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Indonesia Energy Situation - energypedia.info

Indonesia Energy Situation

From energypedia.info

Republic of Indonesia

Capital
Official Languages(s)

Jakarta (6 10 30 S, 106 49
42 E)
Indonesian

Government

Unitary Presidential Republic

President

Susilo Bambang Yudhoyono

Vice President

Boediono

Total Area '( km)'

1,919,440

Population

237,556,363 (2010 census)

Rural Population
GDP (Nominal)

$670.421 billion (2010

estimate)

GDP Per Capita

$2,858

Currency

Rupiah (IDR)

Time Zone

UTC+7 to +9

Calling Code

+62

Electricity Generation

TWh/year (year)

Access to Electricity
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Wind energy (installed

capacity)

MW (year)

Solar Energy (installed

capacity)

MW (year)

Contents
1 Overview
2 Energy Situation
3 Electricity Situation
4 Policy Framework, Laws and Regulations
5 Institutional Set-up in the Energy Sector
6 Donor Engagement
7 References

Overview
The primary energy supply in Indonesia is mainly based on fossil fuels like oil, gas and carbon. In 2009, 43% of
Indonesian energy consumption was based on oil, 19% on natural gas and, 34% on coal. Renewable energy,
particularly hydro and geothermal have a share of 4%, but statistics do not cover the traditional use of biomass as
energy for cooking, lighting and process heat in rural areas, which is estimated to comprise 21% up to 29% of the total
energy demand. The focus on fossil fuels was caused by the low price of oil in the past due to own oil sources and
prolonged price subsidies. In the meantime, the oil reserve decreased significantly. Considering the existing average
production rate, it is estimated that the reserve oil will be exhausted in around 20 years. Indonesia, which had been a
founding member of OPEC, but left the organisation in 2009, is now importing larg quantities of oil. On the other hand,
Indonesia is still a net exporter of natural gas. Thats why the national utility PLN is switching now power generation
from expensive oil to gas and coal of which Indonesia has large reserves.

Energy Situation
The total power generation in Indonesia is around 50 GW. Around 30 GW has been installed by the utility PLN. The
remaining consists largely of captive power for the manufacturing industry. Diesel generators account for approximately
60 % of captive power capacity, while cogeneration plants provide approximately 25%. 80% from the 30GW are coming
from oil, gas, and coal, 18% from hydropower, and 2% from geothermal. However, hydro and geothermal power plants
generate a higher share of the electricity as the capacity of the other plants is not fully used. Electricity makes around
10% of of the total energy consumption. About 80% of the electricity is consumed on Java und Bali alone. In recent
years consumption of electricity has increased by 7 per cent annually. It is calculated that for every 1 percent increase in
GDP the energy demand increases by 1.8 percent. Indonesia failed to meet this demand growth with adequate system

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investments which has resulted in increased frequency and duration of power outages which prove costly to local
industries. These factors have sharply put the need for diversification of supplies into focus and Indonesia has an
ambitious plan for renewable energy and in parallel are advancing plans for the use of nuclear energy.

Subsides to the energy sector are one of the biggest items on the national budget. The combined fuel and electricity
subsidies accounted for IDR 111.9 trillion in 2010. In the same year the government allocated IDR 57.46 trillion ($6.37
billion) for the fuel subsidy and the rest went to the state utility - PLN - as an operating subsidy in compensation for
being compelled to sell electricity at below cost. Average generation cost in Indonesia are around 1200 IDR/kWh and
reach up to 3000 IDR/kWh for diesel generated power in remote areas. Average selling price is around 700 IDR/kWh.
In spite of abundant hydropower resources hydropower is only used to a small extent. According to a Hydro Power
Potential Study conducted by PLN in 1982, the total potential capacity of hydropower resources in Indonesia is 75 GW.
Yet, in 2008 the country had installed a total of 3,504 MW hydropower capacity, which represents a mere 4.7% of the
technical potential and only 7.2% of the total Indonesian electricity generation capacity. The development of new
hydropower plants for electricity generation remained slow. The contribution of hydropower towards the Indonesian
energy mix has been falling steadily in the last years; from 13% in 1998 to 7.2% in 2008.
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Electricity Situation
Indonesia has a comparatively low overall rate of electrification for a middle-income country. Figures and interpretations
diverge, but as much as 30- 35% of the population representing 75 million people does not have access to electricity.
Around 50% of un-electrified people in Indonesia are actually living in (already) electrified areas and would need grid
densification programmes. The costs are estimated to be US$ 290 per connection. The other half is living in nonelectrified villages, which are mostly found in remote rural areas. Such areas can either be targeted through grid
extension or dedicated off-grid solutions. The World Bank Regional Electrification Master Plan for Indonesia made some
estimation about least cost options coming to the following conclusions:
Grid expansion is the least-cost means of electrification up to distances of around 7 km where good micro-hydro
resources are available (assuming that sufficient grid-connected generation capacity is available)
Where this is not the case, grid expansion is least-cost up to distances of around 16 km, where biomass isolated
grids become lower-cost
In cases where good micro-hydro, biomass (and geothermal) resources are not available, then grid expansion
remains least-cost at distances up to 28 km, where diesel isolated grids are to be preferred
Household level solutions are only to be preferred where practical constraints on access prevent the use of
isolated grids or for smaller villages where it is not economic to install isolated grids.

