Overview of Indonesia’sEnergy Sector

Current Status & Development Plans

Indonesian Institute for Energy Economics

East Asia Science and Security MeetingBeijing, 23-24 September 2010

Presentation Outline

1. Updates in Energy Sector Production Consumption Prices Subsidies Institutional Framework Nuclear Plans

2. LEAP Work

UPDATES IN ENERGY SECTOR

Production (1)

0

100

200

300

400

500

600

2000 2001 2002 2003 2004 2005 2006 2007 2008

Mill

ion

BO

E

C oal

C rude Oil

Natural G as

Hydro P ower

G eothermal

B iomas s

Source: MEMR, Hanbook of Energy and Eocnomics Statistics 2009

Oil35%

Gas15%

Coal25%

NRE*25% Oil

45%

Gas19%

Coal32%

NRE4%

2008

Exclude conventional biomass

Include conventional biomass

Production (2)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2008 2030-BAU 2030-Climate1

2030-Climate2

Mill

ion

Bar

rels

of O

il Eq

uiva

lent

NRECoalGasOil

52%

20.2%

21.4%

6.3%

48.3%

19.6%

21.4%

10.7%

14%

30.5%

30.4%

25.6%

4%32%19%

45%

989.4

4700

3850

3500

BAU: no significant change in energy policy

Scenario Climate1: Policy interventions: energy conservation and renewable energy development

Scenario Climate 2: GOI commitments in emission reduction. Measures include energy conservation, RE development, clean coal technology, nuclear

Outlook 2009:

Source: Center of Data and Information, MEMR 2009

Production (3)

1 Emission from peat fire from van der Werf et al (2008). •Estimated by MoF (2009) and Bappenas (2009)

Source: MoE (2009).

GHG Emission By Sector

Production (4)

• Indicates very high inefficiency in the country’s existing 9 refineries (total capacity around 1 Million barrel per day)

• Electricity sector is the 3rd largest emitter.

(a) (b)Petroleum & gas refining 51.5Transportation 18.2 23Electricity & heat production 12.2 25.6

Residential 7.4 10Manufacturing & construction 5.9

(a) 2nd National Communication to UNFCCC, Nov.09; (b) Environmental Statistics of Indonesia, 2006.

% to the total energy sector emissions on CY 2000Energy Sub-sector

Emission by Energy Sub Sectors

Production (4)

Type of Power Plant First Commissioning

Year

Capacity Addition

(MW)

Coal PP [Crash Program 1] 2010 7078

2011 794

2012 1593

Coal PP [Crash Program 2] 2016 1000

2017 1616

Gas PP [Crash Program 2] 2014 1440

Hydro PP [Crash Program 2] 2014 1174

Geothermal PP [Crash Program 2] 2014 4733

Type of Power Plant First Commissioning

Year

Capacity Addition

(MW)

Coal PP [Crash Program 1] 2010 7078

2011 794

2012 1593

Coal PP [Crash Program 2] 2016 1000

2017 1616

Gas PP [Crash Program 2] 2014 1440

Hydro PP [Crash Program 2] 2014 1174

Geothermal PP [Crash Program 2] 2014 4733

Plan for Electricity Capacity AdditionsCrash Program 1:• Only 600 MW by 2010• Difficulties to secure

financing & coal supply are significant factor delaying the progress

Crash Program 2:• Expect significant role of

private sector• Ongoing effort to push

geothermal development• Financing is still unclear

Consumption (1)• Industry has the most variety of

energy options

• Large share of household energy is still met by conventional biomass, exact figure not known

• Transportation is still heavily oil dependent

Demand growth accelerates, despite various effort to curb it

Consumption (2)

Year

ActivitiesPackage

Distribution (Million

Package)

LPG Volume (Thousand

Tonnes)

Kerosene withdrawal (Thousand Kiloliters)

Subsidy Savings

(Trillion Rp)

Conversion Cost (Trillion

Rp)

Nett Savings (Trillion Rp)

