Thank you for SMA for the background photo! :D

What are the challenges in meeting Indonesia’s energy needs? What’s the solution and how does it solve the challenges? And I will also show some of the more extreme implementation examples of projects in Indonesia

Even in big cities, there are still blackouts lasting several hours.

Double the electricity sales from 215TWh to 430TWh by 2023

Here is the existing transmission lines. Note that even within the large islands of Kalimantan and Sulawesi, there is still very little of the area connected with the transmission lines

Here is the plan for Kalimantan. Note the existing grid and the list of power plants.

Same for Sulawesi

And Sumatra. Just to show you what’s been done in the last 5 years, the next slide is the plan for 2010-2019

What do you notice? I have to mention that PLN (Indonesian’s government owned sole utility company) has done a great job in increasing their distribution lines and have increased the electrification ratio from around 60% to over 80% in less than 10 years.

And just to show a smaller island, they are not forgotten.

Just some statistics for the electrification ratio in Indonesia

Here they are by proviince

What does Indonesia’s population growth look like?

A lot of people. And not only are the number of unelectrified households increasing, the amount of power and energy the currently electrified will increase as well

Here’s a market segment worth 7 BILLION USD

USD 7 billion was only for the fuel spent by PLN to electrify the less densely populated areas

In the end, someone has to pay for the project.

The need is there. The technology is there. With the diesel consumption and prices, it makes sense financially. So what are we waiting for? What are the challenges?

From Frost and Sullivan, they’re dead on with the timing. While the report is focused on Asia Pacific market, this matches quite well with the condition in Indonesia

But as good as they are, Frost and Sullivan (and other large consulting companies) produces reports that are comparable to using Google Maps while we’re looking for directions. Google Maps will get us there, but unlike asking a local person, Google Maps will miss out on things like planned closures, shortcuts, road conditions, etc. For this chart specifically, there is actually government budget for microgrid projects. I know this because I’ve lead local teams of engineers and technicians to survey and inspect over 200 microgrid sites. Also the microgrid test-bed projects are already there. The 200 sites we’ve inspected are great test beds not only for the technical issues but also for social and economic data

Just a quick summary of the Asia Pacific Microgrid report by Frost and Sullivan

So if the conditions are perfect, why is it difficult to get funding? There are many reasons out there, and they can be different with each investor/financial institution. Even just the monetary value of particular risks are different for each investor. But the following slides are some of the more major issues that are often the barrier when working with Indonesian banks.

For most of us, the technology is familiar and proven, many project developers and investors have invested and worked on and owned many of these types of projects. But for Indonesian financial institutions, they lack the technical capacity to analyze the project. In addition, there are many examples of failed projects and projects that don’t meet the initial expectations. For example, many (I can say over 80%) of the recent hydro projects have failed to meet the initial expectations. The most common failure modes are overbudgeting (>20% over), over scheduling (more than 20% late) and even if they’ve overcome those failures, the capacity factor of the power plant is far lower than is indicated in the feasibility study. The figures that are quoted in the feasibility studies are often above 70%, with many in the 80% range. But by the time they’re operational, the operating capacity factor is in reality only 60% or less. This is caused by technical issues at the power plant itself, mistakes made in the hydrology analysis (using data from >40 years ago), or even worse is the grid capacity is unable to use all of the available power from the plant

Related to above, there are no examples of financially viable projects that have met their initial projections.

Even within less than a year there have been systems that have failed or under performed. No viable long term systems exists, either technically or financially. Bad workmanship, lack of knowledge and understanding, etc.

This includes NGOs and government subsidized systems (“gifts”). There is no real free market for energy. Consumer tariffs are regulated, instead of charging the regional cost of generation. Public sale of electricity is monopolized. Donors are often focused on their own key performance indicators/goals; normally this would be to claim a high number of people assisted by the funds they’ve expended. Often this is without thought of how the system can be sustainable in the long term, no operation and maintenance plan.

