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Achieving Universal Electricity Access in Indonesia

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Achieving Universal Electricity Access in Indonesia Achieving Universal Electricity Access in Indonesia Indonesia has achieved an impressive 84% electrification ratio, but faces significant challenges in reaching the remaining 16% of its households. This report describes Indonesia’s electrification environment and identifies barriers to achieving universal electricity access. Principles drawn from international best practices such as government commitment, enabling institutional environments, adequate and sustainable financing, and stakeholder coordination are discussed in the context of Indonesia’s energy sector. The report gives recommendations for establishing service standards, streamlining financing, setting appropriate targets, and monitoring and evaluation, as well as near-term steps to help achieve universal electricity access. About the Asian Development Bank ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to the majority of the world’s poor. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. ACHIEVING UNIVERSAL ELECTRICITY ACCESS IN INDONESIA ISBN 978-92-9257-268-6 ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines ASIAN DEVELOPMENT BANK www.adb.org ACHIEVING UNIVERSAL ELECTRICITY ACCESS IN INDONESIA ASIAN DEVELOPMENT BANK Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2016 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 632 4444; Fax +63 2 636 2444 www.adb.org; openaccess.adb.org Some rights reserved. Published in 2016. Printed in the Philippines. ISBN 978-92-9257-268-6 (Print), 978-92-9257-269-3 (e-ISBN) Publication Stock No. RPT167922 Cataloging-In-Publication Data Asian Development Bank. Achieving universal electricity access in Indonesia. Mandaluyong City, Philippines: Asian Development Bank, 2016. 1. Electrifi cation.2. Energy access.3. Indonesia.I. Asian Development Ba nk. The views expressed in this publication are those of the authors and do not necessarily refl ect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specifi c companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of said license as well as the Terms of Use of the ADB Open Access Repository at openaccess.adb.org/termsofuse This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims that arise as a result of your use of the material. Attribution—In acknowledging ADB as the source, please be sure to include all of the following information: Author. Year of publication. Title of the material. © Asian Development Bank [and/or Publisher]. https://openaccess.adb.org. Available under a CC BY 3.0 IGO license. Translations—Any translations you create should carry the following disclaimer: Originally published by the Asian Development Bank in English under the title [title] © [Year of publication] Asian Development Bank. All rights reserved. The quality of this translation and its coherence with the original text is the sole responsibility of the [translator]. The English original of this work is the only offi cial version. Adaptations—Any adaptations you create should carry the following disclaimer: This is an adaptation of an original Work © Asian Development Bank [Year]. The views expressed here are those of the authors and do not necessarily refl ect the views and policies of ADB or its Board of Governors or the governments they represent. ADB does not endorse this work or guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. Please contact [email protected] or [email protected] if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo. 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Printed on recycled paper Contents BOXES, FIGURES, AND TABLES iv ACKNOWLEDGMENTS vi ABBREVIATIONS vii EXECUTIVE SUMMARY ix 1 INTRODUCTION 1 1.1 Indonesia’s Electrifi cation Challenge 1 1.2 The Importance of Electrifi cation 1 1.3 Principles for Successful Electrifi cation Programs 3 1.4 Scope of this Report 4 2 THE CURRENT ELECTRIFICATION ENVIRONMENT 7 2.1 Present Levels of Electricity Access 7 2.2 Electrifi cation Targets 10 2.3 The Institutional Setting 13 2.4 The Prevailing Planning and Implementation Process 19 2.5 Financing Electrifi cation 29 3 CHALLENGES TO ACHIEVING UNIVERSAL ACCESS 41 3.1 Financial Adequacy: How Much is Enough? 