Rural Electrification: Renewanble energy power plants for the rural areas and remote islands.

Since long, the archipelago geography of Indonesia’s has been causing Indonesia to face tough challenges along Indonesia’s establishment of basic infrastructure in particular in the areas of power coverage and power generation. Nevertheless, it is a common consensus that the economic growth of a nation is inseparable from the industrial development in many aspects. Hence, shall the Indonesian government want to stimulate the economic development in the areas outside the Java Island, it is even more crucial to ensure reliable power supply to all regions of the entire country, in order to improve the living standards of the residents and build various industries so that in return numerous job opportunities can be created for the local residents.

According to the data released on the website of the Indonesian Research Department of the GBG (Global Business Guide), as of the end of 2011, the total installed power supply capacity of Indonesia was 31 billion watts, while the electrification coverage rate was only 71% which indicates that more than 80 million people do not have power supply. In 2003, the government set a goal to achieve 90% power coverage by 2020, and at the same time reduce greenhouse gas emissions by 26%. The goal has demonstrated the need for significant investments in the country’s power supply capacity and tremendous opportunities created by the industry to investors, especially in the renewable energy industry.

In the power system of Indonesia, the Indonesian State Power Corporation (Perusahaan Listrik Negara, PLN) takes care of 84% of the country’s electricity transmission, while the remaining 16% is completed by independent power producers (IPP). In terms of raw material supply, coal is the main source of fuel for grid-connected power generation, accounting for 40% of the total capacity of power plants, followed by oil 29% and natural gas 21%, while renewable energy accounts for only 10% (data from Indonesia’s 2010 Indonesia Basic Infrastructure Report). In terms of off-grid power generation capacity, the power generation capacity reached 6.4 billion watts in 2010. In the non-renewable energy field, diesel power plants are the main form of power generation, while renewable energy accounts for 50% of the total off-grid capacity. Implemented with the Solar Home System (SHS) (data from 2010 Indonesia Basic Infrastructure Report). The overall domestic electricity demand is increased along with the macroeconomic growth in the country. It is estimated that Indonesia’s macro economy will continue to grow at an annual growth rate of approximately 9% by 2019. However, due to lack of investment and excessive dependence on expensive fossil fuels, Indonesia’s power generation capacity has grown at an average annual growth rate of less than 5%, failing to keep pace with demand growth.

Indonesia is facing a huge gap in between power supply and demand. According to the 2016-2025 Electricity Supply Business Plan (Rencana Umum Penyediaan Tenaga Listrik – “RUPTL”), Indonesia shall be facing a prolonged predicament of huge gap in between power supply and demand. Therefore, to increase the capacity of power plant establishment has become a critical component for the economic growth of Indonesia. In the 2016-2025 Electricity Supply Business Plan (Rencana Umum Penyediaan Tenaga Listrik – “RUPTL”), to meet Indonesia’s economic growth rate of 6.7%, Indonesia will need to install additional power generators of 80,538 MW in 10 years, with an average annual growth of about 8,000 MW and requires an estimation of a total investment of USD153.7 billion which the projected required IPP investment is more than USD 100 billion (based on the consideration of 70% new power generators installed by independent power producers (IPP) IPP investment). Such calculation depicts that the total market size is relatively huge.

Along the poverty alleviation work that the National Federation of Rural Co-operative (Induk KUD) has been carrying out the past years, the biggest challenge is the lack of power supply in remote rural areas, in particularly that is the factor why the income of many rural farmers where palm oil is the main crop has not been increased.

According to the data of global palm oil supply, Indonesia is the largest palm oil producer in the world, but as the basic infrastructure is not pleasing, many oil palm fruits failed to be sent to processed plants for refinery within the shortest time and thus has affected the quality and hence do not allow a better bargaining advantage in palm oil price.

This problem that has plagued the Induk KUD for years, after many years of hard work, finally in April 2018, under the witness of Duke Capital and numerous partners, the Induk KUD has signed a MoU with Controlnet International Ltd. from Taiwan to assist the Induk KUD to build 1,000 small biomass power plants in the rural provinces in Indonesia to lay out green micro-grid network system for the communities of farmers in remote areas.

Through the construction of the bio-energy power station and the green micro-grid system built by Controlnet International Ltd, many palm oil-growing villages with a population of less than 1,000 people can build a small palm oil processing plant to ensure the harvest of palm fruit. It can be refined into palm oil in the shortest time, and the residue generated in the refining process will be turned into a power generation source for the biomass power station to form a green and environmentally friendly power supply ecosystem.

Besides supplying electricity to palm oil processing plants, the excessive power generated by the power stations can be supplied to the surrounding rural industry through the green microgrid network system. The branches of the National Federation of Rural Co-operative (Induk KUD) in the rural areas can assist local farmers to carry out various small-scale rural processing industries to promote the development of  rural agriculture-related industries with the regional economies.

The implementation of this plan is complementary to the active promotion of the Indonesian government in its economic growth policies outside Java. At the same time, it is a very important strategic layout for the National Federation of Rural Co-operative (Induk KUD) to implement “Smart Agriculture” and promote “Precise Poverty Alleviation” throughout the whole country.