Government funded microgrid and electrification projects are also normally capex subsidy/donation only to the local communities or local government. They’re not given any resources or funds for the professional operation and maintenance of these capital infrastructure investments. As a result, many of the donor based systems are poorly implemented, poorly maintained and operated (if at all) and within 6-24 months many are no longer operational.

Lack of regulation to support financially sustainable projects. Such as feed in tariff, ability to set up public utility companies (monopoly by state owned company), incentives. Also as important is the perception of government support and leadership for such projects. Best would be government backed guarantees for projects. However in the last few years Indonesia have taken great strides in trying to support the growth of renewable energy. Hydro project tariffs will be revised again (increased), rooftop PV and wind regulations are being worked on, etc. And with the recent change of the president and his cabinet, the newly appointed people are even more of a supporter.

Who will pay for the project? How will it be financed? Where will its income and revenue come from? Starting at the end user, we must ask where’s the willingness and ability to pay. See: too many donors, the consumers often expect free electricity since their neighbor got the grant, even if it’s not sustainable. One way to calculate a project size is to look at the potential energy use in the area and then figure out how big of a power plant to install and its costs and then figure out how much to charge the end users. But another way, which may be more appropriate for smaller grids, is to figure out how much money each household spend for energy that can be replaced with electricity from the new power plant. Then use this amount as the base revenue for the project, and figure out the size of the power plant based on this revenue. What this does is to help the end users pay the same amount as they’re used to paying, and providing them with better access to electricity. Of course there would be occasions where this calculation would result in a system size that is far smaller than is needed. This would be a good indication that the area is not a good fit for the technology that was considered.

Having given the challenges of doing renewable energy projects in Indonesia, I have to remind ourselves that challenges are just opportunities waiting to be grabbed. We need to look at our capabilities and strengths, look at the challenge and when there is a good fit, there’s our opportunity. Creating new ways to implement and to give electricity in Indonesia is important. Consider the economic benefit to the community and how they can grow as a way to increase the size of the project. Look at anchor tenants (existing industries and productive use of energy) or create the opportunity for anchor tenants to come in. They would have the means and the needs for a larger size power plants. When we can create opportunities from challenges, this is where we can be pioneers and be one of the first and the few who are operating in this space

So now that we’ve looked at the problems, what are the solutions?

Simple, decentralized power generation and storage. Of course for the power plant itself, we have to look at the local conditions. What resources are available.? Solar PV is relatively easy to implement, and very quick. Other renewable power plants are more difficult to implement. Often other permits from several ministries (such as the Ministry of Forestry) are required and they can be difficult to obtain.

So why decentralized power generation?

Indonesia is full of isolated grid systems, and having decentralized power generation and energy storage plants to cover the gap and to work with the isolated grids are a way to increase the electrification ration and the use of energy in Indonesia.

Of course, with the power generation being modular and decentralized, additional plants can be added as the need arises

One number; US$ 7,000,000,0000 per year spent by PLN on diesel fuel alone. Decentralized power plants and energy storage, specifically renewable energy based ones are ideal solutions to be able to replace the diesel fuel usage

When comparing LCOE of solar PV vs Diesel and other benefits such as green house gas reduction. Even rooftop solar PV systems are becoming cheap enough to be at grid parity with Indonesia’s fairly low electricity tariff

It’s not new, companies own and trade these systems all over the world

Plenty of manufacturers, plenty of technology types to use, nothing that need to be invented from the ground up

B2B projects, whether with the monopoly utility company or with private companies are great ways to develop projects. They already make financial sense without government support

As before, the capex is handled by donation/subsidy, and then the operations can be handled with the low tariff. The tariff can be low and localized because the power plant and the microgrid is decentralized. The community that directly benefit from the project can clearly contribute according to their actual usage.

