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Indonesia, which unveiled its net zero target in 2022, is striving for carbon neutrality
Kepala Biro Komunikasi, Layanan Informasi Publik, dan Kerja Sama
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Indonesia is an archipelago country located in Southeast Asia; the fourth most populous country in the world with close to 280 million people occupying 17,000 islands spread across 4,000 miles. It is also by far the largest economy amongst the ten Association of Southeast Asian Nations (ASEAN) member countries, dwarfing the economies of Singapore, Thailand and Vietnam.
As a developing, emerging-market economy, Indonesia has been facing significant electricity transmission and distribution issues including intermittent brownouts, power losses and theft. Electricity distribution to Indonesia''s rural communities has been particularly problematic, the country''s complicated geography and unequal distribution of natural resources has led to significant challenges for the country to provide electricity evenly, particularly to Indonesia’s remote communities. Much of Indonesia lies in the South Pacific''s ''Ring of Fire'' and, as such, is vulnerable to earthquakes and other geologic instability. This is especially true outside the most populous island of Java.
Maintaining grid security and the reliability of electricity supply when natural disasters strike has been a particular challenge for Indonesia. Electricity reliability and price, has prevented Indonesia from becoming one of the best investment destinations in the region and has hindered economic growth.
Projects opportunities related to smart grid developments, include:
Accessing The Market:Indonesia''s demand for Smart Grid technologies likely will grow as the country is aiming to reduce dependency on imported diesel used for power generation in many rural communities; the hope is that much of this power production can switch to renewable energy. The Indonesian government has set a target for the renewable sector to contribute 23% of total power production by the year 2025.
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IEA (2024), Indonesia Case Study, IEA, Paris https://, Licence: CC BY 4.0
PLN (Perusahaan Listrik Negara) is the government-owned corporation which holds the monopoly on the ownership and operation of transmission and distribution assets in Indonesia. Despite the legal provision allowing the private sector to operate grids, there is no robust regulation concerning technical procedures and financial charges for network access, and this model has been applied only for generation projects in Indonesia. In the 2021‑2030 RUPTL, there is a larger share of IPPs in generation capacity compared with the 2019‑2028 RUPTL, which was more reliant on PLN. This market structure and level of sector participation is similar to many other countries in Southeast Asia and Africa.
Being a state-owned entity, PLN funds the extension and renovation of the grid through its balance sheets and consequently, the financing capacity and costs are tied to the financial health of the corporation, rather than the project itself, which currently poses a challenge. PLN unveiled a net debt of around USD30billion on its financial statements, and it anticipates a gradual increase of the debt-to-equity ratio in the foreseeable future. The return on equity hovers around 1.1% and although PLN generates ample cash flows to meet debt service obligations, maintaining financial well-being in a sustainable way still depends heavily on government subsidies – which represented over 20% of revenues last year.
The tariffs that are set by the Ministry of Energy and Mining Resources have consistently been below operating costs and rely on government subsidies. However, this could change as the JETP Comprehensive Investment and Policy Plan proposes updating PLN''s revenue model to adopt a forward-looking methodology, considering annual return requirements for new investments.
Additionally, there is a lack of transparent and clear accountability regarding the tariffs and associated costs for generation, transmission and distribution, which complicates the assessment of the profitability of each component separately.
The capital structure of the transmission and distribution project development would typically rely on PLN balance sheet (equity and state support in the form of direct loans and government guarantees) and concessional funding coming from development finance institutions (DFI) and multilateral banks, often at minimal or zero interest rates, contributing to an overall low cost of capital for these initiatives.
Overall, improving the planning and assessment process for future infrastructure needs, the transparency of projects, and the evaluation of PLN''s costs and revenue requirements offer ways to enhance the efficiency of investment. The Ministry of Energy and Mining Resources has issued regulations that establish a set of quality standards that are accounted as compensation from PLN, as an ex-post mechanism.
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In efforts to enhance the reliability of the electric power system in the country, the Indonesian government believes that a Smart Grid is one of the solutions. Such a grid, it is felt, will increase the efficiency of services to the community as well as improve transmission flexibility to receive more Variable Renewable Energy (VRE). A Smart Grid in the National Medium Term Development Plan (RPJPM), has been proposed in the development of the Java-Bali system. The plans sets targets for five new systems to be installed in Java-Bali region every year from 2020 to 2024. With this goal, over the next five years, twenty-five new Smart Grid systems will be built and become operational.
At a virtual engagement, “Smart Grid as a Power System Reliability” Webinar, representing the Director-General of Electricity Rida Mulyana, Secretary of the Directorate General of Electricity Munir Ahmad said that Smart Grid technology is one of the strategies being pursued by the government to provide reliable electricity nationwide so that all Indonesians get electricity in sufficient quantities, of good quality and at affordable prices.
Smart Grid is an electric power grid system equipped with advanced information and communication technology that can enable an efficient electric power management system, provide high reliability of electricity supply, utilise renewable energy sources and allow customer participation in the supply of electricity. Munir confirmed that the use of Smart Grid technology would not be limited to urban and large-scale electricity consumers. Smart Grid technology can also be utilised on small-scale Smart Micro Grids in rural and remote areas with difficult access to the transmission network
The Smart Grid concept is in keeping with the Industry 4.0 paradigm where consumers, in this case, can also become producers – they can generate, store and sell electricity to electricity providers or fellow consumers. In this digital age, the Coordinator of Electricity Cooperation, Senda H. Kanam, said that consumers are becoming smarter in their use of electricity and are being supported by smart equipment.
Senda elaborated that Smart Grid is a concept of smart electricity grids to meet the needs of electrical energy by utilising information technology and two-way communication technology between electricity producers and consumers with the aim of being efficient, reliable, better utilisation of new renewable energy (EBT) and reducing CO2 emissions.
The addition of a smart grid system will help reduce dependence on electricity from fossil-based power plants, Senda agreed. None the less, challenges remain in deploying this vision. As the systems require advanced technology with high standards there are financial and technical hurdles. Primarily the challenge for the implementation of Smart Grid in Indonesia is the large investment costs of the advanced technology and infrastructure. Apart from the logistics, the vision will need commitment across the board. Further, there must be regulations for standardisation and technology that require different applications.
In the early stages, Smart Grid implementation focuses on reliability, efficiency, customer experience and grid productivity. Meanwhile, the next stage will focus on resilience, customer engagement, sustainability and self-management, acknowledged Executive Vice President of PT PLN Corporate Planning Hot Martua Baraka.
There have been several Smart Grid pilot projects that PLN had conducted. Currently, several Smart grid projects are running according to the 2020-2024 RPJPM and have been designated as one of the National Strategic Projects (PSN) according to PERPRES No. 18 of 2020. The Indonesian Ministry of Energy and Mineral Resources will apply smart grids technology to achieve the national energy mix target of 23% by 2025. The application of that technology has been mandated in the Presidential Regulation concerning the National Medium-Term Development Plan for 2020-2024.
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