattered among Kalimantan, Bali, Sulawesi and Nusa Tenggara.

The Indonesian government is interested in developing mini and micro hydro projects to reduce the cost of supplying electricity to remote communities compared with diesel-fired generation. A target of 59.5MW has been set for commercial micro hydro schemes by the end of 2003, rising to 153.4MW by 2020.

Villages requiring less than 100kW of power supply will be encouraged to build off-grid micro hydro schemes where sufficient water resources exist. In addition micro hydro schemes of 25kW or larger will be used to replace small diesel-fired plants.

Four approaches to the development of mini and micro hydro schemes have been identified for Indonesia. Build, Operate and Transfer (BOT) projects where the hydro power project is transferred to PLN’s ownership after an agreed number of years are likely to be bilaterally or multilaterally financed.

So-called Engineering, Procurement and Construction (EPC) schemes still involve PLN as the official developer and project owner. However, the entire implementation process from project design to commissioning is contracted out.

The UNESCAP project is planned to follow the small power purchase agreement (SPPA) approach where private developers of small power plants offer surplus electricity generation to PLN to purchase. Known as Build, Operate and Own (BOO) projects, these schemes are attractive to PLN as the cost of purchasing micro hydro generated power is much cheaper than diesel-generated electricity that PLN may otherwise be required to supply.

Another approach would involve a micro hydro developer selling electricity direct to a third party and paying PLN a commission for distributing the power supply. This approach is not thought to be in operation so far.

UNESCAP’s decision to follow the SPPA approach is intended to create a model for other communities to finance and operate micro hydro schemes on a private development basis. Indonesia’s banking sector is generally reluctant to finance non-traditional projects in the power or other sectors. In addition, local financing terms are often considered unacceptable for such schemes. By developing the funding model, other communities will be able to follow the same procedures and build their own micro hydro schemes.

Model village

After considering locations throughout Indonesia, UNESCAP chose to support construction of a 100kW micro hydro scheme in the village of Cinta Mekar, situated about 150km from Jakarta in West Java. The scheme was chosen from a short-list of five potential project sites. Short-listing depended on numerous criteria including geographical location and each villages economic situation.

‘We have set up the micro hydro project to sell electricity to the power grid,’ explained a UNESCAP spokesperson. ‘If the site is far from the grid power lines the investment and the electricity price would be higher as the villagers and private investors will invest in the project.’

The four other short-listed project sites were located on several other islands outside Java. One proposal was for an estimated 40kW micro hydro scheme in the village of Pesondongan in central Sulawesi while separate 42kW and 47kW schemes were proposed for two villages in south-eastern Sumatra. The other scheme was a larger 165kW micro hydro project for Golo Cador, a village in Nusa Tenggara Timor, formerly Timor.

According to UNESCAP, the villagers and private investors will sell electricity to the grid and use the profit for social development such as providing electricity supplies to poor households without mains supplies as they cannot afford the connection cost. The profits will also provide a seed fund for the households to provide education for children where families currently cannot afford it and to develop handicraft production.

Cinta Mekar, which consists of four sub-villages, is home to 646 families. Currently 102 households are still without mains electricity supplies. According to an UNESCAP project preparation survey, the poorest inhabitants are rice farmers who are expected to benefit first from the project by being connected to mains power supplies.

‘We got the villagers themselves to rate who are the poorest people,’ said the spokesperson. ‘We will start by connecting the poorest houses first and then the slightly better off houses that also are without electricity.’

Minimise risk

UNESCAP chose to build a 100kW scheme as a model project because difficulties were anticipated in finding a private investor for a larger scheme because of the greater risk involved. For the Cinta Mekar project, UNESCAP is providing 50% of the total cost as the local community’s investment.

The private investor is Hidropiranti Inti Baxti Swadaya Microhydro Systems, a local turbine manufacturer that for this project will also supply the Cinta Mekar micro hydro scheme with a 100kW turbine generator. The shareholding in the project has been evenly divided 50:50 with the local community.

According to UNESCAP, the turbine generator manufacturer’s management has said the company will provide any extra finance required if there is a cost overrun. Should this be necessary, Hidropiranti will still own 50% of the project and receive a 50% share of the profits.

