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    Indonesia Power Key View


    January 24, 2022 - Fitch Solutions Sector Intelligence

     

      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      Indonesia Power Key View

      • 24 Jan 2022
      • Indonesia
      • Power

      Key View: We expect Indonesia's power and renewables sector to see robust growth over the coming decade, underpinned by strong underlying demand, government commitment to develop the sector, and relatively strong investor interests across most fuel types. We note that Indonesia appears to show stronger intent to decarbonise the power sector in recent months, although we remain cautious on integrating it into our forecasts at present, given the ongoing challenges from the underdeveloped regulatory framework for renewables, domestic coal lobby groups and priorities for energy security and affordability.

      Headline Power Forecasts (Indonesia 2021-2026)
      Indicator 2021e 2022f 2023f 2024f 2025f 2026f
      Generation, Total, TWh 285.4 301.2 318.7 336.4 352.8 371.9
      Consumption, Net Consumption, TWh 266.3 280.9 297.7 314.7 330.9 350.4
      Capacity, Net, MW 74,953.8 76,981.4 79,368.0 82,570.8 85,355.4 87,534.8
      e/f = Fitch Solutions estimate/forecast. Source: EIA, national sources, Fitch Solutions

      Latest Updates And Structural Trends

      • We forecast power capacity to grow by an annual average of 3.2% over the coming decade, to reach over 102GW by 2031, supported by strong underlying demand for electricity which will necessitate growth of the power capacity, and ambitious expansion plans by the government and state utility.
      • We expect coal to remain a key generation source for Indonesia, despite increasing headwinds against the fuel source. We believe that the current coal projects in the pipeline will be among the last wave, and will continue to drive growth, peaking at the end of the coming decade. We forecast coal generation to grow by an annual average of 5.2% between 2022 and 2031, and account for 64.0% of the total power mix by 2031.
      • We have revised our hydropower forecasts slightly this quarter to account for the latest historic data, and expectation for progress of several large-scale projects in the pipeline. By 2031, we forecast hydropower capacity to total 10.2GW and account for 6.2% of the total power mix, with increasing upside risk as Perusahaan Listrik Negara (PLN) looks to leverage the market's hydropower potential and economies of scale with larger projects. This is particularly as the latest National Electricity Supply Business Plan (RUPTL) targets for hydropower has seen a significant increase, with net capacity additions at over 9GW by 2030.
      • We forecast non-hydropower renewables capacity in Indonesia to grow by an annual average rate of 5.0% between 2022 and 2031, to reach 7.4GW by 2031. Geothermal will remain the main driver of Indonesia's non-hydro renewables growth, although we see significant upside risks for Indonesia's solar sector, growing from a lower base. This stems from a greater focus in the RUPTL 2021-2030, rising investor interests and developments in the solar sector over recent months, which could kickstart the industry in Indonesia.
      • We expect Indonesia's T&D sector to see ongoing improvements, amid strong support from the government and PLN, with robust investments to support the expansion and modernisation of the network, including interconnections across Indonesia's Islands and with Malaysia and Singapore. The RUPTL will also look to open up the sector for private investments, creating opportunities for investment.
      This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.

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