Indonesia is ready to undergo a remarkable energy transformation. Despite being the world’s largest archipelago, its national reserves are depleting fast, leading to an urgent need to address climate change issues. To tackle this issue, the Indonesian government has shifted its attention towards harnessing large renewable energy resources available in the country. Let’s find out more about the Smart Energy System Market in Indonesia.

Indonesia’s Rise from Low Fossil Fuels to High Renewable Energy

The sun-drenched islands and the geothermal hotspots are on the frontline to pave a way for a sustainable future. Smart Energy market constitutes of devices with inbuilt digital technology, designed to carry out daily activities with less human interference. They are mostly powered by artificial intelligence and are classified by their operation and component.

  • By Operation – Used for emissions & CO2 reductions, quality service to & by end used, and security of energy supply.
  • By Component – Divided into memory, power, communication interface and processing.

In terms of functions, smart energy refers to a secure and advance system of cost-effective energy source. It includes infrastructure for renewable energy production and consumption paired with smart information and communication technologies. Based on end-target user smart energy can be classified into residential, industrial and commercial sectors.

Segments and Applications of Smart Energy

Practically it is divided into type and end-user that has 4 major applications, as follows:

  1. Digital Oilfield – It is a combination of business process management and digital technology. It helps in maximizing productivity and minimizing gas and oil operations cost.
  2. Smart grid – It is an electric grid with automation, communication and IT systems to monitor the power flow from point of generation to consumption. Smart Grid also control the power flow and load to match real time generation.
  3. Smart solar – It is a PV system with integrated DC power optimizer. Each panel is optimized to operate at its maximum power level. It enables more production from these systems.
  4. Home Energy Management Systems (HEMS) – With this technology users can adopt the technology comprised of software and hardware that can be manually controlled.

Indonesia Renewable Energy Market Analysis – 2024

The renewable energy market size is expected to grow from 16.04 gigawatts in 2024 and by 2029 it will be around to 42.37 gigawatts. During this period, this aim will be achieved at a CAGR of 21.44%.

Indonesian Renewable Energy Market Trends

A significant growth is expected in the solar energy sector in Indonesia.

  • They set a target of producing 23% to 31% of total electricity from renewable resources by 2025. Presently, hydroelectric and geothermal power are generating only 13% of national power.
  • Indonesia is rich in solar and according to the Ministry of Energy and Mineral Resources (MEMR) they have the potential of around 207 GW.
  • According to the International Renewable Energy Agency (IRENA), Indonesia is all set to install solar power capacity that will grow more by 2030. This will be driven mainly by initiatives by PLN and government.
  • As part of its 2017 Roadmap for a Renewable Energy Future (REmap) program report, IRENA identified Indonesia’s potential to deploy 47 GW solar power by 2030.
  • In September 2021, the Ministry of Energy and Mineral Resources (MEMR) established net metering legislation for rooftop PV. This increased the net metering factor from 0.65 to 100.

Here is a graph demonstrating Estimated AMI Market by Region by the Data Bridge Market Research, 2019.

Pic Credits: Research Gate

Reasons Behind the Shift in Smart Energy Market in Indonesia

After several years, recently Indonesian New and Renewable Energy (NRE) gained momentum. Until now, the country was lagging behind in developing new and renewable energy resources compared to other countries.

  • Once the rich gas and oil reserves of Indonesia started depleting, the government started paying attention to the NRE sector.
  • The Energy Law of 2007 set Indonesia to shift the focus from fossil fuels, mainly coal and oil, towards eco-friendly sustainable means of energy.
  • According to the data by the Ministry of Energy and Mineral Resources, country has huge potential for geothermal energy at 23.9 GW and hydropower more than 94 GW.
  • The potential of biomass in Indonesia is more than 32.6 GW and 200,000 barrels per day of biogas.
  • There have been a rapid advance in renewable energy technology in Indonesia. Presently renewable energy projects are estimated at 60.6 GW wind energy, 208 GW for solar, and 17.9 for tidal & ocean energy.
  • According to the International Renewable Energy Agency, the total installed renewable energy capacity was around 12.48 GW in 2022. This represented an 8.88% increase as compared to 11.53 GW in 2021.

Cross-Reference: Renewable Energy in Indonesia Market Size & Share Analysis

Smart Energy System Market in Indonesia

Power system in Southeast Asia faces challenges due to increasing demands and reliability issues. This further questions the generation and demand criteria. Thus, there is a need for transparent energy consumption mechanism leading to smart grid in ASEAN market.

Indonesia is the largest economy in the ASEAN and the 4th most populous country in the world. Nearly 280 million people occupy 17,000 islands that are spread across 4,000 miles. Power loss, brownouts, and theft are some of the issues related to distribution and transmission of electricity.

Fossil fuels dominated most of the power plants installed capacity that includes, coal (50%), renewable energy (11%), and gas (29%).

