With its rapid growth, Indonesia faces a daunting challenge to upgrade its various critical infrastructures — from roads to airports to energy infrastructure. Yet the price the country will pay in failing to invest in its infrastructure is enormous.
Last week, once again, we saw Indonesia’s largest airport and main gateway crippled by a blackout caused by a breakdown in its electrical infrastructure. More than 100 flights and thousands of people were affected. While this particular occurrence was relatively brief and did not cause any casualties, incidents such as this damage investor confidence and the country’s image.
The country has historically lagged behind its neighbors in infrastructure investments. In 2011, Indonesia spent about 1.7 percent of its gross domestic product on infrastructure, compared to Malaysia’s 5.4 percent and Thailand’s 3.6 percent. Experts believe Indonesia needs to spend much more in infrastructure to continue its impressive growth streak.
With its inadequate energy infrastructure, Indonesia experiences blackouts relatively frequently. Several years ago, a massive power outage left more than 100 million people — approximately half of the country’s 240 million population — without electricity for hours.
The Electric Power Research Institute estimated that annual power outages cost the US economy about $150 billion per year. Extrapolating this for the size of the Indonesian economy — with a GDP of approximately $1 trillion compared to the US GDP of $15 trillion — power outages have the potential of costing the Indonesian economy of approximately $10 billion per year. This shows a clear need for a smart strategy to generate, distribute and manage the country’s energy resources to fuel Indonesia’s growing economy sustainably.
The country needs to take innovative approaches in the energy sector to answer the challenges of increasing energy demands, inadequate energy infrastructure, and the need to reduce greenhouse gas emissions. President Susilo Bambang Yudhoyono has set an ambitious plan to cut emissions by 26 percent by 2020, while at the same time setting an economic growth target of more than 6 percent.
A smart grid can help the country modernize its energy infrastructure by enabling enhanced energy efficiency, improved grid reliability and the integration of more renewable and distributed energy resources.
What is a smart grid exactly?
While there is no one definition of a smart grid, it is essentially the layering of intelligence across our whole energy value chain — from generation to transmission to distribution to the homes and buildings, and even to beyond the homes and buildings all the way to distributed energy resources such as smart appliances, solar panels, storage and electric vehicles. By layering this intelligence, the smart grid essentially creates a two-way communication between our energy supply and energy demand, which results in a more balanced and efficient system of energy supply and demand.
To improve grid reliability, a smart grid can help reduce both the number and duration of outages by quickly pinpointing the cause and in some cases, automatically restoring power quickly. A smart grid can also prevent massive blackouts by isolating an outage and ensuring that it does not cascade to other areas. Recently, some utilities in the eastern United States have found that their investments in smart grid technologies made a difference in the herculean efforts to restore power to millions of customers adversely affected by hurricane Sandy.
As a smart grid is just an implementation of technology, the country needs to have a smart energy strategy that embraces both current and future energy infrastructures. In some areas where the energy infrastructure is non-existent, the country has the potential to leapfrog to smart grids and renewable energy, instead of focusing on building traditional power systems. In other areas where the current energy infrastructure exists but needs upgrading, the country needs a cohesive strategy that up-levels the traditional infrastructure today while at the same time keeps an eye for the advanced needs of tomorrow.
Indonesia has the choice — and the opportunity — to overcome many of its energy challenges, such as poor infrastructure, low reliability, supply/demand imbalance, and environmental impacts, through the embrace of a cohesive smart energy strategy for the creation of a smarter grid. With the right choice, Indonesia has the golden opportunity to serve as a role model, not only for Southeast Asia, but also the world.
Sonita Lontoh is an executive at a leading Silicon Valley smart grid company. She is the recipient of the Indonesian Diaspora award and has been named a Global Emerging Leader under 40.