For remote locations without access to the national grid, the options for independent electricity production at a realistic cost are limited to two solutions: generators (diesel and gasoline) and local renewable energy. While generators are the most accessible and lowest capital cost option, they rely heavily on fuel to operate. Hundreds of cities and villages in Indonesia still rely on diesel supply for their power generation. This dependence on diesel is not unique to these areas, as many private businesses and properties operating outside the national grid also rely on diesel generators for their electricity needs. However, it’s essential to examine the supply chain and local production of diesel to understand the potential risks associated with this dependence.
Local v Imported Diesel Consumption
In 2022, Indonesia only produced 65% of the total crude oil used within the country. The remaining 35% is primarily imported from the Middle East, with most of it passing through other countries like Singapore or Malaysia for processing into gasoline or diesel. This complex supply chain raises concerns about its fragility and vulnerability to disruptions.
Potential Risks and Implications
In the event of a crisis, such as a petrol shortage or an unrealistic cost increase, private operations and homes relying on diesel generators will be on the frontline. This could lead to significant disruptions to their business models or way of living. The impact of such disruptions could be severe, particularly for communities that rely heavily on diesel for their daily needs.
Mitigating the Risks: PLN’s Diesel Replacement Program
In recognition of the risks associated with diesel dependence, the state-owned electricity company, Perusahaan Listrik Negara (PLN), has initiated a diesel replacement program. The program aims to reduce Indonesia’s reliance on diesel for power generation by promoting the use of renewable energy sources, such as solar and wind power. The program involves the installation of solar-powered mini-grids and the conversion of existing diesel-powered plants to renewable energy sources.
The de-dieselization program is expected to reduce fuel consumption by up to IDR 722.1 billion and reduce CO2 emissions by approximately 132 thousand tons per year. The program will also increase the renewable energy mix in the electricity sector, with a potential of 171 Gigawatt hours (Gwh) per year. Additionally, the program aims to provide reliable, cheap, and environmentally friendly electricity to remote communities, promoting economic growth and reducing the country’s reliance on imported fuels.
Indonesia’s dependence on diesel for power generation represents both a risk for ongoing supply chain logistics – while diesel generators are a convenient and affordable solution for remote locations, the fragile supply chain and limited local production of diesel can pose significant risks. Alternative energy sources, such as locally available renewable energy can reduce dependence on diesel and mitigate the potential supply chain risks.
