In 2004, Indonesia had 25 gigawatts (GW) of installed electricity generating capacity. During 2004, Indonesia generated 112.6 billion kilowatthours (Bkwh) of electricity, of which 86 percent came from conventional thermal sources (oil, natural gas, and coal), 8 percent from hydroelectric sources, and 5 percent from geothermal and other renewable sources. In 2004, Indonesia consumed 104.7 Bkwh of electric power, showing net electricity exports during the year.
Sector Organization
Indonesia’s power generation sector is dominated by the state-owned electric utility PT PLN (Persero), formerly known as Perusahaan Listrik Negara. PT PLN operates 45 power plants, or roughly two-thirds of the country’s generating capacity. Indonesia’s electricity sector faces severe underinvestment, and the country’s energy officials have set out on a program to expand generation capacity. The plan, known as the “10,000 MW Acceleration Program”, aims to add 10,000 MW of new capacity by 2010.
In September 2002, the government passed new legislation aimed at strengthening regulatory guidance in the power sector and promoting new investment in power projects. According to the 2002 Electricity Law, certain markets for power generation will be open for competition from 2007. Retail market competition is scheduled for 2008, when power producers will be able to sell directly to their customers rather than through PT PLN. The 2002 legislation also established a new regulatory body, the Power Market Supervisory Agency, and created incentives for rural electrification programs. However, little progress has been made on these proposals, mostly because foreign and private companies have shown little interest in investing in Indonesia’s electricity sector. Some of the previously-cancelled IPP projects have been revived, but many of them remain in a stalemate over payment disputes.
One of the major obstacles to increasing Indonesia’s power generating capacity is pricing. The government sets the price at which PT PLN sells electricity in the country, and since the Asian Financial Crisis, it has often had to sell electricity at less than the cost of production. PT PLN’s financial difficulties, coupled with its inability to increase power prices, have prevented the company from investing in new infrastructure projects to build up capacity.
Conventional Thermal
The Indonesian government has stated that it would like to promote natural gas-fired and coal-fired power stations so that the country can utilize its domestic resource base and shift away from oil-fired power generation. PT PLN has prepared numerous proposals for new power plant projects, which it will offer to investors as part of its 10,000 MW Acceleration Program. However, foreign investors have largely avoided the Indonesian power sector in recent years due to the poor financial condition of PT PLN and the uncertain regulatory climate in the electricity sector.
In 2004, Indonesia generated 9.4 Bkwh of electricity from hydroelectric sources, representing about 8 percent of the country’s total generation. Industry reports suggest that Indonesia holds vast hydropower potential, but that the country has yet to embark on the same sorts of large hydroelectric facilities as seen elsewhere in the region. Since hydropower plants require huge upfront capital investments, it is unlikely that PT PLN or other companies in Indonesia will have the incentive to invest in hydroelectric projects in the near term.
Geothermal and Other Renewables
According to EIA data, Indonesia generated 6 Bkwh of electricity from geothermal and other renewable sources in 2004, making up about 5 percent of the country’s total electricity supply. According to outside sources, Indonesia today has more than 800 MW of geothermal capacity, making it the fourth largest producer of geothermal power in the world behind the U.S., Philippines, and Mexico. The Indonesian government estimates that the country holds large untapped geothermal resources, with the potential to supply up to 21 GW of additional generating capacity. However, several plans for large-scale geothermal development projects were scrapped when Indonesia faced economic turmoil during the Asian Financial Crisis.