Indonesia Power Sector

Indonesia is well-endowed with plentiful supply of renewable and non-renewable primary energy sources, however, the energy policy towards 2050 indicates a desire to maintain the current dominance of the non-renewable energy supply. This would appear to indicate a lock-in of the existing energy system which favours coal-fired power plants. Thus, we explore policy interventions which can support more sustainable and inclusive supply for power generation in light of market failures.

Indonesia is the world’s second largest exporter of coal, in 2018 it accounted for 16.6% ($20.6 billion) of global export. Thus, non-renewable coal-fired power-plants are the preferred choice of supplying generation of electrical power, where, coal accounts for 57.2% of fuels for Indonesia’s generation of power. However, while these plants can provide significant economies of scale and capacity for urban regions, they are the largest emitter of greenhouse gases (GHG) and the most inefficient of the fossil fuel-based power plants. Moreover, government subsidies on electricity prices has provided significant disincentives for the state electricity company to invest in efficiency, upgrading capacity or creating more connected power networks.

On the renewable technological opportunities, Indonesia is blessed with significant potential for geothermal, hydropower and solar. It already has the third largest installed capacity for geothermal energy and over 75GW of potential for hydropower. In 2015, Hydropower generated 16.6% of the world’s total electricity, where, it also represented 70% of all renewable electricity.