Is sustainability challenging in Indonesia’s energy provision? Fuel type vs. externalities in electricity cost analysis

Main Article Content

Novena Damar Asri Purnomo Yusgiantoro


This study aims to reveal the challenging sustainability within Indonesia’s energy provision by studying the electricity generating cost (GC) formation, externalities’ effect, and current Indonesia’s electricity and budget condition. In studying GC formation, two variables thought to have remarkable influence are fuel price (represented by Fuel Cost/FC) and operating time, which indicates the power plant’s type (represented by Capacity Factor/CF). The regression results indicate that CF has a greater impact on GC than FC; GC increases as FC increases but decreases as CF increases. FC contributes by 10%-86% of GC, subject to fuel prices and CF. Since coal is the cheapest, GCCoal < GCGas < GCDiesel, but internalizing the externalities triples the GCCoal and doubles the GCDiesel. However, its internalization is challenging as it affects the producers’ and consumers’ welfare. Sustainable energy provision is challenging due to two factors. First, there is a dilemma between applying sustainability principles and providing energy immediately. The fastest route, which is the lowest price orientation, is preferable, indicated by coal domination in the electricity mix. Second, sustainability is not the priority yet, indicated by the environment programs is outside the top ten priority development programs.

Article Details



Afful-Dadzie, A., Afful-Dadzie, E., Awudu, I., & Banuro, J. K. (2017). Power generation capacity planning under budget constraint in developing countries. Applied Energy, 188, 71–82.
Andersen, F. M., Baldini, M., Hansen, L. G., & Jensen, C. L. (2017). Households’ hourly electricity consumption and peak demand in Denmark. Applied Energy, 208(September), 607–619.
Asri, N. D., & Yusgiantoro, P. (2020). The energy provision dilemma of coal versus wind from the economic, environmental, and social perspective within the energy security framework. Defense Journal, 6(3), 310–327.
Asri, N. D., & Yusgiantoro, P. (2021a). A Revisit of the Energy-Economy-Environment Nexus with Multi-regression. International Journal on Advanced Science, Engineering and Information Technology.
Asri, N. D., & Yusgiantoro, P. (2021b). Investigating a hampered NRE utilization in Kaltim’s energy system: Is there an energy policy with a syndrome of the energy-abundant area? International Journal of Renewable Energy Development, 10(4), 653–666.
Bartnik, R., Hnydiuk-stefan, A., & Buryn, Z. (2018). Analysis of the impact of technical and economic parameters on the specific cost of electricity production. Energy, 147, 965–979.
British Petroleum. (2017). BP statistical review of world energy 2017 (Issue June).
Chatzimouratidis, A. I., & Pilavachi, P. A. (2008). Multicriteria evaluation of power plants impact on the living standard using the analytic hierarchy process. Energy Policy, 36(x), 1074–1089.
Di Valdalbero, R., & Kovács, T. G. (2004). Energy the real cost. IEE Power Engineer, 23–25.
Ding, H., He, M., & Deng, C. (2014). Lifecycle approach to assessing environmental friendly product project with internalizing environmental externality. Journal of Cleaner Production, 66(April 1995), 128–138.
Dutu, R. (2016). Challenges and policies in Indonesia’s energy sector. Energy Policy, 98, 513–519.
Ekholm, T., Ghoddusi, H., Krey, V., & Riahi, K. (2013). The effect of financial constraints on energy-climate scenarios. Energy Policy, 59, 562–572.
Fahrioglu, M. (2016). Effect of demand management on regulated and deregulated electricity sectors. Energy Policy, 90, 115–120.
Feretic, D., & Tomsic, Z. (2005). Probabilistic analysis of electrical energy costs comparing: production costs for gas, coal and nuclear power plants. Energy Policy, 33, 5–13.
Ghimire, L. P., & Kim, Y. (2018). An analysis on barriers to renewable energy development in the context of Nepal using AHP. Renewable Energy, 129, 446–456.
Gómez-navarro, T., & Ribó-pérez, D. (2018). Assessing the obstacles to the participation of renewable energy sources in the electricity market of Colombia. Renewable and Sustainable Energy Reviews, 90(March), 131–141.
Harun, N. (2011). Teaching Material: Design of Electricity Generation.
Jayanti, R. K., & Gowda, M. V. R. (2014). Sustainability dilemmas in emerging economies. IIMB Management Review, 26(2), 130–142.
Jeong, S., Kim, K., Park, J., Lim, D., & Lee, S. (2008). Economic comparison between coal-fired and liquefied natural gas combined cycle power plants considering carbon tax: Korean case. Energy, 33, 1320–1330.
Kadaffi, M. (2011). Teaching Material: The Characteristics of Electricity Load (No. 14).
