Indonesia Energy Situation
Energy situation
The primary energy supply in Indonesia is mainly based on fossil fuels like oil, gas and carbon while renewable energy has a share below 5%, but statistics do not cover the traditional use of biomass as energy for cooking, lighting and process heat in rural areas. For electricity generation hydro power has a share of 14% of the total installed capacity of about 25 GW in 2005. For the energy consumption, a share of 31% traditional biomass energy is estimated. Without the traditional use of biomass, in 2003 90% of energy consumption has been fossil fuels (with oil having the largest share of 63%), while electricity made up for 10% of energy consumption. About 80% of the electricity is consumed on Java and Bali alone.
The electrification rates are as low as 45% on the outer islands and 55% in Java. Most non-electrified communities live in sparsely populated areas that are situated too far from the grid to allow for grid extension at reasonable costs. Existing plans to electrify 90% of Indonesian households by the year 2020 are ambitious, and throughout the vast archipelago of Indonesia there are many rural communities without access to electricity who will not be connected to the national power grid even within the next decade. Villagers in non-electrified areas rely on candles, kerosene lamps, dry cells and car batteries to satisfy part of their energy needs. Rural households typically spend a significant share of their income on these energy sources – despite the inconvenience and the environmental and health hazards associated with them.
Whilst the application of MHP technology is not new to Indonesia, only a small proportion of the country’s huge mini and micro-hydro power (MHP) potential has been exploited so far. Unfavourable framework conditions for stand-alone systems and on-grid schemes, lack of specialist know-how and a basic lack of awareness of the available potential have been the main reasons for this sluggish progress in the past. However, in remote rural areas, hydro power is now becoming increasingly competitive compared to fossil fuel-powered alternatives, due to the high energy prices (which can be trice as high as in the centres) that neutralise the still existing fuel subsidies by the Indonesian Government.
Other renewable energy technologies like Solar Home Systems, small wind turbines or biogas plants and other bioenergies are spread to a different extend in rural areas but lack for the technical maturity or sustainable operation and service models that are necessary for large scale dissemination.
Policy framework, laws and regulations
The Coordinating Ministry of People’s Welfare is responsible for the development and administration over poverty reduction policies and programs in Indonesia. In the last years government programs have been consolidated in 3 major clusters focussing on (1) individual assistance and social protection (subsidised staple food and scholarships for the poorest), (2) national program for community empowerment (PNPM) and (3) strengthening of small and medium enterprises (mainly by providing cheap credits). As a core element of the national poverty reduction strategy PNPM has been up-scaled for 2009 covering the whole country with a budget over 2 billion US$. The PNPM follows the philosophy of community driven development (CDD), providing institutional training and support to communities, who then can apply for funding for self-defined community development projects. The core PNPM cycle is foreseen to be implemented for three consecutive years building the institutional base in the villages for later intervention of other sector programs, and all line ministries are required to follow PNPM guidelines. As communities are free to define their priorities they can also opt for local energy infrastructure projects like hydro powered mini grids.
The Indonesian energy sector transformation started in 2002 but due to legal disputes unbundling of PLN has not been implemented so far. The current National Energy Management Blueprint identifies ambitious short- and long-term developmental objectives for the electricity sector including the increase of the electrification level to 90% of all households by 2020 and to 100% of all villages by 2010. For Renewable Energy the Ministerial Decree on Renewable Energy Resources and Conservation (Ministerial Decree No. 002/2004) pursues such objectives as optimising and improving the efficiency of renewable energy resources, securing sustainable, environmentally compatible forms of power generation, increasing public awareness and improving consumer behaviour with regard to energy conservation. The Ministerial Decrees No. 001/2006 on biofuels and No. 005/2006 on the national energy program until 2025 increased the targets for renewable energies.
Energy policy for rural electrification is developed by the Directorate General for Electricity and Energy Utilisation (DGEEU) of the Ministry for Energy and Mineral Resources (MEMR). A rural electrification program is jointly implemented by the DGEEU and the Indonesian electricity utility PLN. The strategy pursued by PLN for the future electrification of rural areas is based on the following principles of (1) empowerment of the rural population to secure electricity according to their own conceptions, (2) utilisation of local energy resources, in particular renewable, and (3) increasing the involvement of the private sector and of rural cooperatives. Part of that strategy is the “community-based rural energy development” concept, according to which cooperatives, municipal institutions, non-governmental organisations and/or private actors, with the technical assistance of PLN, serve as power providers or producers in rural areas. PLN provides assistance at two different levels: either for establishing a stand-alone (isolated) grid including power generation, or for establishing a village network for connection to the PLN-operated central power grid. However, the program has been criticised as inefficient and too bureaucratic.
