Powering Indonesia’s Sustainable Future: The Diesel Replacement Program

In March 2022, Indonesia embarked on a journey toward a more sustainable and energy-efficient future with the initiation of the Diesel Replacement Program (DRP), an ambitious project by the state electricity company, PT PLN (Persero), that aims to convert approximately 5,200 diesel power plants (PLTD in Bahasa Indonesia) into renewable energy-based generators or integrate them into the grid. Its primary objectives include reducing the nation’s dependence on fossil fuels, enhancing RE in the energy mix, and reducing electricity costs while improving reliability.

The concept of de-dieselization within the broader framework of just energy transition takes center stage in the DRP. This approach seeks to ensure that the last miles of Indonesian communities in remote areas not only receive electricity but also gain access to clean, sustainable and more reliable energy sources. By adhering to the principles of just energy transition, the program would ensure that every citizen has equal opportunities to benefit from clean energy, marking a significant step towards inclusive and sustainable development.

The Global Energy Alliance for People and Planet (GEAPP) as a key supporter of energy transition in emerging economies, welcomes this program to reshape Indonesia’s energy landscape. We see a great alignment of this program to our focus in pushing the adoption of Distributed Renewable Energy (DRE), which involves generating energy from localized renewable resources such as small-scale solar projects, biomass, and hydroelectric and wind power, often distributed over micro/mini grids, and equipped with battery systems (BESS). We believe this is a cost-effective means to improve access and fortify future electricity grids.

Despite significant strides in electrification over the past decade, approximately 140 Indonesian villages remain unelectrified, while over 2,000 locations depend on diesel power plants, resulting in high energy costs due to logistical challenges and unreliable supply of diesel fuel. DRE can offer these unelectrified and under-electrified localities clean and reliable energy that aligns with the principles of just energy transition. The aim is no Indonesian left behind in accessing modern energy—all Indonesian to have access to clean and reliable energy 24/7.

International collaborations play a crucial role in the implementation of the DRP. In the Diesel Replacement Program, recently PLN has partnered with international companies such as Germany’s ib vogt GmbH and InfraCo Asia (who partnered with EMITS – Empat Mitra Indika Tenaga Surya of PT Indika Energy Tbk.), underscoring the significance of global cooperation in achieving sustainable energy goals. Projects of this size – a total of 94 locations across Indonesia with total size estimated to be more than 200MW, will surely also attract global capital active in green energy, adding more global RE investment to the country.

However, to realize the vision of the DRP, it is crucial to consider the local context. Factors such as the local diesel supply chain, environmental and social aspects, capacities of the local workforce to operate and maintain RE power plants, and other local concerns must be adequately addressed to ensure seamless project delivery.

The development of financial packages will be a crucial accelerator of the learning process for implementing the DRP. Since this is the first tender to replace diesel in many locations in Indonesia, understandably many stakeholders, including in the financial markets, are anticipating on how the project will pan out. This is also a landmark project, where establishing markets for commercial scaling to assure investors of the sustainability and economic viability of the project is of paramount important. Success of this project will lay the groundwork for many more diesel replacement programs.

GEAPP is prepared to provide support in ensuring the success of the DRP. As a global player in energy transition, GEAPP facilitates the seamless deployment of renewable energy projects by providing essential financial support including directly to the project. Through its flexibility in deploying necessary instruments as required by the project, GEAPP bridges the financial gap between project initiation and implementation, empowering developers to overcome obstacles and accelerating the transition to clean energy. We have been using this approach in parts of Africa and India and hope to replicate its success in Indonesia.

At GEAPP, we believe the way forward for Indonesia’s energy landscape lies in collaborative efforts between the government, industry stakeholders, and experts. By aligning strategies, sharing knowledge, and fostering partnerships, we can pave the way for a sustainable energy future. The Diesel Replacement Program serves as a beacon of hope, showcasing the nation’s commitment to a cleaner, greener tomorrow. Together, let us drive Indonesia towards a more sustainable and resilient energy ecosystem.