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Indonesian coal mining firms expect global 1 gigawatt by shortening the construction According to Somesh Kumar, partner and
coal demand to recover in mid-2021 as period of substations from six years to three leader, power and utilities, EY India, tariff
economies around the world heal from years and increasing grid access limits from indexation partially releases the burden on
COVID-19, even though volumes will remain 10MW to 12MW. discoms’ financials, whereas it fails to address
below pre-pandemic levels. Kepco will also apply different calculation the issue of long-term tie-up with PPAs.
Exports are expected to hit 430 million methods when allocating grids. “It is imperative to evolve the existing
tons in 2021, growing 3.6 percent from this According to Kepco, as renewable energy power markets which are capable of relieving
year, but still 8.9 percent below last year’s facilities rarely utilize 100% of the grid the discoms from entering into a long-term
figure, according to Indonesia Coal Mining capacity, it will now only assign 70% capacity. contract for power,” he added.
Association (APBI) estimates. In its example, Kepco said that 10MW He said that policymakers have continued
However, most of next year’s growth is solar farms would only be allocated a grid with flat tariffs to provide better recovery
likely to come in the July-December period, capacity of 7 megawatts as seldom reach certainty to developers while inflation indexed
as countries focus on the distribution of maximum power output. tariffs might only help discoms.
COVID-19 vaccines in the January-June “Renewable tariffs have seen sharp
period, said APBI deputy chairman Kurnia decline... Since the entire project cost is
Ariawan. sunk, it is not subject to huge inflation either.
“We think the first half of 2021 will still be SOL AR Hence, to provide greater recovery certainty
highly impacted by the pandemic,” he said at to developers and investors, steady tariffs have
a virtual discussion celebrating APBI’s 31st Indexed renewables tariffs been continued by policymakers. Inflation
anniversary. indexed tariffs might only help discoms,
“The second half is when we will see real could save Indian discoms which also remains to be seen if they actually
recovery,” added Kurnia, who is also president do,” he added.
director of coal mining giant PT Kideco Jaya INR218.bn over five years According to the report, state-owned
Agung. discoms have not been able to take full
The COVID-19 pandemic has destroyed New Delhi: India’s discoms could save up to advantage of new cheaper renewable energy
global energy demand over the past year. INR218.bn over the next five-year period due to two-part thermal contracts which
Demand fell so much that the Indonesian under a partially indexed renewable energy command a fixed capacity charge even if no
benchmark coal price (HBA) dropped to a tariff structure, even if solar tariffs continue to power is drawn.
five-year low of $49.42 per ton in September. fall, according to a recent report. Typically coal-based power plants have
For comparison, prices averaged around This was compared with cash outflows tariffs in two parts: Fixed charge to recover
$77.89 per ton last year. resulting from incremental renewable capacity fixed cost and variable charge to recover cost
Demand has recovered in the fourth auctioned under a flat tariff regime, it added. of fuel, etc. Since fuel cost varies, developers
quarter as some economies have reopened, The report by the Institute for Energy are given the option of escalation of variable
which boosted the HBA to $51 per ton in Economics and Financial Analysis and the costs based on notified indices.
October, but experts say prices are unlikely to CEEW-Centre for Energy Finance said that In case of renewable energy plants, since
reach 2019 levels even in 2021. inflation indexation of tariffs for future solar the fuel cost is zero and the operational costs
capacity could provide much-needed financial are minimal, inflation-based indexation has
respite to the distressed discoms helping India not been prevalent.
move away from coal-fired power. “Since renewable energy plants, especially
GRIDS However, this was an interim solution to utility-scale solar plants were relatively new
ease the unsustainable near-term financial in India, the financial bodies did not have
Kepco to build more grids pressure on discoms. confidence in their operation. Hence, a

to meet demand from

renewable energy facilities

Korea Power Corp. (Kepco) will construct
power grids in regions where renewable
energy facilities are expected to be built,
including the counties of Shinan and
Yeonggwang in South Jeolla. Province.
Kepco has been implementing a policy
since October 2016 of guaranteeing access to
power grids for renewable energy facilities of
1 megawatt or smaller.
However, the concentration of 14.4GW of
renewable energy facilities in specific regions
resulted in power grid shortages of 4.2GW.
According to a Kepco official, the state-run
utility will address the shortage of 3.2GW by
next year.
It would further solve the shortage of

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