2007 3,976 33 121 0.6 0.8 -0.22008 15,078 592 2,116 9.15 3.62 5.532009 24,355 1,840 5,402 12.79 5.87 6.922010 1,265 1,328 3,677 7.41 0.33 7.08

Total distribution until 30 June

2010

44,674 3,793 11,317 29.95 10.62 19.33

Target 2010 9,395 3,002 6,173 16.06 2.43 13.63

Year

ActivitiesPackage

Distribution (Million

Package)

LPG Volume (Thousand

Tonnes)

Kerosene withdrawal (Thousand Kiloliters)

Subsidy Savings

(Trillion Rp)

Conversion Cost (Trillion

Rp)

Nett Savings (Trillion Rp)

2007 3,976 33 121 0.6 0.8 -0.22008 15,078 592 2,116 9.15 3.62 5.532009 24,355 1,840 5,402 12.79 5.87 6.922010 1,265 1,328 3,677 7.41 0.33 7.08

Total distribution until 30 June

2010

44,674 3,793 11,317 29.95 10.62 19.33

Target 2010 9,395 3,002 6,173 16.06 2.43 13.63

Substitution from Kerosene to LPG• To decrease dependency on kerosene.• To provide practical, clean, and efficient cooking fuel for household and

small businesses. • To improve access to modern energy to biomass users in rural areas• To reduce burden in the State Budget (LPG subsidy < kerosene subsidy).

Consumption (3)GOI plans to limit consumption of subsidized petroleum fuels

A Roadmap of Fuel Subsidy is being prepared, expected to be applied in 2011 – 2014.

Targeted to save 40% of current budget for energy subsidy (Evita Legowo, 2010) Several mechanisms are under consideration:

By type of vehicle By cylinder capacity of vehicle By year of vehicle production

Few and intermittent energy efficiency measures Government offices Some programs in the industry and commercial sectors Energy saving lamps for households Limited impacts, since mostly are based on short term government programs. No

support from the financial sector for those interested to continue EE implementation after GOI programs concluded.

Prices (1)

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Apr01 Jan02 Jan03 Jan04 Jan05 Jan06 Jan07 Jan08 Jan09

Pri

ce (

Rp/

Lt)

Retail Industry Singapore Market Price (MOPS)

700600400

2000

Ind

ustr

y: 5

0% o

f mar

ket

Indu

stry

: 75

% o

f ma

rket

Ind

ustr

y: fi

xed

ma

x/m

in c

ap

Indu

stry

: fix

ed p

rice

Indu

stry

:re

fer

to m

arke

t

Indu

stry

:re

fer

to m

arke

t

• Price gap among consumer categories, incentive for mis-use

GASOLINE

Prices (2)

0

2,000

4,000

6,000

8,000

10,000

12,000

Apr01 Jan02 Jan03 Jan04 Jan05 Jan06 Jan07 Jan08 Jan09

Pri

ce (R

p/Lt

)

Retail Industry Singapore Market Price (MOPS)

Indu

stry

: 50%

of m

arke

t

Indu

stry

: 75%

of m

arke

t

Indu

stry

: fix

ed w

ith m

ax/m

in c

ap

Indu

stry

& R

etai

l: fix

ed p

rice

Indu

stry

: not

reg

ulat

ed

Decline in prices and also price gap in recent years

KEROSENE

Prices (3)Feed in Tariff

Geothermal: Other renewable energy:

Microhydro as benchmark Multiplier factor: Java = 1, other islands > 1

The regulation stated that PLN is obliged to purchase electricity from renewable energy. However, various hurdles in implementation.

Electricity TariffHigher tariff, except for customer in 450 VA, 900 VA and above

6600 VA. New scheme: flat tariff (Rp/kWh)Customer groups with non-adjusted tariff have to pay higher

price for uses higher than the national average benchmarkEffective 1 July 2010. The first adjustment in more than 6 years.

