Jakarta, September 19, 2023 – The Indonesia Clean Energy Forum (ICEF) and the Institute for Essential Services Reform (IESR) are urging Indonesia to reform its electricity system to accommodate the integration of larger capacities of renewable energy, particularly solar and wind, also known as variable renewable energy (VRE). This would involve flexible operation of the electricity system, strengthening VRE forecasting capabilities, and revitalizing the network infrastructure.

There are at least three key considerations. Firstly, incentives for players involved in operating a flexible electricity system. Secondly, transparency in the procurement processes for renewable energy generation and network infrastructure. Thirdly, regulatory reforms to accommodate flexible electricity system operation and encourage greater adoption of renewable energy.

The opportunity to reform Indonesia’s electricity system with a larger share of renewable energy capacity requires substantial investment support. Hasyim Daeng Barang, Director of Mineral and Coal Downstream at the Ministry of Investment and BKPM RI, stated that investor interest in renewable energy development in Indonesia is growing. The ministry is committed to facilitating investor needs, especially regarding the initiation of new renewable energy projects, by coordinating and connecting investors with relevant stakeholders.

“The Ministry of Investment/BKPM is also working to provide comprehensive information to investors through the preparation of Investment Projects Ready to Offer, including pre-feasibility study documents for strategic projects in various regions,” explained Hasyim during the second day of the Indonesia Energy Transition Dialogue 2023 on Tuesday (9/19/23).

Furthermore, BKPM emphasizes that alongside promoting investment in potential/priority sectors, sustainability remains the responsibility of the entire economy.

In his presentation, Michael Waldron, Senior Advisor Program Manager at the International Energy Agency (IEA), introduced six stages of VRE integration into the electricity system. According to Michael, Indonesia, with its current VRE mix still below 1%, is in the first stage of VRE integration. This means that VRE operation has a very minor impact on the electricity system. However, future planning should significantly consider a higher VRE mix as the cost of VRE generation has been declining over the past decade.

Regarding the electricity system’s prices and investment costs in Indonesia, Michael believes they are still above international market rates. This makes renewable energy development economically less attractive in Indonesia. He encourages Indonesia to reduce costs through contract and operational reforms within the electricity system to attract more investments. Inter-island electricity network integration connects renewable energy sources with demand centers. He added that contract and operational reforms should also target conventional power plants, such as coal-fired, which can play a role in flexible electricity system operation.

He believes that progress in interconnection within ASEAN and flexible energy system operation in Indonesia will accelerate emissions reduction and cost savings.

“Indonesia’s energy system can prepare for a larger share of renewable energy through new contracts, providing incentives for investments in the electricity network, developing system flexibility strategies, and adapting network planning and operation to maximize the share of variable renewable energy and establish a vision for a smart grid,” Waldron expressed.

Munawwar Furqan, General Manager of PLN Unit Induk Pusat Pengatur Beban Jawa, Madura, and Bali (PLN UIP2B Jamali), mentioned that renewable energy generation with variable energy variations is currently located in Sulawesi, consisting of 5 renewable energy generators with a total capacity of 170 MW, including Likupang SPP (15 MW), Sumulata SPP (2 MW), Sidrap WPP (77 MW), and Tolo (Jeneponto) (66 MW). However, Munawwar pointed out that they have identified several challenges in operating an energy system accommodating variable renewable energy, including the intermittent nature of renewable energy affecting the system, changing reliability, and frequency.

“Several strategies are being implemented to control the intermittency of variable renewable energy, such as revising the grid code for network users, forecasting and load curtailment for system stability, and installing battery energy storage systems. Forecasting capacity is essential for operating generators with variable renewable energy to manage variability and anticipate it,” he explained.

Deon Arinaldo, Energy Transformation Program Manager at IESR, suggested that relevant parties should inventory weather forecast data to make more accurate forecasting and more efficient renewable energy generation investment planning.

“Collaboration with other parties like BMKG for weather forecasts is important and potential. Actual weather conditions in each location must be considered. The availability of weather forecast data on solar radiation for the public is crucial as it will benefit many parties. Accurate data forms the basis for system flexibility, allowing us to assess battery needs, variable renewable energy variations, and more,” Deon stated.

Highlighting energy storage to support renewable energy integration, Indonesia, through the Indonesia Battery Corporation (IBC), is increasingly concerned about Battery Energy Storage System (BESS) plans or technology for storing electrical energy using specialized batteries. BESS will store excess energy from renewable energy systems to supply loads when renewable energy sources cannot generate power.

“Several factors contribute to the success of BESS projects, including technology, competitiveness, price, innovation, and market growth. Battery prices continue to decline and are expected to fall below $200/kWh, so we are optimistic that BESS development is the right moment for Indonesia’s future,” said Bayu Yudhi Hermawan, VP Business Development at Indonesia Battery Corporation (IBC).

IBC is building an integrated industry from upstream to downstream to produce battery cells for electric vehicles, including cars and motorcycles. Indonesia has significant potential as the world’s largest nickel producer, the primary raw material for electric vehicle batteries.

“Therefore, IBC is currently working on nickel-based projects, primarily for the downstream ecosystem of electric vehicles and batteries. Concerning capability investments, we believe we can compete with other countries. Our resources are number one globally regarding reserves and nickel production,” Bayu stated.