Indonesia Energy Situation

1.1 Energy Sector

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.

Throughout the vast archipelago of Indonesia there are still many rural communities without access to electricity who will not be connected to the national power grid within the next decade. Villagers in non-electrified areas rely on candles, kerosene lamps, dry cell 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.

Micro hydro power (MHP) is now becoming increasingly competitive compared to fossil fuel-powered alternatives, due to the ongoing reduction of fuel subsidies by the Indonesian Government.

Whilst the application of MHP technology is not new to Indonesia, only a small proportion of the country’s huge micro-hydro potential has been exploited so far. Unfavourable framework conditions for stand-alone systems, 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.

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.