To promote efficiency and transparency in Indonesia’s power transmission and distribution system, senior officials and core technical staff in Indonesia’s power sector sought to exchange ideas with their Brazilian counterparts on conditions for and benefits of adopting smart grid technologies, understanding how smart grid applications work for utility companies, and gaining practical experience to plan and implement smart grid programs.

Challenge

By the end of 2010, Indonesia’s per capita electricity consumption and electrification ratio ranked lowest among the World Bank’s larger, developing member countries in East Asia. More exploitation of renewable energy resources, expansion of efficient transmission and distribution systems, and capacity building in demand-side management were required for meeting the growing demand for electricity accompanying economic growth and also for reducing greenhouse gas emissions.

However, there existed deficiencies in policies, standards, and other incentives meant to guide the pursuit of these needs. The performance of PT Perusahaan Listrik Negara (PT PLN) Persero, the state-owned power utility monopoly, was perceived as weak and lacking incentives because it received a huge subsidy from the government. Staff in the Ministry of Energy and Mineral Resources (MEMR) and PT PLN also needed to build capacity to enable the adoption of smart grid technologies. Also, a consensus was needed on effective planning and implementation requirements to introduce such technologies and efficiently expand nationwide electric power transmission and distribution.

Solution

In 2011, during preparation of the Second Power Transmission Development Project in Indonesia, the idea of introducing practical smart grid in the country was discussed. Power sector officials expressed strong interest in learning from the experience and accomplishments of smart grid projects and the benefits accrued for large industrial and commercial customers. In the last 15 years, about 100 Brazilian companies have been involved in power transmission and distribution; most of these 100 have made significant achievements in those areas where Indonesia faced significant challenges. The proposed exchange between these countries would therefore support both the Indonesian Government’s energy conservation strategy and the World Bank’s energy sector program for Indonesia.

During May 19-28, 2012, eight senior officials from the Indonesian Ministry of Energy and Mineral Resources and PT PLN went on a study tour of Brazil. The delegation visited field operations and held discussions with officials of ABRACE (Brazilian Association of Major Power Consumers and Free Consumers), AMPLA and CEMIG (distribution companies), ANEEL (Brazilian Electricity Regulatory Agency), and EPE (Federal Energy Planning Agency). 

With daily presentations and question-and-answer sessions, participants better understood the perspectives of each country’s energy sector and their respective challenges. The exchange raised awareness among Indonesian policymakers and practitioners on the benefits of and conditions required to adopt smart grid technologies. It facilitated practical experience in planning and implementing smart grid programs and laid the foundation for further cooperation and exchange of experience between government agencies responsible for policy and regulations of the power sector and utilities in the two countries.

The Brazilian team generously shared their experience. Although the visit focused on smart grid deployment, discussions broadened to include energy planning, regulations, electricity tariff setting, and mobilization of public and private investment for new generation capacity, including renewable energy. This heightened the interest of the Indonesians, and they expressed a desire to follow up.

Results

• Participants gained hands-on experience with equipment for smart grid technologies and saw how such equipment functions as a key part of energy services.
• PT PLN enhanced the quality of a proposal to the Australian Government for technical assistance for capacity building in planning and implementing smart grid technologies for transmission and distribution systems.
• Indonesia began developing various practical plans and implementing the latest technologies and smart operations in its power sector.

An unplanned result one year after the exchange was a follow-up study visit to Brazil in December 2013, fully paid for by the Government of Indonesia. Seven senior officials from the Ministry of Finance and PT PLN went to learn from Brazil’s experience in implementing the performance-based regulation (PBR) approach to manage its power utilities. Based on the result of the visit, the Ministry of Finance decided to introduce performance-based regulation as the framework to regulate PT PLN. The performance-based regulation has been drafted and is awaiting approval for implementation in 2015.

Lessons Learned

• Compared to lecture-style delivery of knowledge and working on desk plans, the interactive discussions and on-site observation of Brazilian operations were an effective catalyst to advance innovative thinking to improve the energy sector in Indonesia. The Indonesians learned different ways to tackle plans for the energy sector, which they applied on return home.
• One needs to be open to the possibility of unintended benefits. For example, the presentations and discussions on smart grids – the planned focus of the knowledge exchange – led to further interaction on other sector issues relevant to participants: energy planning, regulations, electricity tariff setting, and mobilization of public and private investment for new generation capacity, including renewable energy. Learning on these topics were not part of the intended results or outcomes of the knowledge exchange.

Moving Forward

The World Bank has expanded its engagement in the energy sector with the Indonesian Government, including in financing transmission and distribution network improvement.  Apart from Indonesia’s Second Power Transmission Development Project approved by the World Bank’s Board of Executive Directors in 2013, a new results-based loan to support distribution system expansion is under preparation and scheduled for the Board’s approval in FY16.

Indonesia and Brazil can continue to operate in the energy sector in the following areas: (a) smart grid in power distribution; (b) planning and auctions for new generation capacity, including hydro and other forms of renewable energy; and (c) tariff setting. Smart grid experience exchange is expected to continue in the framework of the Technical Assistance to PLN for Smart Grid Capacity Building financed by AusAid.

World Bank Group Contribution

World Bank staff in Indonesia and Brazil collaborated to organize the May 2012 exchange. Six members of the Indonesian delegation, representing the Directorate of Energy Conservation under the Ministry of Energy and Mineral Resources and PT PLN, the national power utility, were supported by the South-South Facility grant. Two other officials from MEMR were funded by the Government of Indonesia.

The second exchange in December 2013 was facilitated by the World Bank team, but fully financed by the Government of Indonesia.

Partners

Knowledge recipients from Indonesia:

• Ministry of Energy and Mineral Resources (MEMR)
• Ministry of Finance
• PT Perusahaan Listrik Negara (PLN) Persero

Knowledge providers from Brazil:

• Agência Nacional de Energia Elétrica (ANEEL), Brazilian Electricity Regulatory Agency;
• Associação Brasileira de Grandes Consumidores Industriais de Energia e de Consumidores Livres (ABRACE), Brazilian Association of Major Power Consumers and Free Consumers;
• AMPLA, a private distribution company, which has the most comprehensive experience worldwide in the use of advanced metering in all market segments—from large consumers across all voltages to low income users living in dangerous slums;
• Companhia Energética de Minas Gerais (CEMIG), a private power company and Brazil’s largest distribution company (7 million customers), with successful operational and financial performance;  
• Empresa de Pesquisa Energética (EPE), the Federal Energy Planning Agency responsible for planning studies for the energy sector (power sector, oil and gas sector, renewable sources, nuclear power, and energy efficiency) in support of government policies. 

Beneficiaries/Participants

• Officials from the Ministry of Energy and Mineral Resources (MEMR)
• Core technical staff from Indonesia’s state-owned national power company, PT Perusahaan Listrik Negara (PLN) Persero

Learn More

www.worldbank.org/indonesia

Multimedia

Scaling up energy efficiency in Indonesia, the Philippines and Vietnam: http://www.worldbank.org/en/news/video/2014/02/18/scaling-up-energy-efficiency-indonesia-philippines-vietnam