[Kabar-indonesia] JP Editorial: Expediting the Power Program [+NYT: Ascent of Wind Power]

[JoyoNews at aol.com]

also: NYT in India: The Ascent of Wind Power [Wind power is emerging 
as an alternative in fast-growing countries like India and China that are 
avidly seeking new energy sources.]

The Jakarta Post
Tuesday, October 3, 2006

Editorial

Expediting the Power Program 

Preparations for the implementation of a crash program to build several 
coal-fired power-generation plants with a total capacity of 10,000 megawatts seem 
to be proceeding at a frustratingly slow rate, while the threat of a major 
electricity crisis has been increasing.

By definition, a crash program requires a much faster implementation process, 
even the possibility of directly awarding power projects to bona fide 
contractors to meet needs in an emergency situation. But four months after the 
announcement of the program, it remains unclear as to when construction will start, 
while the time bomb of a power crisis is ticking. 

All agree that the crash program is badly needed not only to prevent a power 
crisis but also to cut down state electricity company PLN's dependence on 
oil-based power generation, which is currently estimated at between 30 and 35 
percent of its total capacity. Power generation also needs to be diversified to 
control electricity subsidies and keep the fiscal deficit at a sustainable 
level. 

However, the crash program raised controversy and set off allegations of 
potential conflicts of interest right from the outset, because the projects were 
reportedly based on proposals made by Vice President Jusuf Kalla's younger 
brother, Achmad Kalla, the chairman of the Bukaka engineering company. 

The government should nevertheless be commended for its decision to go ahead 
with the projects because they are urgently and truly needed and potential 
investors have always cited the lack of electricity as one of the main barriers 
to new investment in the country. 

Vice President Kalla even braved criticisms by openly promoting the projects 
during his recent visit to China, as they need at least US$15 billion in 
foreign financing, including $7.7 billion for the construction of transmission and 
distribution stations and grids. 

The government rightly decided to subject the crash power program to what it 
termed an expedited tendering process, instead of the normal procedure, which 
could have taken between 12 to 15 months. This alternative was seen as the 
most viable to minimize the risk of collusion but at the same time ensure that 
the projects could be completed within the next three years. 

Given the notoriously corrupt procurement system in the public sector, the 
extra efforts made to ensure that the "expedited" tender process be accepted as 
fairly clean were crucial, otherwise the projects could be stalled by major 
protests and even litigation. The public's apprehension is understandable 
because the families of senior politicians and some Cabinet members, including Jusuf 
Kalla and Aburizal Bakrie, the coordinating minister for the people's 
welfare, control the biggest of the few big builders. 

While the expedited tender process seems to have run smoothly without any 
major controversy, a financing aspect of the project preparations is stalling the 
preparations for the program. 

The power-generation projects alone require an estimated $7 billion in 
foreign financing (mostly export credit). The problem is that state-owned companies 
cannot borrow directly from overseas. Hence, a special government regulation 
needs to be issued as the legal basis for PLN to obtain export credits for the 
projects. 

But overseas creditors require a guarantee letter from the government as a 
hedge against the risks related to such heavily-regulated infrastructure 
projects. Loans for infrastructure projects bear high risks because of the long-term 
nature of the financing and the fact that the credit is given in foreign 
exchange, while PLN's revenues are in rupiah, which is floated against other 
foreign currencies and thus fluctuates according to market forces. 

Yet more important is that PLN's rupiah revenue very much depends on the 
power tariff, which is set by government approval. Foreign creditors therefore 
need some form of guarantee against the risks of loan defaults caused by the 
government. 

The government certainly should be careful in extending such a financing 
guarantee because it causes contingent liabilities on the state budget. And like 
in many other policies that concern the public's interest and the taxpayers' 
money, the government must go through the much slower, albeit more legitimate, 
democratic process of constituency building. 

Here again, we need a strong leadership to create a wider consensus to push 
the decision on the government guarantee. 

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The New York Times
September 28, 2006

The Ascent of Wind Power 

By KEITH BRADSHER

photo: Wind-powered turbines set up by Suzlon Energy near Dhule, India, 
are part of the technology increasingly reaching the country’s rural regions. 
Scott Eells for The New York Times

KHORI, India -- Dilip Pantosh Patil uses an ox-drawn wooden plow to till the 
same land as his father, grandfather and great-grandfather. But now he has a 
new neighbor: a shiny white wind turbine taller than a 20-story building, 
generating electricity at the edge of his bean field.

