How will Indonesia's new rural electrification regulation affect businesses?

How will Indonesia's new rural electrification regulation affect businesses?

12,000 Indonesian villages are still unelectrified.

In an unprecedented move, the Directorate General of Electricity under the
Indonesian Ministry of Energy and Mineral Resources pushed through a rural
electrification regulation recently signed by the new Minister, Ignasius
Jonan. This regulation provides the framework on how a private business
entity can provide electricity to currently un-electrified regions through
business area concessions. It also provide ways to calculate and receive
electricity subsidies from the government.

Andre Susanto, a clean energy consultant at Bluejay Energy, said that this
regulation opens the flood gates to businesses currently providing
electrification technologies and business models to rural areas. The exact
requirements on how to become an appointed electricity provider is not
defined within the regulation.

Here's more from Andre Susanto:

Today there is an abundance of technologies and business models available.
Without a complete and responsible feasibility study, there is a huge risk
to the communities that they will receive electricity in ways that is not
appropriate nor adequate. Indonesia's diversity means that the energy use
needs and growth potential between the communities vary widely.

Who will be performing a complete and responsible energy needs assessment,
geophysical survey of the area, studies for social behavior, and economic
activity and growth potential compiled as a useful feasibility study?
Without knowing these variables, any business model that relies on household
tariff collection can fail before it even starts.

Farming communities only has cash a few months within their harvest
payments. Fishing communities and day laborers at nearby mines or fields
typically have daily income. Will the businesses pay attention to these
facts and apply the right payment scheme? Or will they assume everyone will
pay for all of the electricity produced for the duration of the project?

Even more worrying is that there is no standard of service defined in the
regulation. A solar lantern or an inadequate small home system given to each
household may be counted as providing electricity service to the community.
This means that distributors of these products will be able to get approval
to disseminate their wares and get paid through the subsidy fund. What if
the community need more than lanterns or individual systems? What about
productive use of energy? What about communities that are better served with
mini grids?

The reverse can also happen where mini grid providers will be able to
install their systems in locations where there is no need. A huge amount of
subsidies will be required to build the mini grids in these locations.
Unless they are also bringing additional economic activity, the available
energy will be wasted.

Rural electrification and its financial viability is a complex issue. It
involves engaging with the communities and understanding their needs, both
physically and culturally. Understanding their requirements, their potential
for growth, and acknowledging their way of living is required for a
sustainable electrification program.

Our team members and myself are still learning new things despite having
visited over 300 rural communities and engaging with them and listening to
their stories. We inspected over 200 solar PV microgrid systems and continue
to find opportunities to learn more about how to acknowledge each community
as unique social constructs. Only then we can develop and design an
appropriate electrification plan using the right technologies and payment
schemes that meet their needs.

Despite all of this, the new regulation provide an opportunity for the
private sector to engage in electrifying Indonesia's 12,000 villages
currently without any access to electricity. If the right companies can take
advantage of the regulation, this will create mutually beneficial
relationship between them, the Indonesian government and more importantly
the community members and households.

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Link to Original Article:
http://asian-power.com/regulation/news/how-will-indonesias-new-rural-electri
fication-regulation-affect-businesses

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com