Indonesia consumes half as much electricity as Britain, despite being four times as populous. Eager to step up electrification, President Joko Widodo promotes private ventures that seek to add 35GW of new capacity within five years – a plan that comes at an estimated cost of up to $73 billion.
Assuming that Indonesia’s electricity demand will rise by nearly 9% a year, following through with the 35GW of capacity addition would boost Indonesia’s electrification ratio to over 90% by 2020.
Despite the short timescale and bureaucratic hurdles surrounding land acquisition, Indonesia’s growth targets present an opportunity for foreign energy companies. The government in Jakarta has put processes in place to help foreign investors by cutting the time it takes to acquire permits from around two and a half years to just eight months.
Fast delivery, local content
“To achieve its goals, the government will require agile and efficient work by foreign energy companies, said Arka Wiriadidjaja, sales manager at GE’s Power Conversion.
To put this into context, a coal plant—currently Indonesia’s dominant energy source—takes four to five years to construct. So, given the five-year window, there is little margin for error.
“This means that energy companies with a strong local presence will be preferred, as they will have an established local supply chain, which meets the local content requirement,” he said, explaining that depending on the generation type and the size of the plant, the local content initiative can require up to 60%of components to be locally sourced.
Regulated power prices
The Indonesian government also fixes the price per kilowatt-hour and therefore, subsides the gap between the true cost of energy and the price it is bought at. Because of this, the cost of energy needs to be kept to a minimum.
In order to meet these stringent cost requirements while also delivering reliable, high-quality energy, innovative technology needs to be deployed. Solar power and flexible gas generation spring to mind – both fuels have the potential to challenge, if not reign in, Indonesia’s dependency on coal power.