Wind power may still have an image as something of a plaything of 
environmentalists more concerned with clean energy than saving money. But it is quickly 
emerging as a serious alternative not just in affluent areas of the world but 
in fast-growing countries like India and China that are avidly seeking new 
energy sources. And leading the charge here in west-central India and elsewhere is 
an unlikely champion, Suzlon Energy, a homegrown Indian company.

Suzlon already dominates the Indian market and is now expanding rapidly 
abroad, having erected factories in locations as far away as Pipestone, Minn., and 
Tianjin, China. Four-fifths of the orders in Suzlon’s packed book now come 
from outside India.

Not even on the list of the world’s top 10 wind-turbine manufacturers as 
recently as 2002, Suzlon passed Siemens of Germany last year to become the 
fifth-largest producer by installed megawatts of capacity. It still trails the market 
leader, Vestas Wind Systems of Denmark, as well as General Electric, Enercon 
of Germany and Gamesa Tecnológica of Spain.

Suzlon’s past shows how a company can prosper by tackling the special needs 
of a developing country. Its presence suggests a way of serving expanding 
energy needs without relying quite so much on coal, the fastest-growth fossil fuel 
now but also the most polluting.

And Suzlon’s future is likely to be a case study of how a manufacturer copes 
with China, both in capturing sales there and in confronting competition from 
Chinese companies.

Suzlon is an outgrowth in many ways of India’s dysfunctional power- 
distribution system. Electricity boards owned by state governments charge industrial 
users more than twice as much for each kilowatt-hour as such customers pay in 
the United States — and they still suffer blackouts almost every day, especially 
in northern India.

Subject to political pressures, the boards are often slow to collect payments 
from residential consumers and well-connected businesses, especially before 
elections. As a result, they often lack the money to invest in new equipment.

To stay open and prevent crucial industrial or computer processes from 
stopping, a wide range of businesses — including auto parts factories and 
outsourcing giants — rely on still more costly diesel generators.

With natural gas prices climbing as well, wind turbines have become 
attractive to Indian business. The Essar Group of Mumbai, a big industrial conglomerate 
active in shipping, steel and construction, is now working on plans for a 
wind farm near Chennai, formerly Madras, after concluding that regulatory changes 
in India have made it financially attractive.

“The mechanisms didn’t used to be there; now they are,” said Jose Numpeli, 
vice president for operations at Essar Power. The electricity boards “know how 
to cost it, they know how to pay for it.”

Roughly 70 percent of the demand for wind turbines in India comes from 
industrial users seeking alternatives to relying on the grid, said Tulsi R. Tanti, 
Suzlon’s managing director. The rest of the purchases are made by a small group 
of wealthy families in India, for whom the tax breaks for wind turbines are 
attractive.

Wind will remain competitive as long as the price of crude oil remains above 
$40 a barrel, Mr. Tanti estimated. To remain cost-effective below $40 a 
barrel, wind energy may require subsidies, or possibly carbon-based taxes on oil and 
other fossil fuels.

Mr. Tanti and his three younger brothers were running a textile business in 
Gujarat, in northwestern India, when they purchased a German wind turbine — 
only to find that they could not keep it running. So they decided to build and 
maintain turbines themselves, starting Suzlon in 1995 and later leaving the 
textile business.

To minimize land costs, wind farms are typically in rural areas, chosen for 
the strength of the wind there as well as low prices for land. But that can 
mean culture shock.

“There were no big changes until the turbines came,” Mr. Patil said, pausing 
from plowing here with his father in this remote, hilly, tribal area 200 
miles northeast of Mumbai, where oxen remain at the center of farm life and 
motorized vehicles are uncommon.

Doing business in rural areas of the developing world carries special 
challenges. The new Suzlon Energy wind farm in Khori is a subject of national pride. 
More than 300 giant wind turbines, with 110-foot blades, snatch electricity 
from the air. But it has also struggled with the sporadic lawlessness that 
bedevils India.

S. Mohammed Farook, the installation’s manager, was far from happy one recent 
afternoon. At least 63 new turbines, worth $1.3 million apiece and each 
capable of lighting several thousand homes when the wind blows, could not be put 
into service because thieves had stolen their copper power cables and aluminum 
service ladders for sale as scrap.

