In Indonesia, electricity consumption has increased rapidly, averaging about 4% annually over the past decade. — The Jakarta Post
JAKARTA: The International Energy Agency (IEA) projects that US$25 trillion of investment in grid upgrades will be required by 2050 to achieve our net-zero goals, equivalent to about one-quarter of the world’s annual total economic output today.
This need is even more pronounced in South-East Asia, where legacy grid infrastructure is struggling to keep pace with regional demand growth.
In Indonesia, electricity consumption has increased rapidly, averaging about 4% annually over the past decade and reaching 289 terawatt hours (TWh) in 2023.
Despite achieving a high electrification rate of 99.8% in 2023, the country’s grid infrastructure remains challenged by the archipelagic geography, leading to inefficiencies and difficulties in accommodating distributed renewable energy sources.
Moreover, the majority of Indonesia’s grid network is configured as a radial grid, like the spokes of a great wheel reaching out from a central location. While cost-effective for low-density areas, it suffers from efficiency and resilience issues.
These factors collectively underscore the urgency for modernising grid systems to meet changing energy demands. Both transmission and distribution infrastructure will be vital for this transition.
To align with the IEA’s net-zero emissions scenario, average annual investment worldwide in transmission and distribution networks needs to be 88% higher from 2020 to 2030 than it was from 2012 to 2021.
Boston Consulting Group’s latest report, Delivering the Energy Transition Will Come Down to the Wires, explores how, if Indonesia to deliver on energy transition goals, it needs to tackle complex and interconnected challenges and recognise that there is no transition without transmission.
Why grid investment matters
Renewable energy investment is on the rise, and grid companies need to adapt, as 70% of global power generation is projected to come from variable renewables by 2050, rising from about 10% today.
In Indonesia, the government plans to add 69.5 gigawatts (GW) of power capacity between 2025 and 2034. Approximately 60% of the total capacity (42.6 GW) is expected to come from renewable energy.
Transmission grid companies must build out their networks so that they can connect geographically dispersed generators.
In particular, a dramatic expansion of offshore wind operations in many major markets will require the addition of power lines and substations to connect offshore projects to the transmission grid and add onshore grid capacity to prevent networks from becoming overloaded.
Accelerating electrification will also increase the strain on ageing grid infrastructure.
Approximately 40% of transformers in Indonesia are over 25 years old, nearing or surpassing their intended operational lifespan.
This hinders the acceleration and development of renewable energy and electrification, which require flexible and responsive infrastructure.
Grid modernisation will be key, introducing equipment that can operate effectively in a grid dominated by variable renewable power, geographically dispersed generation, evolving power line interconnections and more.
This modernisation includes the complex integration of new, supporting technologies, such as battery energy storage systems (BESS).
Maintaining stability of the electricity supply and system capacity is crucial, and BESS deployment plays a crucial part in performing this function.
Indonesia also needs an effective ancillary services market to ensure that reliability is promoted in the grid.
Currently, Indonesia does not have a FCAS (frequency control and ancillary services) market. Instead, the responsibility for grid stability and reliability resides with state utility PLN, which manages its generation assets outside of the market to provide these services.
Electrifying challenges to overcome
Grid companies are already operating with constrained supply chains, resulting in severe shortages and higher prices.
Furthermore, most grid companies lack the capabilities and workforce capacity to deliver the increase in capital expenditure (capex) needed if players are to achieve their build-out goals.
At the same time, government leaders are placing significant pressure on companies to accelerate infrastructure development.
However, local opposition to projects, combined with complex planning regulations and, in some cases, restrictive regulatory environments, continues to create major obstacles for grid companies.
The IEA reports that 1.5 terawatts of renewable energy projects are currently stalled in grid connection queues, largely due to inefficient planning and permitting processes.
In Indonesia, the development and technical performance of the power system are significantly constrained by the country’s archipelagic geography, which consists of thousands of islands spread across vast distances.
As a result, regional disparities in electricity supply persist. While grids in Java, Sumatra and Bali often face periods of over-supply due to concentrated generation capacity, many outer islands, such as those in eastern Indonesia, experience significant under-supply and limited access to reliable power, reflecting the deep structural imbalances in national grid connectivity.
Moreover, the significant capital required for grid expansion and modernisation is expected to exert upward pressure on electricity prices, potentially triggering consumer resistance. This investment burden is already straining the financial health of many utilities. — The Jakarta Post/ANN