Planning for Smart Grid System

  • Smart grid market in this region was expected to grow from US$ 1,248.8 million in 2019 to US$ 2,949.6 million by 2024, at a CAGR 18.76% during that period.
  • According to a 2016 report by Northeast Group, the region will invest around US$ 24.6 billion in smart grid infrastructure between 2016 and 2026.
  • Officially, the Smart Grid planning, Indonesia Electricity Master Planning, has been listed in RUPTL 2019-2028.
  • In 2018 the power plant capacity increased by 3% that is an increase of around 64.5 GW from 2017.
  • In 2017, Indonesia imported $4.1 billion electric power equipment along with 15% of the U.S. origin products.
  • Other suppliers include Chine, France, Germany, Japan, Korea, Malaysia, and Singapore.

Solutions to Increase Renewable Energy Ratio in Indonesia

There is a possibility of congestion and complexity in the grid due to renewable energy’s rising share in the energy mix. Many Indonesian islands are rich in renewable energy resources.

  • Using smart grid paired with the following methods can reduce the issues existing in the current grid system.
  • Transmission and distribution automation software
  • Advanced metering infrastructure
  • Demand response technology

Renewable Energy Microgrids Ideal for Indonesia

The first microgrid smart technology is presently used in the country to reduce dependency on fossil fuels particularly in remote areas. Reasons backing this decision are as follows:

  1. High fuel costs
  2. Adequate amount of renewable energy sources
  3. Shortage of energy

PLN’s Take

Also known as PT. Perusahaan Listrik Negara, is the state-owned utility company that controls all transmission and distribution in Indonesia. Its infrastructure is aging and obsolete and lacks incentives through market competition.

PLN has been pioneering for smart grid installations since a couple of years. Below is the table showing smart grid pilot plans in Indonesia by different companies. PLN has aligned smart grid objectives with its main challenges, that are:

  1. To improve energy efficiency, Integrate client-side demand information, Provide a two-way metering infrastructure to address non-technical issues.
  2. To reduce blackout and feeder outages by providing service reliability solutions. Also, to improve real time monitoring accessibility.
  3. To provide better access and lower carbon emission, integrate renewable energy or distributed renewable energy (DER) into the grid.

3 Regions of Improvement

Three work streams to overcome regional differences requiring different approaches are as follows:

  1. Main island system –Here main focus is on grid stability, increase power generation and outage prevention.
  2. Medium sized islands – To focus on stabilization of infrastructure and system dynamics, increase renewable energy ratio for grid stability and to give access to electricity for expansion of industrial activity.
  3. Small island system & Isolated networks – To provide energy access and a blend of suitable off-grid/on-grid solutions to ease the shift from grid and fossil fuel.

The image below shows the stimulation by PLN about 59 locations at isolated Indonesian islands with high potential for smart grid. With combined technology of PV array, battery, diesel in EMS technology the estimated capacity required PV array is around 2.1 MWp and 2.1 GWH for battery storage system (BSS).

Pic Credits: Research Gate

Challenges in Implementing Smart Energy System Market in Indonesia

  1. The main challenge here lies in the competition with international companies in the market, including Japan, Korea, China, Taiwan, Germany, and the United States.
  2. Huge investments are required to implement the smart grid planning. On the basis of top-down estimation, basic and advanced requires the following:
  • Basic – 10-15% of grid CAPEX. About US $666.7 to $800 million for building basic infrastructure, annually.
  • Advanced – additional 30-40% of grid CAPEX, US$ 2 to 3 billion for full scale operations.

With low investment and technological assistance, the status of smart grid adoption in Indonesia is as follows:

Pic Credits: Research Gate

Since these companies are willing to support PLN, there is a big scope of opportunities and the possibility of potential smart grid markets such as:

Smart Solar

  • Nov 2019 – Installation of 152 MW of solar PV system
  • 2019 – Triple growth in solar energy since 2018, around 44%
  • 2019 – Target 550 MW not achieved
  • Current year – Installed capacity 908 MW
  • 2020-2025 Plan – Develop at least 1,000 MW solar power per year
  • 2025 Target – To achieve 6,500 MW by the year end

Advanced Meter Infrastructure (AMI)

PLN suggested a plan to install 79 million smart meters during the span of next 10 years. AMI works as 2-way communication technology such as radio frequency (FR), narrow & broad band PLC, optical cable and Cellular GPRS. It will also works as Head End System (HES) and Meter Data Management System (MDMS).

Transmission and Distribution (T&D) Digitalization

There has been a decrease in installed capacity by 6.60% but the number of distribution substations increased by 2.28% since last year. Moreover, to readily meet various demands on the network, PLN has or is installing various devices like sensors, automation equipment and controls.

Power Plant Digitalization – 2018

  • Installed capacity including rental generators and IPP was around 57,822.47 MW
  • No. of PLN power generating units and total installed capacity reached 29,924.58 MW (71.77%) in Java
  • Coal fired 20,192.00 MW (48.43%)
  • Combined cycle 9,812.11 MW (23.53%)
  • Diesel 4,383.42 MW (10.51%)
  • Gas turbine 3,133.61 MW (7.52%)
  • Geothermal 579.50 MW (1.39%)
  • Hydro power 3,582.98 MW (8.59 %)
  • PV Solar and wind turbine 12.54 MW (0.03%)
  • Total PLN production plus purchased – 2018 267,085.38 GWh

Electric Vehicle

Indonesia is one of the major automaker in Southeast Asia with a significant potential for growth with each passing year. Considering the same, transportation sector is the largest consumer of energy in the country and majorly relies on fossil fuels.