The copper or aluminum fetches as little as $1 from black-market scrap 
dealers. But each repair costs thousands of dollars in parts and staff time, in a 
country that is desperately short of electricity and technicians.

“I am crying inside,” Mr. Farook said.

Despite such problems, Suzlon has expanded rapidly as global demand for wind 
energy has taken off. Its sales and earnings tripled in the quarter ended June 
30, as the company earned the equivalent of $41.6 million on sales of $202.4 
million.

The demand for wind turbines has particularly accelerated in India, where 
installations rose nearly 48 percent last year, and in China, where they rose 65 
percent, although from a lower base. Wind farms are starting to dot the 
coastline of east-central China and the southern tip of India, as well as scattered 
mesas and hills across central India and even Inner Mongolia.

Coal is the main alternative in the two countries, and is causing acid rain 
and respiratory ailments while contributing to global warming. China accounted 
for 79 percent of the world’s growth in coal consumption last year and India 
used 7 percent more, according to statistics from BP.

Worried by its reliance on coal, China has imposed a requirement that power 
companies generate a fifth of their electricity from renewable sources by 2020. 
This target calls for expanding wind power almost as much as nuclear energy 
over the next 15 years. India already leads China in wind power and is quickly 
building more wind turbines.

Chinese and Indian officials are optimistic about relying much more heavily 
on wind.

“I believe we may break through these targets — if not, we should at least 
have no problem reaching them,” said Zhang Yuan, vice general manager of the 
China Longyuan Electric Power Group, the renewable-energy arm of one of China’s 
five state-owned electric utilities, China Guodian.

Kamal Nath, India’s minister of commerce and industry, was even more 
enthusiastic. “India is ideally suited for wind energy,” he said. “The cost of it 
works well and we have the manufacturing capability.”

International experts are more skeptical that wind will displace coal to a 
considerable extent, saying that while electricity production from wind is 
likely to increase rapidly, the sheer scale of energy demands suggests that coal 
burning will expand even more.

Suzlon still sees plenty of opportunity in China and has decided to build 
some of its latest designs in China for the market there, despite the risk of 
having them copied by Chinese manufacturers.

“Being an Asian leader,” Mr. Tanti said, “we cannot afford to ignore China.”

A dozen Chinese manufacturers have jumped into wind-turbine manufacturing as 
well. They have struggled with quality problems and have limited production 
capacity so far, resulting in long delivery delays.

But the Chinese producers already have an edge on price over imported 
equipment, according to Meiya Power of Hong Kong, which owns and operates power 
plants in China and across Asia, and is considering a wind farm in windswept Inner 
Mongolia.

Mr. Tanti said that rapid innovation and design changes would allow Suzlon to 
stay ahead of copycats. “It’s a time-consuming process,” he said, estimating 
that it would take two to three years for rivals to clone Suzlon turbines 
because they use unique or proprietary parts.

Suzlon manufactures its turbines at two factories in India, but has begun 
test production at a just-completed turbine-blade factory in Minnesota, where it 
already supplies turbines for a wind farm operated by the Edison Mission Group 
and Deere & Company. It has also begun test production at a Chinese factory 
that will make both turbines and blades.

To reach the Suzlon wind farm here, the huge rotors travel by night on 
special trucks for a 300-mile journey from northwestern India on a succession of 
paved and dirt roads.

Squatter huts have had to be removed along the way to allow the long trucks 
to turn; Suzlon is not required to pay compensation but often makes donations 
in these cases, Mr. Farook said.

The truck crews also carry wooden poles to prop up electricity wires across 
the road and pass underneath. The trucks sometimes attract gawkers, and live 
wires occasionally burn bystanders.

“With human error, it may touch human flesh,” Mr. Farook said. “In that 
case, we have to pay compensation.”

Villagers in Khori said that thievery and even robberies by rock-throwing 
gangs were nothing new, and were a problem long before Suzlon began setting up 
wind turbines. The company’s response — stepping up patrols by security guards 
— has reduced everyday crime. That has made villagers more willing to rent 
land at the edge of their fields for the turbines.

At first, “we were really confused about what was going on,” Mr. Patil said. 
“But 
now we’re O.K. on it.”

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