Renewable energy technologies have undergone dramatic cost reductions in recent years, making them broadly cost-competitive with fossil fuels in the markets around the world. Despite the global trend, in Indonesia, renewables are still cited as expensive sources of electricity. This perspective affects how Indonesia’s future electricity system is projected, the direction and the making of the energy policy, as well as attractiveness of the country to investors.
In this project, the Institute for Essential Services Reform (IESR) and Agora Energiewende collaborate and provide an analysis of the cost comparison between renewable and fossil generation, as well as the underlying conditions that make the cost difference, specifically for Indonesia. We use the “Technology Data for the Indonesian Power Sector” report by Dewan Energi Nasional (DEN) as the primary reference and refine with the most recent data from other related market studies as well as surveys with the association, project developers, and Indonesian state-owned utility, PLN; to calculate the Levelised Cost of Electricity (LCOE) in Indonesia.
We discuss the major cost driver in LCOE calculation, the cost drivers for different power generation technologies, and the impact on LCOE if these component changes. Further, we discuss a simulation of Indonesian policy measures: what makes the cost of renewables higher (or cheaper).