The announcement last week of new mobile and diesel gas contracts for various locations around Indonesia is short-sighted, expensive and risky due to the requirement for diesel imports, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
While the President and the Energy Minister have made bold statements supporting renewable energy for remote and rural electrification, including a plan to install solar photovoltaics in 2,500 villages between 2019-2020, electricity provider PLN is continuing to plan for the procurement of diesel generators for up to 400 locations in Indonesia.
“Renewable energy makes economic sense for Indonesia’s small islands and isolated locations, and reduces the need for imported diesel,” said Sara-Jane Ahmed, Manilla-based energy analyst for IEEFA.
“Given the continued rapid reduction in cost of renewable energy, implementing diesel generation risks burdening Indonesia with years of unnecessary high-cost power delivered by out-dated technology. Today, Indonesia has a major opportunity to look forward, not back.”
A recent IEEFA report highlights how small islands need to modernize outdated imported diesel fuel power generation systems and how solar- and wind-powered grids on these islands can supply affordable, reliable, more efficient, more secure, and cleaner power.
Sumba Island in Indonesia is a powerful case in point of how the uptake of renewables has reduced electricity prices. In 2009, electricity produced by imported diesel fuel cost $0.26/kWh.
A 50% reduction in the use of imported diesel via the use of storage, wind power, solar power, and hydro power resulted in end-user cost savings of 35%, equivalent to approximately $0.09/kWh. The switch to a renewable micro-grid energy power also limited the need for costly new transmission and distribution infrastructure.
According to Bloomberg New Energy Finance, solar-powered electricity costs have fallen by 99% since 1976 and 90% since 2009 while the cost of wind-powered generation has fallen 50% since 2009. As solar power, especially, is added to a grid, the cost of each additional unit of capacity to producers goes down, a phenomenon that stands to drive solar’s eventual domination of energy mixes.
“Indonesia has embarked on the important task of boosting electricity access to its remote and rural areas as part of its drive to achieve an electrification rate of 100% by 2024 from 85% in 2015,” said Ahmed.
“Developing small island grids is a key strategy to advance inclusive and modern development. Renewable technologies and batteries can complement these national objectives and drive economic growth by improving the affordability and reliability of electricity.”
“Indonesia needs an electricity market free of subsidies. Removing all subsidies in addition to allowing for technology agnostic procurement policies will enable a level playing field to drive low electricity rates.”
“Key to driving electrification is not subsidised fuels such as diesel, but delivering on government promises to roll-out affordable and effective clean energy.”