41 3.2 Funding Eff ectiveness 45 3.3 The Need for a Single Plan 46 3.4 Unsustainable Off -Grid Delivery Models 46 4 APPLYING PRINCIPLES FROM SUCCESSFUL ELECTRIFICATION PROGRAMS 49 4.1 Government Commitment and Leadership 49 4.2 An Enabling Institutional Environment 50 4.3 Suffi cient and Sustained Financing 51 4.4 Stakeholder Engagement and Coordination 52 5 MEASURES TO ACHIEVE UNIVERSAL ACCESS IN INDONESIA 53 5.1 Defi ne Service Standards and Tariff s 55 5.2 Establish a Comprehensive Least-Cost Plan 56 5.3 Streamline Funding for PLN Electrifi cation Programs 58 5.4 Mobilize Non-PLN Suppliers for Off -Grid Electrifi cation 59 5.5 Set Targets and Monitor Performance 65 5.6 Next Steps 67 APPENDIXES 1 The Sumba Least-Cost Electrifi cation Plan 70 2 Directorate General of Electricity and State Electricity Company Electrifi cation Data by Province 83 3 The RUPTL, the Road Map LisDes, and Planning Alternatives 86 4 Sample LisDes Procurement Notice 91 iii Boxes, Figures, and Tables BOXES 1.1 The Sumba Iconic Island Initiative 5 2.1 How Electrifi cation Ratio is Measured in Indonesia 11 2.2 State Electricity Company’s Service Level Agreement 25 3.1 Proposed ADB Photovoltaic Minigrid Pilot Program 48 FIGURES ES.1 Electrifi cation Funding Flows Under the Original 2015 APBN x ES.2 Elements of a New Electrifi cation Paradigm xv ES.3 Electrifi cation Planning and Implementation as an Iterative Process xviii 1.1 Relationship between Human Development Index and Gender Inequality Index with Electrifi cation Rate, 2009 2 1.2 International Experience with Access Scale Up 3 2.1 Regional Disparities in Electricity Access 7 2.2 Provincial Electrifi cation Ratios and per Capita GDP 8 2.3 Provincial Electrifi cation Ratios and Population Density 9 2.4 Institutional Roles Within the Indonesian Electricity Sector 18 2.5 The Planning, Budgeting, and Implementation Process for Electrifi cation Programs Executed by PLN 23 2.6 Three Dimensions of Financing Electricity Access Scale Up 29 2.7 PLN Projection of Power Sector Investment Needs 31 2.8 Current Electrifi cation Funding Flows 32 2.9 Residential Customers, Energy Sales, and Generation Capacity by Year 33 2.10 New Residential Connections and Government Subsidy by Year 34 2.11 Total Electricity Subsidy by Region, 2013 35 2.12 Cost of Supply and Tariff Yield by Region, 2013 35 2.13 Consolidated Interest Cover Ratio and Debt Service Coverage Ratio of PLN, 2002–2012 38 2.14 Household Willingness to Pay for Electricity in Sumba, 2012 Data 39 3.1 Required Electrifi cation Investment to Achieve Universal Access by Province 44 5.1 Scope of a New Electrifi cation Policy 53 5.2 Alternative Mechanism for Funding Grid Extension by PLN 60 5.3 Proposed Process for Private Sector Involvement in Off -Grid Supply 63 5.4 Electrifi cation Planning and Implementation as an Iterative Process 66 A1.1 The Planning Methodology 72 A1.2 Current Settlement Patterns and Medium-Voltage Network 73 A1.3 Base Case Results for 2025 74 iv Boxes, Figures, and Tables v A1.4 Low Case Results for 2025 75 A1.5 Base Case Least-Cost Generation Mix 77 A1.6 Least-Cost Generation Mix with Pumped Storage 77 A1.7 Sumba Network in 2025 79 A1.8 Representation of 2025 Network 79 A3.1 System Planning Process of PLN 86 TABLES 2.1 Draft 2012–2031 RUKN Electrifi cation Targets 12 2.2 Subsidy Road Map Updated for Permen ESDM 31/2014 37 3.1 Rural Electrifi cation Forecast of PLN 42 A1.1 Summary of Geospatial Analysis Results 75 A1.2 Generation Scenarios 76 A1.3 Summary of Least-Cost Generation Capital Costs and Performance 78 A1.4 Capital Costs for Network Development 80 A1.5 Consolidated Summary of Capital Costs Required to Achieve 95% Electrifi cation Ratio by 2025 81 A2.1 Electrifi cation Data Reported by DJK for 2013 83 A2.2 Electrifi cation Data Reported by PLN for 2013 85 A3.1 Example from Nusa Tenggara Timur of PLN Road Map LisDes APLN “Roll Up” 88 A3.2 Comparison of Conventional and Geospatial Electrifi cation Planning 89 Acknowledgments This report was prepared under a technical assistance grant (Technical Assistance No.
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