41074-013: West Kalimantan Power Grid Strengthening Project

Project Data Sheet (PDS): Details


Description

The proposed project is perfectly aligned with ADB's Energy Sector Assessment Strategy and Roadmap, which supports investment in strategic transmission assets that connects regions or countries across seas or international boundaries to optimize power networks by reducing the overall need for reserve capacity, improving system reliability, removing transmission bottlenecks, and transmitting cheaper power from one area to the other, addressing overall regional socio-economic and environmental improvement.

Project Rationale and Linkage to Country/Regional Strategy

In West Kalimantan, Sumatera and the other outer islands of Indonesia, most of the power generation is either oil or diesel based, and, as a result, cost of power generation is more than 25 cents/kWh. Large numbers of customers also do not have access to grid connected power supply in those areas, and the power grid will need strengthening to accommodate new customer connection. In addition to strengthened network, supply to new customers will need new generation capacity, especially low cost power generation to reduce the overall cost of power generation. The proposed project will address all these issues in West Kalimantan. PLN, the state owned power utility in Indonesia, plans to reduce its cost of power generation in West Kalimantan by importing hydropower generated electricity from neighboring Sarawak, Malaysia by building about 83 km 275 kV transmission line from its Bengkayang substation to the border with Sarawak, Malaysia. On the other side of the border, in Sarawak, PLN's counterpart, SESCO, the state owned power utility in Sarawak will build about 42 km 275 kV transmission line from Mambong substation to the border with West Kalimantan. Together, these transmission lines in the two countries will form the first regional BIMP-EAGA flagship project and the first leg of the Trans Borneo Power Grid that aims to connect West Kalimantan across Sarawak, and Brunei, to Sabah (Malaysia) enabling power trading between the BIMP-EAGA countries. PLN's investment in West Kalimantan is part of its nationwide plan to connect about 10 million new customers between 2011 and 2015 to support Government's commitment to 90% electrification by 2020 from about 62% in 2009. This national plan will need large investments and PLN will have to increase its operational income for it. Currently, PLN's income from its operation is insufficient to cover its cost of operation as the tariffs have been set low by the Government (average of 6.9 cents/kWh) for social reasons. As the cost of generation is much higher than the average tariff, PLN's operations are subsidized by the Government through a public service obligation (PSO) program that is approved by the Parliament each year. For 2011 PLN subsidy, the Government has allocated about $7.3 billion from the 2010 level of $6.46 billion ($82 million for West Kalimantan). PLN's cost reduction will reduce the need for larger subsidy by PLN. The proposed strengthening of the 150 kV distribution network, and PLN's import of cheaper power will also avoid emissions of about 400,000 tons of CO2 that would have been generated by the old rental oil fired that PLN currently uses in West Kalimantan. This is a priority project for strengthening distribution network in rural areas and for regional cooperation. It is consistent with ADB's country strategy and program for 2006-2009 and country operations business plan 2009-2011 that support the Government's economic growth target rate of 6.3%-6.8% per annum in 2010-2014 to reach at least 7% by 2014. They highlight the importance of removing infrastructure bottlenecks and promoting regional cooperation.

Impact

Sustainable power supply in West Kalimantan

Project Outcome

Description of Outcome

Cost of operating West Kalimantan power system reduced

Implementation Progress

Description of Project Outputs

1. Construction of Sarawak-West Kalimantan interconnection network 2. Construction of new distribution network in West Kalimantan 3. New connections to households in West Kalimantan

Safeguard Categories

Environment: B
Involuntary Resettlement: B
Indigenous Peoples: B

Summary of Environmental and Social Aspects

Environmental Aspect
This is classified as a Category B project for environment. The projects poses no significant environmental risks. The draft IEE prepared shows the proposed 275 kV transmission line: (i) passing through flat to hilly country, with scattered villages and associated small farms and gardens mainly along the roads including shifting cultivation and re-growth; (ii) does not pass through any protected areas, areas with rare or endangered species, or areas of high ecological diversity; (iii) requires 9.04ha land in West Kalimantan area for tower sites; and (iv) requires tall trees to be cleared on land of 30m width, from the centre line, in West Kalimantan In the project area, the vegetation is already highly modified by human activity through shifting and permanent cultivation. The area involves no protected areas, no primary forest, no cultural heritage sites, 30% of land occupied by crops and grassland, 68% is high canopy vegetation such as plantations and forest, and only 2% other land use.

Involuntary Resettlement
Project has separate resettlement plans (RPs) for the 275kV section from Benkayang to the Malaysian border and for the 150kV section from Benkayang through Ngabang to Tayan. Both draft RPs include specific actions to address gender and ethnic minority issues.

Indigenous Peoples
The ethnic minority plans are incorporated in the resettlement plan.

Stakeholder Participation and Consultation

During Project Design
Stakeholders meetings were conducted in West Kalimantan; near the border area in Bengkayang and in other areas along the proposed route of the transmission line.

During Project Implementation
ADB and AFD fielded a loan inception mission from 3-7 March 2014. PLN and ADB confirmed that internal monitoring will be conducted semi-annually, and external monitoring will be conducted twice (three months after compensation payment for 50% of towers, and once 30% of ROW compensation has been provided, for 275 kV TL and 150 kV TL each), according to the updated RCCDP for 275 kV and draft RCCP for 150 kV. All the monitoring reports will be submitted to ADB for web posting, and internal monitoring report will be made available to the affected people as well. PLN will submit the first internal monitoring report in June 2014 both for 275 kV TL and 150 kV TL. During construction, PLN is required to submit the progress of EMP implementation and monitoring twice a year which will be uploaded to the ADB website. The first SEMR is expected for submission in July 2014.



Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

Project Data Sheets (PDS)

Timetable

Concept Clearance
28 Aug 2010

Fact-finding
14 Feb 2011 to 17 Feb 2011

Management Review Meeting
09 Aug 2011

Board Approval
27 Aug 2013

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