From a technical point of view, UNESCAP was not looking for a large project. ‘We wanted about 100kW to show people a working power purchase agreement (PPA) with a power company and how to get a good return. Our investment is to help show the project can be a success if a private public partnership (PPP) is set up. Some of the other short-listed projects were bigger or smaller as different hydro power resources exist in each of the proposed locations,’ explained the spokesperson.

‘The object of the whole project is rural income through a PPP. There is a lot of grant aid support for rural development but afterwards no one takes care of the projects. But this will be set up as a PPP and will recover the interest. When we had a dialogue with the villagers there everyone supported it as they also expect the project will provide some new jobs.’

One of the reasons that UNESCAP chose Indonesia for the demonstration project was that the government’s new electricity law supports private power investment. PLN already has started negotiations with the Cinta Mekar management to conclude the PPA.

According to the organisation, the power purchase price for Cinta Mekar’s electricity sales will be about 80% of PLN’s normal power generation costs. This also allows the utility to benefit from the PPA. Electricity will be supplied from Cinta Mekar through a medium voltage 21kV line to connect with PLN’s rural grid.

‘The village will sell all the electricity to the grid to guarantee a constant income. If they sell electricity to individuals there could be problems to collect payment,’ UNESCAP claimed. ‘They will sell to PLN, and PLN has to collect payment. Payment is one difficulty of this project compared with the other model rural income schemes, so the PPA will sustain the project.’

Located in Bandung in central Java, Hidropiranti is one of several local turbine manufacturers that produce small as well as larger size micro hydro turbine generator sets.

The smallest produced is the 2kW unit, which is used to supply electricity to a single household. The turbine is powered by the run of the river or by building a small dam with a reservoir designed to hold sufficient water for one day’s power generation.

Final details of the Cinta Mekar project have yet to be announced. A feasibility study has recently been carried out considering the dam structure.Whether a rock, earth fill or concrete dam is built will be decided shortly.

UNESCAP explained that a 2m high, 30m long and 50cm wide irrigation dam already existed in Cinta Mekar at the site selected for the dam, adding that plans called for the dam to be increased in height to 3m. The existing 30cm wide irrigation channel will be widened to 1.5m and the depth increased to 40cm, which is calculated as being sufficient for the installation of the 100kW turbine generator.

Civil engineering work at Cinta Mekar is being carried out by the local villagers and technicians from Hidropiranti. Construction is due to begin at the start of September and is expected to be completed in five months.

‘This is an environmental protection project as it provides energy and stops fuel wood gathering in the forests within a 2–3km radius of the village. Now a lot of villagers burn wood. This includes those people connected to mains electricity supplies but who cannot afford to use it,’ said UNESCAP.

Money maker

The Cinta Mekar scheme is expected to operate 24 hours a day for 25 days a month. In fact, the estimate is conservative and the plant could operate for longer.

According to preliminary estimates, once costs are deducted, the scheme is expected to make US$940 per month, which will be split 50:50 between the community and Hidropiranti.

While such a sum may seem small by western standards, the impact of such earnings over a long period of time in Cinta Mekar is expected to be substantial.

Compared with the situation now when the community are without this income, the villagers are very interested in the project, claimed UNESCAP.

Apart from helping to finance the cost of providing the poorest villagers with mains electricity connections, investment plans for profits from the scheme also include planting palm sugar trees to produce palm sugar for export and replace trees previously cut down for firewood.

While the Cinta Mekar villagers’ main interest in the mini hydro scheme is to earn income from selling the electricity generated, UNESCAP sees the demonstration project as having far wider impact in showing villagers elsewhere in Indonesia and in other Asian countries how to increase their incomes by developing renewable energy resources.

According to UNESCAP, the Cinta Mekar micro hydro finance and operations model will be promoted through seminars and by providing onsite training to people from other villages planning to build similar schemes themselves. UNESCAP also expects the Indonesian government to play an important role in promoting the model project as part of government efforts to increase rural incomes and development.

‘Our main target is to develop a mechanism model and show people that it is low risk to bring in the private sector and do this kind of work,’ said the UNESCAP spokesperson. ‘This model is suitable for a lot of countries with abundant hydro power resources like Nepal, China and Vietnam. At the moment this is the only model mini hydro project that we are working on. We will see the results before replicating it in another scheme.’