The power industry in Indonesia has experienced a high growth in demand, averaging 6
– 8% per annum in the last ten years. However, due the lack of infrastructure investments in the power sector between 2000-2005, Indonesia is still facing a power crisis in various areas. The current installed generation capacity is 30,940 MW, of which 5,496.4 MW is from renewable energy sources. The state-owned electricity company PT PLN generates 85% of the total capacity, while the rest comes from Independent Power Producers (IPP) and captive power. PT PLN estimated that the additional generation capacity will be 57.4 GW by 2018, of which 35.3 GW will come from PLN’s power plants and 22.2 GW will come from IPP.
The government’s commitment to prioritize the development of new and renewable energy and energy efficiency has been followed by establishing the Directorate General of New & Renewable Energy and Energy Conservation, through a Presidential Regulation No. 24 Year 2010, 14 April 2010. The agency launched Vision 2525 which had targetted that RE will contribute 25% of the country’s electricity demand by 2025.
The GOI estimates that during 2010-2014, the total investment needed for electricity development will reach $50.4 billion. PT PLN will need $6 billion for developing transmission and distribution, and $19.7 billion for power plants. The GOI will need $11.3 billion for transmission and distribution, and Independent Power Producers will need $13.3 billion for power plant development. In 2009, $5.3 billion was invested in the sector, increased from $4.7 billion of investment in 2008. However in 2010, investment in this sector was only $4.97 billion. It is estimated that investment will reach $9.7 billion in 2011.
It is estimated that the value of imported products from the U.S. will increase by another 15 percent in 2011. Indonesia imported $809 million of electrical power equipment in 2010. The market share of U.S. products was 29 percent of imports. In 2011, imported value of U.S. products is estimated to reach $230 million. The other major suppliers in Indonesia are from China, Singapore, Japan, France and Germany. Indonesian companies usually imported U.S. products directly or through an agent/distributor in Singapore.
U.S. companies are strong competitors in boilers, parts for boilers, parts for turbines, electrical generating equipment, transformers, lightning arresters, junction boxes, panel boards, and electrical conduit.
In the efforts to overcome the electricity shortage, the government has charged PLN with carrying out the first crash program to build coal-fired power plants with a total capacity of 10,000 megawatts. The program consists of development of 10 new coal-fired plants with a total capacity of 6,900 MW in Java, and 25 power plants with a total capacity of 3,100 MW outside Java. The total investment for developing 10 power plants in Java and 25 power plants outside Java would be $6 billion and $2.5 billion respectively. Around 8,000 MW would be developed by private companies and the rest would be produced by PLN, the state-owned electricity company. Most of the power plants developed under the first crash program operated in 2010.
The GOI issued the Presidential Decree No.4 / 2010 as a legal base for the second 10,000 MW acceleration program. The decree states that PT PLN must implement the crash program using renewable energy, coal, and gas sources of energy. The Presidential Decree also regulates that funding for this program will be born from the state budget, PT PLN, and other legal forms of funding which is regulated under prevailing laws. In developing this program, PT PLN is authorized to cooperate with Independent Power Producers (IPP) through an electricity purchase program.
During the second crash program, PT PLN will build a total of 5,118 MW and Independent Power Producers will build a total of 5,035 MW. The program will focus on developing 3,312 MW steam power plants, 3,977 MW geothermal power plants, 1,660 MW steam gas power plants, and 1,204 MW hydro power plants.
Construction of power plants, transmission and distribution lines in Indonesia should bring significant commercial opportunities for U.S. companies that supply engineering services and equipment such as turbines, substations, transmission, and distribution equipment.