GTZ’s involvement in the sector through the Mini-Hydro Power-Project (MHPP) initially focused on the introduction of simple technology enabling local engineering workshops to build and construct MHP village schemes. Even though there are already important elements of a market for MHP plants for rural electrification, this market does not yet serve all regions in Indonesia nor is capable to expand on its own. Municipalities, village organizations and service providers active in village infrastructure development need assistance to successfully implement rural electrification projects in areas that will not be connected to the central grid.
The MHPP partner institution DGEEU demanded for joint activities to institutionalise the experiences made by MHPP in the Indonesian hydro power sector. Parallel a new “green” block grant facility (Green PNPM) has been established under the country-wide PNPM. For this special fund the World Bank acts as trustee via the PNPM Support Facility (PSF). The objective of this facility is to provide additional funding to the existing block grants provided under PNPM for activities contributing to the sustainable management of natural resources (NRM). A large component of Green PNPM is the provision of funds for building MHP schemes supporting rural electrification and providing energy access for remote villages. Because of its long term experiences, the GTZ has been asked to provide a technical support unit for MHP (MHP-TSU) implementation under the Green PNPM.
Institutional set up in the energy sector, Activities of other donors
The central governmental actor for mini and micro hydro power is the DGEEU which is supported by GTZ through the MHPP. The DGEEU sees its role in guiding facilitation for the hydro power sector development by providing regulation and standards. The private mini and micro hydro power sector is small but evolving, with 4 turbine producers in Java and 2 in Sulawesi. Several NGOs are also involved, particularly in the aspect of community development and set-up of management and operation systems for MHP plants in villages.
The Green PNPM is managed by the Worldbank and jointly financed by Australia, Canada, Denmark, and the Netherlands and provides for MHP earmarked grants of approx. 25 Mio US$. This will be the by far largest intervention in the field of MHP, funding about 250-350 schemes until 2012. Different other actors as UNDP (Integrated Microhydro Development and Application Program - IMIDAP), EU (Contributing to poverty Alleviation trough Regional Energy Planning – CAREPI), the Netherlands (Indonesian-Dutch Energy Working Group – EWG) and the Support Office for Eastern Indonesia (SOfEI) are also active in MHP.
The MHPP in its current phase has established working relations with most relevant actors in the MHP sector. For the present project proposal, the first component is to provide a technical support unit for MHP implementation funded by the Green PNPM. Therefore all activities will be closely coordinated with the actors involved and follow the PNPM guiding principles. The second component supports the DGEEU in defining its role as regulator of the heterogeneous MHP sector and will start with a joint capacity demand analysis focussing specific fields for consolidation.
1.2 Problem Situation
GTZ’s involvement in the sector through the Micro-Hydro-Power-Project (MHPP) initially focused on the introduction of simple technology enabling local engineering workshops to build and construct micro hydro village electrification schemes. Effectively starting from scratch in 1991, the project has built up local capacities in the MHP-sector through a sustained approach of technical backstopping towards technology transfer. Equipment manufacturers, contractors and institutions active in planning, design and implementation of projects were the main target group. Today a niche industry is established that is capable of providing a broad range of services to both the local and international micro hydro power sector.
Even though there is already a self-sustaining market for small and micro hydropower plants for rural electrification, this market does not yet serve all regions in Indonesia nor is capable to expand on its own. In addition, grid-based hydropower schemes are not suited for places where small amounts of electricity are needed, for households living in isolated places and for locations with less favourable hydrological conditions. Therefore there is a need for strengthening the market for family-size MHP systems (pico hydro of 50 - 1,000 W).
Municipalities, village organizations and service providers active in village infrastructure development need assistance to successfully implement rural electrification projects in areas that will not be connected to the central grid.
The Indonesia proposal of Annual Planning of 2005 focused on direct support to the realisation of 25 MHP sites, assisting the consolidation of the established market capacities and ensuring an immediate promotion of new accesses. The planned activities in the Annual Planning 2006 focus on the establishment of intermediary capacities, which enable a self-sustaining market growth.
