The competitive rivalry in the Indonesia power generation market is moderate owing to the monopolistic structure of the market, reports Transparency Market Research in a study. The leader in the power generation market in Indonesia with an overall share of approximately 85% is the government-owned company chain, PT PLN. The rest 15% is owned by independent power producers (IPPs). As a result of this, the competition in the power generation market in Indonesia is controlled by the subsidy regime in the country.
As the power generation business is highly capital intensive, market incumbents are anticipated to compete strongly and strategically sell their power to obtain a defensible return on investment (ROI). The three leading government PT companies, PT PLN Persero, PT Indonesia Power, and PT Pembangkitan Jawa Bali accounted for approximately 83.3% in 2013 of Indonesia’s power generation capacity. The other government-owned PT power generation companies held 3% of the overall share in the Indonesia power generation market in terms of power generation capacity.
The Indonesia power generation market is expected to rise at a CAGR of 18.7% between 2014 and 2022. The power generation capacity (GW) of the Indonesia power generation market was 49.7 GW in 2015 and is estimated to touch a capacity of 90.1 GW by the end of 2022. Coal fired power generation technology led the Indonesia power generation market in terms of power generation capacity. It is projected to account for 58.3% of the overall share in the Indonesia power generation market. As a large number of coal reserves are present in Indonesia, the demand for coal fired power generation technology is comparatively high than any other form of power generation technology. Indonesia is one the prime coal producing countries in Asia Pacific along with China, India, and Australia. In 2013, Indonesia was ranked fourth globally in terms of production of coal with a production of 259.8 million tons.
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Development in Mining and Quarrying Industry to Aid in Growth of Power Generation Sector
According to a TMR analyst, “Indonesia is one of the prime producers and exporters of coal in the world after China, the U.S., and Australia.” It is also one of the leading exporters of several other types of minerals. At present, the country holds around 0.6% of the coal reserves present worldwide. To discover more coal reserves and enhance their power generation capacity, the Indonesian government is focusing on the development of the coal mining industry of the country. With consideration to the historical trend and government initiatives, production of coal has achieved an upper hand over its consumption in the country. However, due to the population explosion in the country and concerns with electrification, coal mining activities are expected to grow in the coming years resulting in a rise in power generation capacity of the country.
Power Generation Sector to Face Challenges due to Absence of Proper Infrastructure
Being a developing country, the current infrastructure facilities in Indonesia are at a nascent stage. Post the economic crisis in Indonesia, the government spent massive funds on currency devaluation and stabilizing the political situation in the country. As a result of cut back in infrastructure in Indonesia, the country has faced a massive negative plunge in power generation capacity. To tackle the poor infrastructure scenario of the country, the government is focusing towards on spending approximately 2% of the country’s GDP towards infrastructural development. The development of the country’s infrastructure is likely to attract more foreign investments and thus lead to a roll out in constructive policies. This is likely to favor the growth of the power generation market in Indonesia in the coming years.
Conducive Government Policies to Provide Future Power Generation Enhancement Opportunities
To utilize the country’s abundant natural resources, the government of Indonesia has introduced several new regulations that would help foster development in the renewable resource energy sector. The government further introduced feed in tariffs in order to encourage power generation through renewable resources. The laws passed by the government mandate the inclusion of 15% of renewable energy technologies in the overall power generation technology of the country. The growth in the renewable power energy sector is anticipated to provide profitable growth opportunities to the companies operating in the power generation market in Indonesia.
Key segments of the Indonesia Power Generation Market
Indonesia Power Generation Market: Technology Analysis
- Coal-fired Power Generation
- Natural Gas-fired Power Generation
- Oil-fired Power Generation
- Geothermal Power Generation
- Hydro Power Generation
- Combined Cycle Power Generation
