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Nearly 500 villages located mostly in Eastern Indonesia are still in total dark despite the Indonesian electrification ratio has reached 99% as reported in 2020 data from the Ministry of Energy and Mineral Resources (MEMR). This number is not include about 8,500 villages that are currently electrified by non-National Electricity Company (PLN) and receive power less than 24 hours. The numbers are different from one minister to the others but we all agreed that achieving the remaining 1% with business as usual strategy is going to be a difficult task.

From a utility point of view, Eastern Indonesia, including 73 out of 96 districts/cities in the regions of Moluccas, Papua and Nusa Tenggara that are categorized as underdeveloped, shares the same challenges: difficult-to-access geographic setting leads to fragmented electricity grids, low affordability, slow demand growth and expensive fuel to ensure continuous service of electricity. Therefore, we must look for local solutions – and one of the solution is something that we all share – solar power.

In the past 10 years, the Directorate General of New Renewable Energy and Energy Conservation has made remarkable progress by installing more than 700 Photovoltaic powered mini-grids all over Indonesia including eastern Indonesia. The impact of these community-operated decentralized power systems at accumulated scale is job creation, increased energy resilience, improved livelihoods and increased productivity. More importantly, this proves a promising approach as it is independent of a grid connection or expensive fuel. The lessons learned from this program, however, need to be accounted for. Among them are: continuous funding, safeguarding of operation and maintenance and institutional development within the community. These elements are crucial to ensure a full lifetime of technology and alleviate energy poverty in Indonesia.

The rural economy in eastern Indonesia is mainly subsistence-based with limited cash availability and they also suffered from lack of access to water and sanitation or if they have agricultural resources, they lack access to the market. Even if the power grid arrives, they cannot necessarily afford the connection fee. Therefore, the policy should aim to not only to address electricity by itself but an integrated approach of all above-mentioned aspects for these communities to ease such expenses to grow their economy to a certain level. The rule of thumb is: when people have more income, the electricity demand will also increase.

Thus, over-dimensioned grid extension, low-quality pre-electrification or community energy systems – what is the right approach? The newest developments of 2020 might lead us to new solutions and new opportunities altogether.

Growing giving culture and Energy start-up companies

In the past ten years, we have seen two great phenomena. The first is a growing interest of millennials who want to contribute directly to community through energy solutions. The second is being a growing giving culture in Indonesia through several crowdfunding platforms for various causes including providing basic services to remote, secluded and off-grid communities. As a strong indication of increased giving culture, Indonesia was ranked the top in the World Giving Index for the first time in 2018.,

More and more impact investors, philanthropic organizations and gas and oil companies have paid attention to growing clean energy startup ecosystem to serve rural communities. We have seen a growing number of energy startups. Many of these are intensively looking at finding clean and innovative solutions to electrify secluded off-grid communities. The common pattern is that most of them have access to blended financing schemes and are willing to work with local communities to match their ability to pay.

The lesson drawn from providing energy services to the off-grid community is that it is difficult to realize the value of electricity but appliances and machinery for productivity or entertainment. The only problem is that the adoption of modern technologies means upfront investment, and not all can afford this. This raises several concerns: How can we address these challenges? What kind of services do people need? Can people afford it? Which model is more suitable: leasing or ownership model; or decentralized or centralized system? The point is we need to better understand the community needs. A conventional utility company seems to abandon these issues, but startup companies normally are working through this logic.

Therefore, the remaining question is how can we nurture these startups, who present new jobs, and allow them to penetrate more remote and secluded communities? This lays the opportunity for the government, instead of becoming an active project developer like in the past, the same amount of budget could be allocated to opening the market for these companies, thus helping them to penetrate more secluded communities and create what I like to call “a grid-ready costumer” instead of expanding the grid to serve a very low energy demand.

I’d like to end this article by bringing us through a memory lane around the year 1979. The Village Unit Cooperative or Koperasi Unit Desa had a very important role in rural electrification. Back then, it was through diesel deployment. Both the Ministry of Mining and Energy and the Ministry of Trade and Cooperatives worked hand-in-hand with PLN in making this program sustain – e.g. by adding training and safeguarding the whole process. The project failed to retain its success due to expensive fuel cost and affordability of these communities toward tariffs. Now, though, with renewable energy, especially PV, there will be no fuel cost and affordability can be addressed by providing a different mode of payment, such as daily payment, using pay as you go, leasing models or other business innovation that only startups can provide. The other opportunity lays with the availability of the village fund and the village owned enterprise (BUMDES). The answer to the rural development through energy provision might be in the form of supporting startup companies by allowing them to work with BUMDES and PLN, as well as to ease the permits and licensing and loan facility to allow more growth.

Taken from: https://www.linkedin.com/pulse/re-inventing-rural-electrification-eastern-indonesia-enhance-haning/

Written by: Dedy Haning

SUMBA RENEWABLE ENERGY GROUP

Clean Energy For All

SREG’ Current Member

RE-inventing rural electrification for eastern Indonesia and enhance the role of energy startup companies

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