Villagers in non-electrified areas rely on candles, kerosene lamps, dry cells and car batteries to satisfy part of their
energy needs. Rural households typically spend a significant share of their income on these energy sources despite
the inconvenience and the environmental and health hazards associated with them.
Whilst the application of MHP technology is not new to Indonesia, only a small proportion of the countrys huge mini and
micro-hydro power (MHP) potential has been exploited so far. Unfavourable framework conditions for stand-alone
systems and on-grid schemes, lack of specialist know-how and a basic lack of awareness of the available potential have
been the main reasons for this sluggish progress in the past. However, in remote rural areas, hydro power is now
becoming increasingly competitive compared to fossil fuel-powered alternatives, due to the high energy prices (which
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can be trice as high as in the centres) that neutralise the still existing fuel subsidies by the Indonesian Government.
Other renewable energy technologies like Solar Home Systems, small wind turbines or biogas plants and other
bioenergies are spread to a different extend in rural areas, but lack for the technical maturity or sustainable operation
and service models that are necessary for large scale dissemination.
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Policy Framework, Laws and Regulations

The energy sector in Indonesia is dominated by key policies and objectives related to the following:
Diversification: A key objective of the GOI is to reduce dependence on oil by expanding the use of coal, gas and
renewable energy sources. Specific targets are set for each energy source in 2025. The Ministerial Decree on
Renewable Energy Resources and Conservation (Ministerial Decree No. 002/2004) has set the target for new
and renewable energies to increase to 25% (18% renewable and 7% other new energies) by 2025.
Energy conservation
Energy Sector Reform: more transparency, more coordination; among other things it was planned to make the
utility PLN a fully independent and financially viable company but due to legal disputes such a decision has not
been taken.
Rural electrification: The current National Energy Management Blueprint identifies ambitious short- and long-term
developmental objectives for the electricity sector including the increase of the electrification level to 90% of all
households by 2020 and to 100% of all villages by 2010.

The Coordinating Ministry of Peoples Welfare is responsible for the development and administration over poverty
reduction policies and programs in Indonesia. In the last years government programs have been consolidated in 3 major
clusters focussing on
(1) individual assistance and social protection (subsidised staple food and scholarships for the poorest),
(2) national program for community empowerment (PNPM) and
(3) strengthening of small and medium enterprises (mainly by providing cheap credits).

As a core element of the national poverty reduction strategy PNPM has been up-scaled in 2009 covering the whole
country with a budget over 2 billion US$. The PNPM follows the philosophy of community driven development (CDD),
providing institutional training and support to communities, who then can apply for funding for self-defined community
development projects. The core PNPM cycle is foreseen to be implemented for three consecutive years building the
institutional base in the villages for later intervention of other sector programs. As communities are free to define their
priorities they can also opt for local energy infrastructure projects like hydro powered mini grids.
Energy policy for rural electrification is developed by the Directorate General for Electricity and Energy Utilisation
(DGEEU) of the Ministry for Energy and Mineral Resources (MEMR). A rural electrification program is jointly
implemented by the DGEEU and the Indonesian electricity utility PLN.
The strategy pursued by PLN for the future electrification of rural areas is based on the following principles of
1. empowerment of the rural population to secure electricity according to their own conceptions,
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2. utilisation of local energy resources, in particular renewable, and

3. increasing the involvement of the private sector and of rural cooperatives.

