Indonesia to Facilitate Grid Access for Independent Power Producers

The Indonesian Government plans to legislate a standard that will enable private companies to supply electricity directly to consumers using grids owned by the state-owned company PLN.

This initiative was reported by PV Magazine, referencing the Institute for Essential Services Reform (Ember), which is involved in drafting the new legislation, according to globalenergyprize.org.

Allowing private power producers access to state grids aims to boost the development of renewable energy, which currently has a minimal role in Indonesia’s power sector.

According to Ember, fossil fuels accounted for 81% of Indonesia’s power generation in 2023, while low-carbon sources, including wind, solar, and hydroelectric power, made up just 19%.

Coal-fired power plants are the predominant conventional energy source, contributing 62% of the power output in 2023, thanks to the high availability of feedstock. Indonesia is the third-largest producer of power-generating coal, following China and India, with a global supply share of 9% compared to 50% and 13%, respectively, according to 2023 IEA data.

In recent years, Indonesia has ranked second globally in coal-fired power plant construction pace. Global Energy Monitor reports that the capacity of coal-fired plants launched in Indonesia between 2018 and 2023 totaled 17.2 GW, surpassing India’s 16.3 GW, though still far behind China’s 142.4 GW.

Consequently, Indonesia’s power industry remains more carbon-intensive than the energy systems of leading developing economies in the Asia-Pacific.

In 2023, generating one kilowatt-hour of electricity in Indonesia resulted in an average of 682 grams of CO2 equivalent in greenhouse gas emissions, compared to 582 grams in China and 475 grams in Vietnam, according to Ember.

Indonesia ranks fourth among Asia-Pacific countries in terms of its share in the global greenhouse gas emissions from the power sector, with 2.1% compared to China’s 31.2%, India’s 7.7%, and Japan’s 2.6%, based on Energy Institute data.

Providing grid access to private renewable energy producers will help Indonesia reduce the carbon intensity of its power industry. This standard effectively means that PLN will bear the costs of upgrading grid infrastructure, which is typically necessary for large-scale renewable energy implementation.

Global trends reflect this need, as the global capacity of newly-launched renewables surged from 188 GW in 2019 to 473 GW in 2023, and investments in power grid construction increased from US$310 billion to US$374 billion over the same period (in 2023 prices), according to IRENA and the IEA.