Keeping Up With Indonesia’s Rising Energy Needs

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CEIC Indonesia Data Talk - August 27, 2014 Electricity consumption increased in Indonesia by 7.79% year-on-year in 2013 to a total of 187.54 million MWh. The increase has been perceived as a positive sign of the improving economy. According to statistics from the State Electricity Company, a large portion of this rising electricity consumption is attributed to the industrial sector where it rose by 6.99% year-on-year (YoY) to 64.38 million MWh (Megawatt Hours) in 2013. Similar increases in electricity consumption were also observed elsewhere, including the household sector – which constitutes a dominant component of total electricity consumption – growing by 7.04% to 77.21 million MWh in 2013. In the Business services sector electricity consumption increased by 11.33% to 34.50 million MWh. While high electricity consumption may be indicative of increased economic activity, on the flip side it poses a challenge in the context of electricity supply shortages. Production has fallen below consumption since 2004 when Indonesia was obliged to import additional electricity from abroad to meet rising demand – Indonesia’s domestic electricity production fell short of total electricity consumption since 2004. As of 2013, total electricity supply which includes production and purchase of electricity was 216.19 million MWh, 7.92% higher (YoY) compared to 200.32 million MWh in the previous year. National electricity production is insufficient to meet the electricity needs throughout Indonesia - rising by 9.49% to 163.966 million MWh in 2013, its highest since 2000, from 149.755 million MWh in 2012, national electricity production only covered 87.43% of total consumption. This forced the government to import electricity supply from neighbouring countries, totalling 52.22 million MWh in 2013, 3.16% higher compared to 50.62 million MWh in 2012. In fact, Indonesia still depends on imported electricity from other countries in order to ensure sufficient availability of national electricity supply, which creates the threat of a potential electricity crisis. In addition, the hike in the electricity tariff on 1 July, 2014, has had a huge negative effect, especially for the electricity-reliant industrial sector, which is threatening to pass on the associated price increases to consumers. Rising electricity tariffs have occurred as the government attempts to balance its books through reductions in energy subsidies. The average price of electricity for the industrial sector rose by 12.18% to IDR796.350/KWh in 2013, compared to IDR709.910/KWh in 2012. Increases in tariffs also resulted in household electricity tariffs rising by 9.56% to IDR692.060/KWh and business electricity tariffs rising by 15.68% to IDR965.200/KWh. Electricity supply has evolved to be a crucial issue especially at Indonesia’s critical development stage, which necessitates sufficient energy to secure its much-needed productivity growth. Short-term fixes are unlikely to resolve the problems with Indonesia’s electricity supply shortages, given the government’s prevailing goal of reducing the fiscal deficit and its debt. Long-term structural fixes – which include alternative power plants – and attracting foreign investments into the energy sector may provide a more convincing solution for ameliorating Indonesia’s electricity shortages. By Yudha Prawira Google+ Author Profile - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog

27th August 2014 Keeping Up With Indonesia’s Rising Energy Needs

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