Part of that strategy is the community-based rural energy development concept, according to which cooperatives,
municipal institutions, non-governmental organisations and/or private actors, with the technical assistance of PLN, serve
as power providers in rural areas. PLN provides assistance at two different levels: either for establishing a stand-alone
(isolated) grid including power generation, or for establishing a village network for connection to the PLN-operated
central power grid. However, the program has been criticised as inefficient and too bureaucratic.
Rural electrification is generally not financially attractive to PLN because Indonesias off-grid areas are sparsely
populated, have very low load factor, and are dominated by low-end household consumers who are charged a heavily
subsidized tariff (average revenue for household consumers was about IDR 628 kWh in 2006. Most off-grid regions are
supplied by diesel power plants that consume high priced diesel oil. This increases PLNs cost of production far above
IDR 2000 kWh.

In 2002, MEMR issued a new regulation for small renewable energy projects interested in selling power to PLN known
as PSK Tersebar. The regulation requires PLN to purchase electricity generated from RE sources by non-PLN
producers for projects of up to 1 MW capacity. Institutions eligible to participate are cooperatives, private companies and
government-owned companies. Purchase tariffs are calculated at 80% for medium voltage and 60% for low voltage of
PLNs announced Electricity Base Price, which is supposed to be its marginal production cost at the location, where the
plant is to be built. The ministry also introduced some benchmark tariffs on the cost of power production by area
subsystems.
An additional program to foster rural energy supply is the Energy Self-sufficient Villages program (DME), set-up by
Indonesias president in 2005. All rural energy related activities by Indonesian ministries are considered under this
program if they result in a villages energy self-sufficiency of at least 60%. Because the ministries do not receive extra
funding, ongoing activities are integrated into the DME program. Pilot projects under the DME mainly focus on biofuels
based on Cassava, Nyamblung and Jatropha. The implementation of the DME is significantly delayed and the target for
2009 was not reached. The DME program was supported by a small project of the Environment and Climate Protection
Program financed by the German Ministry for Environment (BMU).

On January 31st 2012 the Government of Indonesia (GoI) issued a Renewable Energy Feed-in Tariff (FiT) for
biomass, biogas and municipal solid waste. The FiT guarantees access to the grid for renewable energy generators and
obligation for national state utility company (PT. PLN) to purchase the renewable energy generated until capacity 10
MW. This policy expected to boost-up renewable energy development and further private sector involvement in
renewable energy sector in Indonesia. However, the new FiT not clearly mentioning time period of standard Power
Purchase Agreement (PPA). Currently, almost all of the time period of the power purchase based on B to B negotiation
with state utility company. This will undermine some potential investors because of un-clear certainty regarding the time
period of the contract purchase power. Based on previous FiT which were issued in 2009, incentive for all renewable
energy varied between 5.5 - 8.2 /kWh. Current issued FiT, additional incentives are applied for biomass/biogas
and municipal solid waste which are at range 8.13 10.6 / kWh and applicable if the electricity feed into medium
voltage (20 kV) transmission line. Further incentives are available for some islands with lack access to electricity and
infrastructure with maximum factor of 1.3.
FiT for other renewable energy technologies, such as solar and wind are also planned but have not been issued yet by

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the regulator. The new issued FiT expected to support bio-energy development in Indonesia and maximize utilization of
bio-energy potential which distribute among the archipelago[1].
Detailed information on the new FiTs in Indonesia can be found here:
http://esdm.go.id/
ESDM 04 2012.pdf http://prokum.esdm.go.id/permen/2012/Permen ESDM 04 2012.pdf
(http://prokum.esdm.go.id/permen/2012/Permen)