The sector accounts for more than 45% of final energy consumption in Indonesia in 2018 with only 0.1% share of non-fossil fuels. Aligning with the United Nations Conference (COP21) in 2015, Indonesia aimed to reduce carbon emissions by up to 20% (303 million tons) by 2030.

Opportunities of Improvement in Indonesian EV Market

Moving towards Sustainable Transportation, there are 3 main opportunities that government can utilize.

  1. Favoring personal transportation – It is an essential point as other countries encourage people to take public transportation, Indonesia favors owning a personal vehicle. It is convenience, flexible and a symbol of economic status for them.
  2. Improved standard of living – With growing population and a rise in middle to high class is evident of their increasing purchasing power. Thus, electric vehicles can be considered an energy-efficient mode of transportation for attracting customers.
  3. Cheapest Electricity Rates – Indonesia have one of the cheapest rates in the region in comparison to petroleum prices that are USD 0.9/L. Electricity in this region costs only around USD 0.1/kWh. It is beneficial for EV customers and potential buyers.

The following graphs illustrates the estimated EV adoption in Indonesia in 2019.

Pic Credits: Research Gate

The plan is to have around 10% or 150,000 vehicles to be EVs with an onward 30% mix by 2030.

4+ Wheeled Vehicles 2-3 Wheeled Vehicles 
Min.% of Local Component UsageTarget YearMin.% of Local Component UsageTarget Year
352019-2021402019-2023
402022-2023602024-2025
602024-2029802026 onwards
802030 onwards  

Fiscal and Non-Fiscal Incentive

As per the report, Central and Local Government is all set to provide fiscal and non-fiscal incentives.

Fiscal IncentiveApplicable On
Import DutyOn import of BEVs in incompletely Knock Down (IKD) conditions/ the main components (for a certain time or amount)
Sales tax incentivesLuxury goods
Exemption incentivesOn Reduction of regional or central taxes
Import duty incentives (borne by government)On import of raw materials or supporting materials (used in production process)
IncentivesMaking of EV charging equipment
Financing incentivesOn exporting
Fiscal incentivesTechnological innovation, research and development
Parking ratesLocations determined by Regional Government
Charging costReduction of charging rates at public EV charging stations
FinancingFor developing EV charging infrastructure
Professional competency certificationFor battery-based industrial human resources
Product certification (technical standards)For BEV industry and component industries
Non-Fiscal IncentiveApplicable on
ExceptionFrom restrictions using certain roads
Delegation of Production RightsFor BEV patented license previously held by government
Providing SecurityIn operational activities

Barriers in EV Adoption in Indonesia

Despite the fact that Indonesian market has high potential for EVs but their high prices remain a major barrier in achieving EV sales targets.

1. High Price Range – The price range for most passenger cars is between 200 and 300 million rupiahs (12311 and 18468 USD), according to Indonesia’s Ministry of Industry. Incentives are necessary to encourage more and more people to opt for electric vehicles.

To this the government has stated restructuring of luxury tax that currently applies on cars. Though there will be a lower luxury tax on hybrid engines, it is possible that EVs will be free from it.

2. Insufficient Charging Infrastructures – In Indonesia, PLN is responsible for building charging infrastructure in its initial state. But again, fewer investments results in less charging facilities.

In 2019, PLN secured US$ 430,000 to trial 22 charging points and it was expected to build 160 more stations in 2020. These stations need to be capable of charging a car battery in 30 minutes. These programs need to accelerate quickly if the government wants to achieve their EVs goal of accounting for 20% of total domestic production by 2025.

Pic Credits: Research Gate

3. Unclear Government Policies – Indonesia not only lacks proper and clear governmental policies but also a detailed and specific roadmap to EV industry development is missing. Indigenous players are waiting for the right time as demand escalates while foreign investors are hesitating to invest in such situations. Stakeholders are unable to make informed decisions and this is affecting the overall progress.

A report by IESR was outlined in 2020 that highlighted lack of regulation in this context. Overcoming these challenges will be crucial for Indonesia to realize its vision of a sustainable and smart energy future.

Cross-Reference: Smart Energy System Market and Business in Indonesia

So talking about the growth and expansion of Smart Energy System Market in Indonesia, it is highly possible in upcoming years. The government is aligning their green energy goals with worldwide CO2 emission reduction targets and EV adoption rules too. Let’s hope for the best.

Recommended: 16 Clever Ways to Protect Yourself from EV Charging Cable Theft

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Olivia is committed to green energy and works to help ensure our planet's long-term habitability. She takes part in environmental conservation by recycling and avoiding single-use plastic.

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