Power generation and electricity coverage is a daunting task for a country like Indonesia, because of its topology as an archipelago. However, the rapid expansion of the country’s consumer class and the subsequent rise in the demand for electricity from businesses, the government sector, and households are collectively exhibiting increased pressure on the existing electricity supply and the production capacity of Indonesia.
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According to a business intelligence report by Transparency Market Research concerning the Indonesia power generation market, Indonesia had about 44.4 GW electricity generating capacity in 2013. Expected to expand at an 8.5% CAGR over the period between 2014 and 2022, the power generation capacity of the country could rise to 90.1 GW by 2022.
At the end of 2013, Indonesia exhibited only about 80% electrification, which means that nearly 20% of the country’s population had no access to electricity. This deficit looks particularly glaring when one considers the abundant natural resources the country has at its disposal, including gas and coal.
Rising Awareness Regarding Implications of Emissions Brings Focus on Renewable Resources
As the demand for electricity continues to rise at a pace much higher than the average annual growth rate of power generation in the country, it is evident that the country’s electricity generation industry has huge untapped growth opportunities.
Despite the abundance of resources well suited for electricity generation in the country, a major share in Indonesia’s electricity generation capacity comes from coal and oil. A major reason behind this is the fact that domestic consumption of petroleum products has been highly subsidized in the country. However, the rising awareness regarding the local and global effects of emissions from burning fossil fuels is leading to an increased focus on the vast potential of renewable energy resources in the country.
Vast Growth Opportunities in Renewable Sector
Indonesia features far-reaching opportunities within the renewable energy sector for the production of electricity, including geothermal, solar power, hydropower, and biomass. Given the country’s island topography, hydropower is the largest potential source of power in Indonesia and has the potential to provide over 76 GW of power.
Biomass follows, at a potential of about 50 GW power generation capacity. Indonesia’s geothermal energy sources have the potential of generating over 28 GW of electricity, the highest in the world. Yet, by 2013, only a fraction of the potential renewable energy had actually been used for power production in the country. Renewable energy accounts for the smallest share in the country’s energy mix and traditional energy sources such as oil, gas, and coal continue to dominate the electricity generation sector.
However, the Indonesian government has started taking initiatives to increase the share of renewable energy in the country’s overall energy consumption. The government has targeted for renewables to account for over 15% of the overall domestic usage of electricity in the country by 2025 and has also planned to subsequently substantially increase renewable power production capacity. The scenario presents a variety of growth opportunities for investors in both small- and large-scale power generation projects.
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Solar power is another under-developed renewable power production sector in the country that features vast untapped opportunities. Most solar power generation installations till date have been on roof-top solar photovoltaic cells in urban parts of the country.