The Government of Indonesia has made a voluntary commitment to reduce the GHGs and pledges to reduce around
26 percent of Business as Usual emission in year 2020 by unilateral finance and it could be increased to 41 percent with
international finance supports. To reach this target, the energy sector must play a role at least by reducing greenhouse
gasses emission by 6% of the total emission reduction target.
Since recently the GOI has also established a new allocation fund for rural electrification called Dana alokasi khusus
DAK. The DAK was approved by the ministry of finance. The technical guidelines have been worked out by the DGEEU
and have still to be approved by the MEMR. The current budget of DAK is 15 Mio US$. It will increase to 100 Mio US$
per year. DAK is providing 200,000 to 800,000 to local governments. These governments can use the money to
construct new MHPPs, rehabilitate MHPPs, extend the grid of MHPPs or install solar systems. The districts have to
contribute at least 10% of the costs. Funds can only be used for hardware. The local governments have to design and
construct the plant. Consultant activities are not included, but can partly be financed by the MEMR.
Go To Top

Institutional Set-up in the Energy Sector

Ministry of Energy and Mineral Resources (MEMR):
The MEMR is responsible for the national energy policy and is supervising state-owned utilities and energy
service companies. Important aspects of implementation have been transferred to the provincial and district level
in the course of the ongoing decentralisation process.
Ministry of Finance:
The Ministry of Finance has taken over a leading role in responding to climate change issues. MoF leads an
inter-ministerial working group on climate change and low carbon issues. It is leading GOI collaboration with the
World Bank on the development of low carbon development options. The MOF has initiated the establishment of
an Indonesia Clean Technology Fund, a US$ 250 million equity enhancement fund for clean technology projects
in Indonesia. MoF takes the lead in preparing project proposals for the World Banks Clean Technology Fund.
Director General of Electricity and Energy Utilisation of the MEMR (DGGEU):
DGEEU is responsible for the electricity sector policy and its regulation DGEEU also chairs the Rural
Electrification Steering Committee, which is responsible of ensuring inter-agency coordination and cooperation in
matters related to the governments rural electrification program. In addition, DGEEU co-ordinates and supports
small power purchase agreement project developments. DGEEU is also the central governmental actor for mini
and micro hydro power. The DGEEU sees its role in guiding facilitation for the hydro power sector development
by providing regulation and standards. Recently a separate Directorate General for New and Renewable
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Energies and Energy conservation (DG NREEC) has been founded that started to work in February 2011. The
new DG NREEC takes over the role of the central governmental institution for mini and micro hydro power.
The Directorate General for New and Renewable Energies and Energy Conservation (NREEC):
The Directorate General for New and Renewable Energies and Energy Conservation (NREEC) started up in
February 2011. NREEC was set up as a focal point for renewable energy in Indonesia. As the central
governmental institution for renewable energies including hydro power it is also the central counterpart on the
policy level for the ongoing ENDEV measure.
BAPPENAS (National Development Planning Agency-Bureau for Electricity, Energy Development and Mining):
Prioritizes renewable energy projects, special rural electrification projects, determines level of government
support, and appoints Government project partners. BAPPENAS is the agency responsible for preparing longand medium-term (five-year) national development plans.
National Energy Council (DEN):
It is chaired by the president, with the objective to define procedures to elaborate a National Energy Master Plan
and Regional Energy Master Plans and to clarify the authorities of the central and local governments.
Directorate General for Community and Village Empowerment (PMD) within the Ministry for Home Affairs
(MOHA):
PMD implements the Rural PNPM and it is supporting the Green PNPM program, a new grant facility established
under the country-wide PNPM. For this special fund the World Bank acts as trustee via the PNPM Support
Facility (PSF). The objective of this facility is to provide additional funding to the existing block grants provided
under PNPM for activities contributing to the sustainable management of natural resources (NRM). The Green
PNPM is jointly financed by Australia, Canada, Denmark, and the Netherlands and provides for MHP earmarked
grants of approx. 26 Mio US$ for about 250-350 schemes until 2012.
Ministry of Public Works (MPW):
responsible for hydro power resource surveys. In a few cases, the operation of hydro plants and building codes.
Ministry of Cooperatives and Small Enterprise Development (MOC):
responsible for enhancing the role of cooperatives in rural electrification and in some cases initiator of
electrification projects.
Unfortunately, there is no effective coordination among the different governmental institutions. In fact, the different
