Electricity in Indonesia: Plenty Natural Resources but Shortage of Electricity
Despite having abundant natural resources at its disposal (including coal and gas), Indonesia has difficulty to supply enough electricity to its people and businesses. Robust economic growth over the past decade has given rise to increased domestic demand for electricity but the country has not been able to adequately meet demand resulting in frequent blackouts and in one of the lowest electrification rates (the percentage of Indonesian households connected to the nation's electricity grid) in the region (about 80.4 percent at end-2013).
This means that about 20 percent of the total Indonesian population (consisting of about 250 million people) has no access to electricity yet and as Indonesian demand for electricity grows by approximately 8.4 percent per year (higher than the annual growth rate of electricity generation) the electrification rate can worsen if no further investments in the country’s power or electricity industry occur.
State-owned Perusahaan Listrik Negara (PLN), which is tasked to supply electricity to Southeast Asia’s largest economy, expects that the nation's electricity demand will rise to 207 terawatt-hours (TWh) in 2014 from 189 TWh in 2013. By 2022, the figure will rise to 386 TWh (nearly doubling from the current figure).
To overcome the electricity problem, the Indonesian government allowed independent power producers to produce and sell electricity (to PLN) in Indonesia since 2009. However, the largest electricity producer is still PLN, generating about 75 percent of electricity in Indonesia. Similar to Pertamina (the nation’s state-owned oil producer), PLN is heavily dependent on government subsidies to survive as it is obliged to sell electricity below the cost of production.
Recently, PLN said that Java and Bali (both are important islands from an economic point of view) can be hit by a power crisis in 2016 as the electricity reserves margin would decline to 16 percent (far below the 30 percent level which is considered safe). Currently the reserves in Java are about 27 to 28 percent.
This electricity supply problem in Indonesia is the reason why big companies prefer to establish their own power plants, particularly in Java and Bali, to safeguard future electricity supplies. Smaller companies, however, cannot afford such investments and are susceptible to blackouts which harm their businesses.
The decline in electricity supply in Indonesia is partly caused by a delay in operation of new power plants. Several projects that have been delayed are the 2x1,000 megawatt (MW) coal-fired power plant in Batang (Central Java), the 1,000 MW Indramayu power plant (West Java) and three plants in South Sumatra that would supply electricity to Java and Bali.
Coal is targeted to form the fuel source for 66 percent of total electricity generation by 2022 from 52 percent currently. As a consequence domestic coal consumption in Indonesia is expected to rise to 151 million metric tons in 2022 from 82.9 million metric tons in 2014.
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MAXPower has made very large monetary payments to Indonesian government officials through Standard Charter Bank so Indonesia will be producing more electricity using natural gas. MaxPower bank transfer information has been passed to the US government which will provide it to KPK in Indonesia if the KPK corruption fighters take action. If KPK does not take action then the corruption goes too high in the Indonesian government- which would not surprise anyone.