The Indonesian electrification ratio at approximately 65% is amongst the lowest in the region. This means that over 70 million people still do not have access to electricity. The Indonesian National Energy Strategy is based on a bold vision of achieving 100% electrification by 2020, the 75th anniversary of Indonesian independence. The planning challenge to achieve full electrification in Indonesia is based on two broad options: a centralised coal fired option and a more decentralised environmentally sustainable option. Indonesia needs to trade-off least financial costs now, which means coal, against the risks inherent with this form of generation relative to other technologies. Strict empirical analysis does not always capture cost externalities and risk; qualitative considerations should also be taken into account. In this paper we present a framework for reviewing the options for targeting full electrification in Indonesia. We review the existing cost structure and likely future cost of electricity in terms of the levellised cost of energy (LCOE) for a range of centralized and distributed generation options, before comparing the total costs. We then review the implications of these alternatives for the costs of extending the grid relative to other electrification solutions and the overall requirements for subsidies in rural electrification. Based on this, we develop recommendations on the most appropriate approaches to electrification taking into account longer-term sustainability.
展开▼