ministries partly compete with each other and the programs they implement have varying procedures and diverse
financing sources. The national electricity system is managed by PLN. This state owned utility company holds a
monopoly for the power generation, transmission, and distribution, as well as power retail-ing. PLN currently operates
5,233 power plants, which comprise around 44% of the genera-tion capacity outside the Java-Bali network, It means
that the average plant size is less than 5 MW. PLN is managing at least 600 mini-grids. PLN is currently unable to
expand its power-generating capacity due to financial difficulties. NGOs play an important role in Indonesias energy
sector. They are advisers, project devel-opers, and managers of energy programs. NGOs are active in different RE
fields.
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Donor Engagement
1. The World Bank has been supporting clean energy and clean development in Indonesia since the mid-1990s.
One of the first WB-executed RE projects was the Indonesia Solar Home Program with the aim to provide PV
systems for 200,000 Indonesian homes. However, the project was not very successful. WB published in 2005 a
study Electricity for All: Options for Increasing Access in Indonesia. Based on the findings WB is supporting grid
expansion in rural areas.
2. The Netherlands, Denmark, Australia, UK and Canada support the Green PNPM. The Green PNPM is the five
years (2008 2012) US$54.8 million environmental pilot-project of the GOI's Program Nasional Pemberdayaan
MasyarakatRural (PNPM-Rural), or the National Program for Community Empowerment in Rural Areas. The
pilot-project disburses block grants and provides technical assistance to beneficiaries within target locations in
eight provinces on the islands of Sulawesi and Sumatra for community investments in green sub-projects
activities focused on natural resource management (NRM), environmental conservation, and renewable energy
(RE).
3. The Asian Development Bank (ADB) is active in a range of projects from upstream gas field development to offgrid rural electrification using renewable energy. A project initiated in 2002 provided over $150 million in lending
for connecting about 76,000 new customers to the power grid, including providing 10,000 low-income families in
Indonesias outer islands with solar home systems and hydro based mini-grids.
4. The Netherlands have financed the Casindo program which supports regional multi stakeholder forums to plan
energy investment and support local universities and vocational school in the field of renewable energies and a
number of other projects however have meanwhile phased out from energy sector.</span>
5. Denmark is supporting in addition to the Green PNPM an energy efficiency program and recently had a planning
mission to support new projects in the field of NRM.
6. The EC-ASEAN Energy Facility (EAEF) had supported some projects. However, the program ended in 2007.
7. IFC has showing increasing interest in financing and providing advisory services to climate change initiatives,
clean energy development and energy efficiency options, and are implementing advisory services in the
geothermal and biomass fields.
8. Different other actors as UNDP (Integrated Microhydro Development and Application Program - IMIDAP) have
been active in the MHP sector in the past, but have phased out now.
9. MCCs $332.5 million Green Prosperity Project is designed to increase productivity and reduce dependence on
fossil fuels by expanding grid connected bigger renewable energy schemes, to increase productivity and reduce
land-based greenhouse gas emissions by improving land use practices and management of natural resources.
10. NORAD development cooperation is primarily focused on climate and forests. In 2010 Norway and Indonesia
signed a declaration with the 4 main pillars: (1) cooperation on international political issues, (2) focus on energy
and climate, (3) democracy and good governance and (4) economic cooperation. Cooperation potential exists in
an exchange programme through which villages are electrified against clear forest protection and rehabilitation
activities.
11. BMZ is funding the ASEAN Renewable Energy Support Programme (ASEAN RESP), a regional project aiming
to accelerate the exchange and best practises in the ASEAN region. This project can be used to disseminate
results from the ENDEV measure to other ASEAN countries with low electrification ratios like Laos, Cambodia
and Myanmar and vice versa. The Hydro Power Competence Center which was established under this project in
Bandung is equipped with a hydro power laboratory and can be essential in providing high quality training and
testing of equipment for ENDEV projects worldwide. BMU is funding the project Least Cost Renewables
(LCORE), which has been commissioned in March 2012. This project is aiming to promote renewables in those
fields where they are already cost competitive like replacement of diesel generated power. There is good
potential for cooperation with ENDEV especially regarding upscaling of pilot projects.
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Go To Top

References
EnDev Indonesia (http://endev-indonesia.org/)
For further questions: mhpp2@giz.de (mailto:mhpp2@giz.de)
1. Author: Fuadi Arif Nasution
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Categories: Country Energy Situation Indonesia
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