Indonesia has huge renewable energy potential due to its abundant natural resources, especially in hydropower, geothermal and solar photovoltaics. The Indonesian Power Development Plan (RUPTL 2021-2030) sets a target of 23% of renewable energy in the power structure by 2025.
To achieve this goal, state-owned power company PLN said it will add hydropower, geothermal, biofuel power generation and biomass co-firing in coal power plants.
As the fourth most populous country in the world and the largest economy in Southeast Asia, Indonesia (referred to as Indonesia) has experienced rapid economic development in recent decades, showing good economic vitality and huge energy and power demand potential.
1. Indonesian electricity market:
Indonesia’s power industry is in a stage of rapid development with the vigorous development of Indonesia’s economy and the continuous advancement of industrialization and urbanization. Overall, the Indonesian government has a high degree of supervision and control over the power industry. The government-controlled Indonesian Power Company (PLN) is a vertically integrated power company that has a monopoly in many fields. In the field of power generation, Indonesia has a high energy endowment and a large space for power supply construction. Currently, coal power is the main power generation, and the proportion of renewable energy will increase in the future. The epidemic has broken the original upward trend of power supply and demand, and growth is expected to resume after the epidemic. In the field of power distribution, the topography of the Indonesian archipelago determines its distributed power grid layout. PLN monopolizes the power transmission and distribution network. In recent years, the quality of power supply has been continuously improved. In the future, the uneven regional distribution of electricity in Indonesia is expected to be improved, and electricity demand will maintain a good growth trend. At present, the cooperation between China and Indonesia in power projects has achieved fruitful results. China Datang, Huadian, Shenhua Guohua, SDIC Power, China Power Construction and other companies have invested in coal-fired power plants in Indonesia, with a total installed capacity of more than 8,000 megawatts in operation and under construction. Electricity demand in Indonesia’s northwestern region is expected to grow at the fastest pace in decades, driven by increased industrial use and the electrification of transport, homes and businesses. Indonesia’s macroeconomic prospects are good. In the medium and long term, thanks to the continuous advancement of infrastructure construction and the improvement of the labor market, Indonesia’s economic growth rate is expected to remain around 5% in the next 10 years.
2. Indonesian energy and new energy market:
With the continuous stimulation of global energy transformation, environmental protection and other factors, in order to optimize the energy structure and establish a cleaner and sustainable energy system, the Indonesian government is working to increase the proportion of renewable energy in the energy structure. Therefore, cooperation in the field of renewable energy will become the main direction of energy cooperation between China and Indonesia in the future. Indonesian Minister of Energy and Mines Arifin said that the government will continue to encourage energy transformation plans and prepare for a competitive green industry in the future by transitioning to new and renewable energy. The Indonesian government has set a goal of gradually phasing out coal-fired power plants by 2060 as part of a plan to achieve carbon neutrality. If Indonesia does not transform, Indonesian industries will be levied a carbon tax, which will make products uncompetitive and factories will be required to stop production. In the post-epidemic era, energy policy will further tilt towards renewable energy, and the proportion of coal power will decrease. Energy sources such as hydropower and geothermal energy, which are rich in natural resource reserves in Indonesia and have less impact on the environment, will receive further attention. In addition, In recent years, with the advancement of technology and the emergence of economies of scale, the production costs of this type of energy have continued to decline, and there is great potential for the development of installed capacity in the future.