The power generation and electricity supply market of Indonesia is marked by vast untapped growth opportunities, abundant availability of resources, both conventional fuel-based and renewables, and an increasing deficit between the rise in demand and actual production and supply.
According to a market research report by Transparency Market Research that covers the Indonesia power generation market, states that the market will expand at a favorable 8.5% CAGR over the period between 2014 and 2022 owing to the growth opportunities that are emerging in the renewables sector and a continuous rise in electricity to support country’s favorable economic progress.
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Vast Energy Resources yet a Major Electricity Deficit
On the conventional power generation resources’ front, Indonesia boasts vast availability of resources such as gas and coal. The country is the world’s largest exporter of coal and the largest exporter of gas regionally. Coal and gas are distributed at subsidized rates for internal consumption and thus form a major portion of the country’s power generation mix.
On the renewable resources’ front, the power generation market in the country holds one of the world’s most abundant potential reservoirs of biomass, geothermal energy, solar power, and hydropower for a country of its size. Given the country’s topology as an archipelago, Indonesia has an abundance of hydropower resources. The country has an estimated potential to provide 76 GW of energy with its hydropower resources. Biomass follows at a potential of about 50 GW power capacity. In the field of geothermal energy, the country holds the topmost position with over 28 GW potential power resources.
Despite the presence of a favorable scenario, the country had an electrification ratio of only about 80%, implying the fact that country’s 20% population has no access to proper supply of electricity.
Favorable Economic Development Leading to Increased Demand for More Electricity
Over the last 15 years, Indonesia has consistently achieved high rate of economic growth, has stabilized its democracy, and has exhibited excellent improvement on fronts such as living standards, urbanization, and industrialization. All these factors have collectively led to a substantial rise in the country’s power consumption. The trend is projected to continue in the coming years as well. Thus, meeting the expected energy demand and energy security will be a major challenge for Indonesia’s power generation market.
Awareness Regarding Ensuring Environmental Sustainability Brings focus on Country’s Renewable Resources
Despite having an abundance of renewable power resources, the country has been able to use only a fraction of it for power production till now. Presently, renewable energy represents the smallest share in the country’s total energy mix and conventional sources of power production such as coal, oil, and gas dominate the market.
However, several initiatives have been undertaken over the past few years by the Indonesia government to increase the share of renewable energy in country’s overall energy mix. The government targets for making renewables account for at least 15% of the country’s overall energy consumption by 2020. This scenario presents vast growth opportunities for businesses in the power generation sector.