The Indonesia power generation market is expected to reach US$63.6 bn by the end of 2022. This market was recorded at US$14.1 bn in 2013 and is projected to expand at an 18.70% CAGR within a forecast period from 2014 to 2022, as stated in a research report released by Transparency Market Research. The report, titled “Power Generation Market - Indonesia Industry Analysis, Size, Share, Growth, Trends and Forecast 2014 - 2022,” provides a clear picture of this market’s future in terms of opportunities for expansion and investment, as well as a map of drivers and restraints that can be negotiated with.
According to the report, the Indonesia power generation market is expanding at a CAGR of 8.50% within the given forecast period, in terms of generation capacity. The power generation totaled 44.4 GW in 2013 and is expected to reach 90.1 GW by 2022.
Rapidly developing economies in Asia Pacific such as China, India, and Indonesia are some of the major consumers of electricity in this region. On the regional level, Asia Pacific is expected to retain its position as the leading power generator in the world during the forecast period. This is due to the aggressive plant installation plans and rural electrification initiatives to fulfill growing demand from the rural sector in the region. Coal is the primary source of power generation in Asia Pacific, accounting for nearly 58.9% of the total capacity installations in 2013 in the region. A country’s economic growth is highly reliant on the development of its electricity sector. Indonesia is currently experiencing a phase of high economic growth, which needs to be supported by an equivalent growth in the volume of electricity supply.
The Indonesian government has set targets to increase electrification rates and to reduce greenhouse gas emissions by 2020. In order to support this target, the government has also implemented various laws and legislations for enforcing development of this sector. Investment-friendly policies such as competitive bidding for awarding exploration projects, and exemption from custom and other duties on imported equipment are boosting investments in the sector. Indonesia’s two-phase accelerated development program is anticipated to encourage renewable energy utilization. The program is also expected to rapidly increase power generation capacity, while gradually phasing out oil-fired power plants from the country.
The Indonesian government has implemented several new laws and regulations to stimulate renewable energy production in the country. The government has introduced several policy and financial support mechanisms for the promotion of renewable power generation in the country. This includes feed-in-tariffs (FITs) for renewable energy production that help provide moderate return on investments for foreign investors and independent power producers (IPPs) willing to invest in the country’s renewable energy sector.
For this market study, power generation technologies have been bifurcated into coal-fired, natural gas-fired, oil-fired, geothermal, hydro, and combined cycle power generation. Coal-fired power generation plants play a significant role in fulfilling the growing demand for power in the country. Indonesia has abundant coal reserves and the domestic mining companies are playing an instrumental role in the growth of the coal-fired power generation sector in the country. Investments are also anticipated to increase in the power infrastructure sector in Indonesia. The government has implemented several policies to attract foreign investments in the power generation sector in Indonesia. Combined cycle gas-fired power plants also account for a significant share of Indonesia’s power generation mix. The government has taken several steps to promote the installation of combined cycle gas-fired power plants to boost Indonesia’s power generation capacity. Combined cycle power plants accounted for 20.0% of the country’s power generation capacity in 2013.
Geothermal power generation accounted for a mere share in the overall power generation capacity in Indonesia in 2013. Although Indonesia has the largest reserves of geothermal energy in the world, it has not yet fully-utilized these reserves. Indonesia’s energy subsidies represent a significant financial burden on the national government. Payments of energy subsidies have reduced the country’s annual GDP by nearly 3% since fiscal year 2010. This has led to intermittent macroeconomic instability in the country causing other core development expenditure to take a back seat. Moreover, the current pricing system for electricity encourages wasteful consumption and further contributes to the deterioration of Indonesia’s trade balance. The Indonesian government plans to further increase electricity tariff during 2014 for reducing subsidies. However, as the government successfully reduces its energy subsidy bills, the annual growth in electricity tariff is expected to reduce in the mid- to long-term future. This has been considered while estimating the market size for the second half of the forecast period (2019–2022).
Key players in the power generation market in Indonesia include PT PLN Persero, PT Indonesia Power, PT Pembangkitan Jawa Bali, PT Pertamina Geothermal Energy, and PT Jawa Power. The other players profiled in this report are Alstom, PT Arutmin Indonesia, Asia Resource Minerals plc, Chevron Indonesia, Hyundai Engineering Co. Ltd., Medco Power Indonesia, Mitsubishi Heavy Industries Ltd., PT Adaro Energy Tbk., PT Bumi Resources Tbk., PT Cirebon Electric Power, PT Geo Dipa Energi, PT Harum Energy Tbk., PT Wartsila Indonesia, Siemens AG, and United Coal Indonesia.
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