Strategies for Electricity Market Reform in Indonesia: Pursuing the Greening National Power System

Maxensius Tri Sambodo and Han Phoumin

Chapter 5 in Electricity Market Reforms in the ASEAN, China, India, and Japan, 2023, pp 117-143 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Between 2011 and 2020, the role of Indonesia’s private sector in terms of power generation development has shown an increasing role, but the phase of electricity market reforms tends to be limited. In terms of electricity generation, the role of the private sector is increasing under the monopsony scheme, but in terms of transmission, distribution, and sales, the state-owned electricity company, or PLN, is still monopolised. This paper argues that Indonesia has a great opportunity to push electricity market reform by prioritising renewable energy development. This can help Indonesia to accelerate a commitment to reduce greenhouse gas emissions from the energy sector as stated in the Nationally Determined Contributions and achieve the Sustainable Development Goals. By utilising the Indonesia 2050 Pathway Calculator and updating information regarding renewable energy development under current conditions, the results have three main findings. First, under the most recent government scenarios, Indonesia has great prospects for optimising renewable energy and the share will increase substantially in the future. Second, although fossil energy still plays an essential role in sustaining the supply of electrical energy, the intensity of carbon emissions will continue to show a significant decline. Finally, Indonesia needs to optimise the ASEAN Power Grid cooperation framework to improve technical efficiency and to reduce emission intensity. This paper argues that low-carbon development works best if government can develop more attractive regulations for renewable energy, support modern energy infrastructure, and strengthen cooperation in energy market integration.

Keywords: Electricity Market Reform; Market Liberalisation; Tariff Reform; Electricity Trade; Renewable Energy; Resource Allocation; Sustainability; Electricity Market; ASEAN; Southeast Asia; Japan; India; China; Renewable Energy; Energy Transition; Sustainable Electricity Market; Liberalised Electricity Markets; Efficiency; Emission Reduction; Carbon Reduction; Clean Energy; Green Energy; Electricity Tariffs (search for similar items in EconPapers)
JEL-codes: O13 Q01 Q4 Q41 Q42 Q43 Q48 (search for similar items in EconPapers)
Date: 2023
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