The Ministry of Energy and Mineral Resources (MEMR) and utility PLN have continuously overestimated energy demand in Java-Bali and Sumatra. If PLN continues with its current plans, there is likely to be an overbuild of 12.5GW of coal, gas and diesel, resulting in approximately US$12.7 billion in wasted investment. This would burden  PLN’s finances and eventually have to be covered by the Indonesian public.

The above statement is one of key findings of new report released today, 21 February, entitled “A Roadmap for Indonesia’s Power Sector: How Renewable Energy Can Power Java-Bali and Sumatra – Summary for Policy Makers” that was was produced by Monash University’s Grid Innovation Hub partnering with the Australia Indonesia Centre, supported by Agora Energiewende and the Institute for Essential Services Reform (IESR).

The study modeled different pathways for Indonesia’s power system to reliably meet energy and climate targets for the period 2018 to 2027. The study focuses on Java-Bali and Sumatra where the majority of the population lives and about 90% of the electricity is consumed.

The model assesses both the demand and supply dimensions of the power system. Analysis was performed with the PLEXOS power system simulation and planning software system, which is widely used internationally for power sector analysis.

The study identifies the impact of reduced demand on generation investment, utilization and power system cost and assesses the impact of adding considerable shares of wind and solar capacity to the system.

The report also finds the risk of lower than planned utilization of thermal power plants may increase as demand projections are overestimated and as renewables become cheaper. Once renewables are built, they produce electricity at almost zero marginal cost. This could result in additional losses for PLN, which is locked into long-term power purchase agreements with Independent Power Producers (IPP).

According to the report, Java-Bali and Sumatra could reliably meet growing electricity demand in the next 10 years through a doubling of the share of renewable energy. The cost of doubling the share of renewables through investment in wind and solar is comparable to the current high fossil-fuel pathway. Greenhouse gas emissions would be reduced by 36%. “The development of renewables would bring important additional cobenefits, reduce negative health and environmental impacts and provide job opportunities throughout the country,” says Fabby Tumiwa, from Institute for Essential Services Reform who is the lead author of the report.

The report highlighted that a high renewables scenario coupled with realistic energy savings would result in a cost saving of US$10 billion over ten years as compared with the current RUPTL plan if the cost of capital and cost of technology is brought down in line with international prices. This would require an ambitious longterm strategic plan, clear intermediate targets and implementing regulations in place. “Even with 43% renewables, the security of supply of the power system is maintained,” Fabby said.

The report also provided several recommendations for MEMR and PLN to develop a reliable, cost-effective energy system which avoids wasted capital and serious environmental impacts.

The first recommendation, MEMR and PLN should review best practice approaches and techniques in demand forecasting around the world and implement such an approach in Indonesia. Second, the two parties should also integrate the potential of energy efficiency for forecasting future electricity demand.

Third, MEMR and PLN must review current proposals for new coal-fired power stations in the Java-Bali and Sumatra systems and apply current prevailing costs for renewable technology in developing future plans to asses alternative cost-effective and low carbon pathways.

Fourth, the two should develop and assess alternative scenarios and low carbon electricity pathways in the National Electricity Plan (RUKN) which integrate medium and higher renewable energy penetration in various electricity systems; and the last, MEMR and PLN should adopt an ambitious long-term strategic plan with clear intermediate targets for renewable energy expansion, supporting policies and streamlined implementation at national, provincial and local levels.