Subsidies

26.1%

21.4%

11.1% 8.9%

16.7%

20.5%

14.2% 15.2%

24%

-

50

100

150

200

250

300

0%

5%

10%

15%

20%

25%

30%

13.4%

20.6%

10.5%

4.8%

7.5%

4.8%

14.5%

5.6%

15.7% 16.5%

11.0%

13.6%

11.5%11.7%

8.8%

19%

50

100

150

200

250

300Trillion Rp

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Notes: 1) Realization in 2008 is estimation based on Financial Notes and the draft of state budget 20092) Electricity and fuel subsidies 2009 is based on state budget 2009 set by GOI.

10%

Electricity Subsidy in the State Budget Fuel Subsidy in the State Budget

Percentage share of fuel and Electricity subsidies to state expenditure in the budget plan Percentage share of fuel and Electricity subsidies to state expenditure in realization

Fuel Subsidy RealizationElectricity Subsidy Realization

Source: Indonesian Institute for Energy Economics

15%

10%

2010

Institutional Framework (1)New Policies

GOI commitment on voluntary emission reduction of 26% with own budget and additional 15% with international support by 2025

Many initiatives to encourage development of renewable energy

Take into account future role of new energy (CBM, liquified coal, sometimes also nuclear)

Central government distribute responsibilities on managing energy security towards local government

RegulationLaw 4/2009 on Mineral and Coal MiningLaw 30/2009 on ElectricityLaw 25/2009 on Public ServiceGovernment Regulations on forest designation, function and

utilization, spatial managementGovernment Regulations on mining areas, mining business

Institutional Framework (2)

New InstitutionsNational Energy CouncilNational Council on Climate ChangeDirectorate General of Renewable Energy and

Energy Conservation

DNPI

Local Government

BP Migas

BPH Migas

Mining

PertaminaPLN

Forestry Industry

Public Transport

Industrial Equipments

Building

BappenasCoordMin Econ

MinEnv

MinEMR

MinSoE

MinForestry

MinTransportation

Min Industry

MinPublicWorks

MinFinance

Development ProgramsFinancing & Investment

Ecosystem Policy

Energy & Mining

SoE Policies

Forest-based resources-

Transport Policy

Process, Mfg

Structure, Construction

MacroEcon & Fiscal Policy

DEN

- MoF Green Paper- National Action Plan CC

National Roadmap

on CC

End-Use EfficiencyLULUCF, REDD

Green/Low Carbon

Economy Policy ?

Source: Adopted from Ecoperspective (2009), unpublished

RenEnergy, CCS, Supply Efficiency

Nuclear Plans (1)Legal references on Nuclear Energy

Law 10/1997 on Nuclear EnergyLaw 30/2007 on Energy (nuclear is listed amongst

sources of new energy)Presidential Decree 5/2006 on National Energy Policy

(nuclear included in the national energy mix target 2025)

Challenges in implementationUnclear plan, lack of information for general publicMany institutions are not involved during planning

processInconsistent support from Government

Nuclear Plans (2)

Role of various institutions are unrecognized No explicit statement on the role of Min of Education,

MoF, Min of Industry, PLN, Local Government, etc Lead to no sense of ownership, limited involvement and

lack of support

Economic and financial Lack of information Limited window to exercise independent assumptions Various cost elements have never been estimated Understatement of financial requirements Lesson learnt: The First Fast Track Program

(development of 10,000 MW coal power plants)

Nuclear Plans (2)

-

1,000

2,000

3,000

4,000

5,000

6,000

BAU ALT BAU ALT BAU ALT BAU ALT

Mill

ion

Barr

els

of O

il Eq

uiva

lent

Other NRE

Nuclear

Coal

GasOil

DATA-1 DATA-4DATA-2 DATA-3

Notes: Data-1: MEMR, Indonesia Energy Outlook 2006-2025, 20 October 2008 Data-2: MEMR, Perkembangan Pelaksanaan Bauran Energi Nasional , 20 November 2008 Data-3: MEMR, Blueprint Pengelolaan Energi Nasional 2010 -2025, 1 April 2009 Data-4: MEMR, Indonesia Energy Outlook 2008, May 2009 BAU: Business As Usual scenario ALT: Alternative scenario

Nuclear 1%

Nuclear 0.5%

Nuclear 0%

Nuclear 0%

Indonesia Energy Mix 2025

Nuclear Plans (3)

