Analyzing the Financial Implications of Increasing Renewable Energy Penetration in Indonesia’s Power System

Over the past decade, renewable energy has witnessed a remarkable surge, accounting for a growth from 10% to 20% of Indonesia’s annual electricity generation. This expansion can be attributed to factors such as reduced technology costs and robust governmental backing. Anticipated is a continued rise in the proportion of renewable energy within the total energy generation landscape. Projections from four distinct organizational reference scenarios indicate that by 2030, Indonesia could achieve optimal cost-efficiency in electricity generation, characterized by renewable energy accounting for a fraction of 30% to 350%. This fraction is projected to further intensify, potentially reaching a range of 410% to 620% by 2045. In the pursuit of enhancing the viability of sustainable energy within the ambit of the most economical solutions, this study employs capacity expansion modeling tools. These tools facilitate assessments considering the costs associated with electricity infrastructure development and management. Notably, the relationship between the share of renewable energy generation and system costs demonstrates a nonlinear pattern. Minor deviations from the lowest-cost solution yield negligible cost fluctuations; a mere +/-4% adjustment in renewable energy penetration results in a meager system cost variation of less than 2%. However, more substantial deviations from this baseline can trigger noteworthy escalations in costs. A paramount outcome of augmenting renewable energy penetration is the potential reduction in absolute emissions. Through meticulous analysis, this study delves into varying levels of Energy Balance Transition (EBT) penetration rates, thereby influencing the intricate tradeoff between curbing emissions and managing system costs.