This way the donated systems can have a budget for proper operations and maintenance and they’ll last more than a decade

When comparing LCOE of solar PV vs Diesel and other benefits such as green house gas reduction. Whether they realize it or not, most rural communities already pay high costs for energy. This is a great way to figure out how to work with the different share holders to get projects that are financially beneficial. There are informal studies done as well as commercial calculations that mentioned the cost of operation and maintenance of a solar PV system (grid-tie) is about US$0.02-US$0.025 per kWh. The lowest tariff requested by PLN for the low income households are double that number

One of the solutions is a decentralized solar PV systems for its ease of design and implementation. Hydro, biomass, wind, geothermal, etc all have their place. But one downfall with all of them has always been the environmental impact. They require a comprehensive study to ensure that the impact is minimized and within an acceptable level.

So let’s look at the challenges of implementing projects in Indonesia and some ways to get around those challenges

Why indeed?

We need to know how “remote” these project sites are. What are its limitations and challenges? Is it something that will prevent the system to be installed? For sure we want to make sure that the projects we do are done correctly no matter how remote the area is

Nice beaches can be one reason we would choose the location :D But make sure they have the logistics facilities for the project.

Remote areas normally mean higher costs. Availability of heavy machinery, or lack thereof need to be considered during the design and planning stage. Don’t plan for heavy and bulky individual component when there is no access for the heavy machinery.

Note the top left photo of 4 people carrying a single battery unit that weighed over 120kg. To the right is the jungle trail that the equipment had to be delivered through to get to the project site. The bottom picture show that in some cases, heavy equipment is unavailable and human power has to be dispatched to do this work.

In the end, logistics of the project can cost significantly more than expected. If not in labor costs, at the very least in the additional time required.

This site was expected to have only 20-35cm of a flood level. But as our team visited the location, we see indications such as water lines that are more in the 1 meter to 1.2 meter high for the flood level. So the design was changed to increase the height of the foundation by 80 cm. And sure enough the first year this plant was operational, it was hit with high wind and rains and there was over 50 cm of water flooding the project site.

Is there a port? If there is, what facilities are there? Crane? For 20 or 40 foot containers? Is the dock and the draft level high enough for the ship?

Many times we hear what we want to hear, but we really need to check. Indonesia being an archipelago of over 17,000 islands, ocean going ships are perfect to deliver materials to the closest port to the site. But is there really a port there?

You tell me

Someone might have told us that there is a “road” to the site. Seasonal conditions need to be considered. It could be nice and dry during the summer, but during the rainy season it could be unpassable

Is there a bridge to cross the river that we saw on the map? Someone may have told us that there is a bridge. It may look like this

Or this

Picking the right partner is very important for the implementation of projects in Indonesia. Not just partners who have experience, because it doesn’t always mean they know what they’re doing. But partners who are willing to learn from each other and willing to work together to overcome any barriers for the project to be implemented

The partners need to know the local culture. This plays a big part in the project implementation. Understanding the local social issues is also crucial. What are the socio economic status of the surrounding communities? Are there any internal issues within the community? Also, each region in Indonesia presents different technical challenges. The local partner need to understand this and be ready to propose solutions

Theft is an issue. Sure, there are security bolts, and CCTV cameras and other technical solutions. But unlike in the developed countries, even when you see the theft happening on the CCTV, calling the police can mean that they’ll arrive on site several days later. This allows the thieves to be able to patiently hack away and cut the structure or the security fasteners. They may even be waving at us on the CCTV knowing that they will likely get away with the theft. The right solution for this is to work with the local communities and remove the incentive to steal.

Community development plays a much more important role in Indonesia than in most developed countries.

Capacity building and having power plants that are clearly providing much needed electricity to the community will help tremendously for the community to feel that sense of ownership

Even in rural communities, the gap between the rich and the poor can be quite high. As project implementer we need to make sure that the poor are getting benefits from the project as well. The “rich” family in the community may already be getting financial benefits by leasing their land to the project. But if we don’t also engage the rest of the community, they can feel a sense of jealousy. A sense that “the rich get richer”.

Here’s what can happen with the wrong partner was selected for the implementation of the project

Or this.

The right partner does a good job in identifying local issues, able to perform high quality work, and possess the infrastructure for proper operation and maintenance