Power Market Structure

Abstract

Indonesia falls into the lower-middle categories for national income (just above $2,000 per capita) and high power system size (30,000 MW [megawatts] installed generation capacity). Even though the country has sizable resources of oil, gas, and coal reserves, it faces an enormous chal-lenge in providing energy efficiently for the world's fourth largest popula-tion spread over an archipelago of more than 6,000 inhabited islands. The electric power industry in Indonesia is managed solely by Perusahaan Listrik Negara (PLN), a state-owned monopoly. PLN has various business units that carry out functions that include generation, transmission, and distribution. About 75 percent of the power produced in Indonesia is on the main island of Java. PLN controls about 85 percent of the total generation capacity, and the remainder is owned by large industries and mines mainly for their own use and by independent power producers (IPPs) that sell their output to PLN. In the last two decades, the power industry in Indonesia has experi-enced high growth in demand, averaging 8 percent per annum. In 2009 PLN served more than 40 million consumers and sold 135 TWh (ter-awatt-hour). The residential consumer category accounted for 41 percent of PLN's energy sales, the industrial category for 34 percent, the commer-cial category for 18 percent, and the public category for 7 percent. PLN 176 Power Market Structure produced 77 percent of the 157 TWh total amount of electrical energy generated, 1 and IPPs produced the remaining 23 percent. PLN generated 36 percent of its output from coal-fired power plants, 29 percent from oil-fired power plants, 24 percent from gas-fired power plants, 8 percent from hydropower plants, and 3 percent from geothermal power plants. Indonesia's power sector faces investment needs that greatly exceed the public sector's financial resources. Therefore, the government must rely heavily on the private sector to expand the country's power system. The chronology of government's attempts to reform the power sector forms the basic theme of this case study.