Indonesia's Financially Sustainable Electricity Sector

In addition to Indonesia’s objective of increasing the share of renewable energy in their generation mix, the country’s electricity sector is facing a number of challenges, notably the need to meet rising demand for electricity and to serve consumers in geographically remote regions.

In order to respond these challenges, the government has launched a set of initiatives that are indeed increasing generation capacity, expanding electricity networks and improving quality of supply. But is this enough to meet the government’s targets?

This report demonstrates that subsidies are still an important part of the state-owned electricity company and that remote areas are not seeing previous improvements in the same way as populated ones are. Also, coal generation is getting the main focus of the capacity-increase programs, despite the important potential of renewable sources.

The document concludes that the largest challenge for Indonesia’s electricity sector might be to move beyond providing electricity to delivering electricity in a sustainable manner. It should rely less on coal and assure an efficient electrification of remote areas, evaluating the potential of decentralized generation based on renewable capacity.