A Brief on Indonesia’s Electricity

by | Dec 18, 2020 | Market Research | 0 comments

With the happening urbanization, rapid economic expansion, and industrialization, Indonesia’s demand for electricity has increased steadily over the years. The Indonesian Minister of Energy, Ignasius Jonan, stated that the country’s demand for electricity is estimated to grow by an average of 6.42% every year in 2019–2028 (Reuters, 2019).

(Photo by Matthew Henry)

Along with Indonesia’s industrial and infrastructure development plan, electricity demand and electricity consumption will also increase. The government is planning a huge development in many sectors in Indonesia. From infrastructure to technology, these developments will somehow increase the demand and consumption of electricity. In the 2020–2024 agenda, the Ministry of Public Works and Housing planned to establish more roads, railway, bridges, airports, and many other infrastructures. These projects require adequate electricity and its tools.

Renewable Energy for a 100% Electrification Ratio

In 2019, Indonesia’s electrification ratio was 98.83%. The State-Owned company, PT PLN is targeted to achieve a 100% electrification ratio this year. The government, along with PT PLN will take advantage of the new renewable energy potential to achieve the target.

As an archipelago, the geographical condition became one of the biggest challenges in providing electricity to every side of the country. Thus, PT PLN will build renewable energy power plants in the local regions to boost electrification rate in 2020. The three energy potentials are solar, biomass, and micro-hydro energies.

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(Photo by Arteum)

Electricity Issues and Covid-19 Pandemic

There are still many Indonesian households that have difficulties with electricity access. Currently, 433 villages in East Indonesia haven’t got any electricity at all. There are still many big problems related to electricity in Indonesia. In 2016, of more than 1100 cases of fire in the country, more than 70% was caused by electrical problems. These problems were caused by the low quality of stabilizer and other electric equipment.

Especially in this current pandemic situation, many business sectors have indirectly affected electricity demand. Due to the large-scale social restriction (PSBB) around big cities, a lower consumption among businesses and industries is driving down the electricity’s overall consumption. In June, most power usages were propped up by the residential sector, up by 9.84% year-on-year (The Jakarta Post, 2020).

A Weak Domestic Manufacturer of Electric Equipments

As we stated before, most of the electricity problems that happened in Indonesia are caused by low quality electricity tools. However, the demand for better quality electric equipment can not be fulfilled by domestic manufacturers. The component supplier industry is still weak in Indonesia, most parts, components and other inputs for assembly are still imported (ILO, 2019).

The limited number of domestic industry producing parts and components leads to a high number of imports for inputs and equipment of electricity (Andres, 2016). A study shows that electronic companies in Batam are importing 90% of their components and inputs, while in Java, 40% of the components are imported (Hutchinson, 2019).

Therefore, even though there are already many big players that distribute their electric equipment products in Indonesia, the country still offers many opportunities for electronic components manufacturers.

Spanish Company’s Struggle to Find the Right Distributor

As a part of Basque Trade and Investment in 2018, a Spanish electronic relay manufacturer came to BRIGHT Indonesia and asked for assistance. Specialized in the design and manufacture, the company has developed a wide range of electronic relays products for multiple low and medium voltage applications.

As an innovation driver and trendsetter, this Spanish manufacturer has marketed its product worldwide. By the time this company approaches BRIGHT Indonesia, it has already entered the Indonesian market and has partnered with a distributor.

For performance reasons, the Spanish company contacted BRIGHT Indonesia and asked to assist in searching for other suitable potential distributors. They also requested BRIGHT Indonesia to help them set up a meeting with an Indonesian’ government-owned corporation that monopolizes the electricity distribution, PLN.

After understanding its preferred characteristics of a distributor, BRIGHT Indonesia started to list several companies to be considered. In the process, the project faced several challenges. In Indonesia, there are already many electricity component companies that are in the market. The fact that this company already has a distributor makes it harder to find another distributor due to Indonesian distributors’ professionalism. They know this company has already partnered with its competitors and thus avoided partnering with the Spanish company.

Despite the challenges, BRIGHT Indonesia was able to deliver favorable results. The Spanish company was able to meet with PLN to discuss the regulation in Indonesia. The company is also satisfied with the distributor information provided and the quality of meetings that have been set up by BRIGHT Indonesia.

Get Into the Business with BRIGHT Indonesia

Finding the right distributors in Indonesia can be somewhat complex. The distributor might not be as you have expected, or you may encounter many other problems. With BRIGHT Indonesia, you will find the potential partners search smoother, as we always tried to put your best interest first.

BRIGHT Indonesia provides several services such as Management and Strategy Consulting, Business Partnership Engagement, and Foreign Direct Investment Promotion (FDI). To help the growth of your company we can provide services such as providing a list of potentially suitable partners, developing corporate or business strategies, and linking your company both from the private sectors in global FD  and also public sector for broader reach.

Our strategy consulting services domain focuses on supporting private and public sector clients with comprehensive and specialized development regarding the company’s needs and being prominent in the market. With exceptional local market expertise and networks in Southeast Asia, BRIGHT Indonesia will offer excellent services designed specifically to achieve your company’s goal. 

For more information, email info@brightindonesia.net.

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