66 81 88

85

166 168-

- -- 11

33

5067

113

119137

-

-

-

-

-

-

-50

100150200250300350400450500

BAU Climate-1 Climate-2

Other New &Renewables

Coal Bed Methane

Wind

Solar

Hydro

Biomass

Nuclear

Liquified Coal

Biofuel

Geothermal

MBOE

Target for New & Renewable Energy, 2030

Source: Center of Data and Information, MEMR 2009

Nuclear appears in Climate-2 Scenario between 2025 - 2030

LEAP WORK

AgendaData & Information SourcesModel StructureAssumptions & Scenarios

Base Case (BC)Nuclear Power (NP)

Interim ResultsConclusions & The Next Step

Data & Information SourcesStatistics of Indonesia (Bureau of Central Statistics)

Population, family size, and Total GDP Urban – Rural population percentageCooking fuel saturation in the Household branch

Transportation Statistics (Ministry of Communications)Handbook of Energy & Economic Statistics of Indonesia

Specific GDP numbers on Commercial and Other sectorsFuel share data for Commerce, Industry, and Other sectors

(Agriculture, Construction, and Mining) Transmission & Distribution losses of Electricity and Natural

GasState Electric Company Statistics

Electrification ratioBlueprint of National Energy Management

New & renewable energy utilization planOutlook Report (Center of Data and Information – MEMR)

General assumption for model scenarios

Model StructureTransformationNatural Gas &

Electricity T&D Module

Briquette PlantElectricity GenerationLNG ProductionOil RefineryCoal MiningBiofuel PlantOil ProductionNatural Gas

Production

Demand Household

UrbanRural

Electrified Non-electrified

CommerceIndustryTransport

PassengerFreight

Other Sectors

Assumptions & ScenariosGeneral AssumptionsPopulation growth 1.05% per yearGDP growth 6.49% per year100% of electrification ration in 2030Coal reserve 18.7 billion tonesCoal export 158 million tones per yearNatural gas reserve 116 TSCFOil reserve 8,4 billion barrelsRealization of Electricity Crash Program phase 1 & 2Implementation of Kerosene to LPG substitution

program as in the Blueprint of Kerosene to LPG Substitution

New & Renewable Energy utilization to produce power

General AssumptionsPower Sector HighlightElectricity Crash Program

Type of Power Plant Year Total Capacity (MW)

Coal PP [Crash Program 1] 2010 7078

2011 7872

2012 9465

Coal PP [Crash Program 2] 2016 1000

2017 2616

Gas PP [Crash Program 2] 2014 1440

Hydro PP [Crash Program 2] 2014 1174

Geothermal PP [Crash Program 2] 2014 4733

Power Sector Highlight (2)New & Renewable Energy Utilization

Year Geothermal Microhydro

Solar Waste Wind

2010 1.122011 102012 102013 102014 20 102015 290 120 10.5 402016 180 10.5 102017 240 60 10.5 102018 720 10.5 10

2019 240 10.5 102020 730 10.5 40 102021 1200 170 10.5 102022 1210 10.5 102023 1490 10.5 102024 890 30 10.5 102025 760 32 10.5 10

CapacityAddition in MW

Total capacity from NRE: 8718.2 MWin 2025

ScenariosBase Case (BC)

Nuclear Power (NP)

Goal: to analyze the impacts of NPP implementation in Indonesia

General Assumptions + No NPP until 2030

General Assumptions +

4 GW NPP operation in 2028

Interim ResultsEnergy Demand by Final Energy Type

Interim ResultsNuclear PP on Total Power Production

Interim ResultsCarbon Dioxide Emission by Scenarios

Conclusions and Next StepsConclusionSmall contribution of NPP in total power

generationChance to reduce more CO2 emission in NPP

implementation

Next StepsEnergy efficiency scenario as in Indonesia’s

climate change mitigation plan in energy sector

Thank YouIndonesian Institute for Energy EconomicsJl. Ciranjang No. 6, Kebayoran BaruJakarta 12180Telp: +62-21-722 0007Fax: +62-21-723 1064www.iiee.or.id