Acting as fuel for tired minds, freshly brewed cups of Indonesia’s famous Java coffee beans have become a staple in many homes and offices—not to mention the millions of coffee shops that populate our high streets—giving us energy to work and play. Now, however, Indonesia may be in need of its own energy boost as the country faces an energy shortfall. Coffee is unlikely to cut it here.
Indonesia consumes about half as much electricity as Britain, despite being four times as populous. Over the next decade or so, demand is expected to rise by nearly 9 percent a year. A focus on increasing electrification has led President Joko Widodo to announce an ambitious plan to install 35 gigawatts (GW) of new generating capacity with an investment of up to $73 billion within five years. This would allow the country to reach an electrification ratio of over 90 percent by 2020.
Despite the short timescale and bureaucratic hurdles surrounding land acquisition, Indonesia’s ambitious growth targets present a lucrative—albeit challenging—opportunity for foreign energy companies.
Indonesia’s administration recognizes the need for foreign investment in its energy infrastructure. It 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.
Despite this, there are still two significant things energy companies must bear in mind.
To achieve its goals, the government will require agile and efficient work by foreign energy companies. 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. Depending on the generation type and the size of the plant, the local content initiative can require up to 60 percent of components to be locally sourced. The requirement ensures that jobs are provided while money goes back into the Indonesian economy.
Potential investors also need to consider setup speed. For example, when PT PP constructed the Gorontalo power station in North Sulawesi, GE Indonesia was able to deliver its TM2500 generator series, which—transported by trailer—can be installed faster than typical power solutions. Solutions such as these, coupled with an established supply chain, will help projects get off the ground much faster.
Innovation and investment
Despite the urgency, a fast approach is no excuse for a solution that doesn’t fulfill the requirements. When you’re talking about providing energy for millions of people, you can’t cut corners.
In order for new projects to be successful, they must work as efficiently as possible in order to meet the low-cost requirements. After all, the power will be useless if locals can’t afford it.
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.
Innovative technology comes into play especially in sectors that are currently underdeveloped but have huge potential in the future. The solar sector is one such example. The government is rolling out energy plans to achieve 5-GW in solar installations by 2025; cost-efficient solutions will be needed to make this a reality. GE’s Power Conversion business’ LV5 1.5kV inverter, which can help increase up to 3 percent lower system cost and up to 15 percent lower inverter operating expenses, presents an ideal choice for the country that is in need of high efficiency and low-cost infrastructure and production.
A global support network is also key, as it allows repairs to be made quickly and cheaply—a very important factor when you consider how urgently Indonesia needs power.
The time is now
Indonesia’s need for power is urgent—something which is recognized by the government’s ambitious targets—but that’s no excuse for cutting corners. Electrification of the country’s power infrastructure is a great opportunity for both the country and its foreign investors. It’s important to ensure the right technology and investment is secured alongside credible companies that can offer agile implementation. With all this in place, Indonesia’s power dilemma can be turned around within these five crucial years.
Much like brewing the perfect cup of coffee, with the right balance of ingredients, care and attention to detail, electrification in Indonesia can be a success and bring energy to the masses.