Kennedy, S. F. (2018). Indonesia’s energy transition and its contradictions: Emerging geographies of energy and finance. Energy Research & Social Science, 41(June 2017), 230–237.
Knoope, M. M. J., Meerman, J. C., Ramírez, A., & Faaij, A. P. C. (2013). Future technological and economic performance of IGCC and FT production facilities with and without CO2 capture: Combining component based learning curve and bottom-up analysis. International Journal of Greenhouse Gas Control, 16, 287–310.
Krishnan C, M., & Gupta, S. (2018). Political pricing of electricity – Can it go with universal service provision? Energy Policy, 116(June 2017), 373–381.
Laporan Tahunan Greenpeace Asia Tenggara 2012. (n.d.).
Larsson, S., Fantazzini, D., Davidsson, S., Kullander, S., & Höök, M. (2014). Reviewing electricity production cost assessments. Renewable and Sustainable Energy Reviews, 30, 170–183.
Locatelli, G., & Mancini, M. (2010). Small-medium sized nuclear coal and gas power plant: A probabilistic analysis of their financial performances and influence of CO2 cost. Energy Policy, 38(10), 6360–6374.
Martosaputro, S., & Murti, N. (2014). Blowing the wind energy in Indonesia. Energy Procedia, 47, 273–282.
MEMR. (2012). General Plan of Electricity Draft 2012-2031.
MEMR. (2015). Kebijakan dan Strategi Pengembangan EBTKE untuk Memenuhi Target Kebijakan Energi Nasional. The Ministry of Energy and Mineral Resources.
MEMR. (2017). Handbook of Energy & Economic Statistics of Indonesia 2017.
Mignone, B. K., Alfstad, T., Bergman, A., Dubin, K., Duke, R., Friley, P., Martinez, A., Mowers, M., Palmer, K., Paul, A., Showalter, S., Steinberg, D., Woerman, M., & Wood, F. (2012). Cost-effectiveness and economic incidence of a clean energy standard. Economics of Energy and Environmental Policy, 1(3), 59–86.
NEA-OECD. (2003). Nuclear Electricity Generation: What Are the External Costs? In N. E. A. of OECD (Ed.), Nuclear Energy (NEA 4372). OECD Publications.
NEA-OECD. (2001). Externalities and Energy Policy: The Life Cycle Analysis Approach. In Nuclear Energy Agency of OECD (Ed.), Workshop Proceedings (Issue November, pp. 195–234). OECD Publications.
Newbery, D. (2011). Reforming competitive electricity markets to meet environmental targets (No. 1126; 1154, Issue August).
Palacios M., S., & Saavedra P., E. (2017). Alternative policies for the liberalization of retail electricity markets in Chile. Utilities Policy, 49, 72–92.
Park, K., Shin, D., & Yoon, E. S. (2011). The cost of energy analysis and energy planning for emerging, fossil fuel power plants based on the climate change scenarios. Energy, 36(5), 3606–3612.
Parry, I., Heine, D., Li, S., & Lis, E. (2014). How should different countries tax fuels to correct environmental externalities? Economics of Energy & Environmental Policy, 3(2), 1–17.
Partridge, I. (2018). Cost comparisons for wind and thermal power generation. Energy Policy, 112(September 2017), 272–279.
PT PLN. (2015). PLN Statistics 2015.
PT PLN. (2018). The Power Supply Business Plan of PT. PLN 2018-2027.
Rahman, F. (2012a). Teaching Material: The Economic Analysis of Power Plant.
Rahman, F. (2012b). Teaching Material: The Technology of Electric Power Generation.
Reddy, B. S. (2018). Economic dynamics and technology diffusion in indian power sector. Energy Policy, 120(April), 425–435.
Rewlay-ngoen, C., Papong, S., & Sampattagul, S. (2014). The NPP and social asset impacts of acidification from coal-fired power plant in Thailand. Energy Procedia, 52, 234–241.
Rodgers, M., Coit, D., Felder, F., & Carlton, A. (2019). Assessing the effects of power grid expansion on human health externalities. Socio-Economic Planning Sciences, 66(July 2018), 92–104.
Sakulniyomporn, S., Kubaha, K., & Chullabodhi, C. (2011). External costs of fossil electricity generation: Health-based assessment in Thailand. Renewable and Sustainable Energy Reviews, 15(8), 3470–3479.
Sayyaadi, H., & Sabzaligol, T. (2010). Comprehensive exergetic and economic comparison of PWR and hybrid fossil fuel-PWR power plants. Energy, 35(7), 2953–2964.
Sequeira, T. N., & Santos, M. S. (2018). Does country-risk influence electricity production worldwide? Journal of Policy Modeling, 40(4), 730–746.
Siddayao, C. M. (1992). Energy investments and environmental implications: Key policy issues in developing countries. Energy Policy, 20(3), 223–232.
Sundqvist, T. (2004). What causes the disparity of electricity externality estimates? Energy Policy, 32(15), 1753–1766.
Teng, F., Jotzo, F., & Wang, X. (2017). Interactions between market reform and a carbon price in China’s power sector. Economics of Energy and Environmental Policy, 6(2), 39–53.
The UN. (2020). The Sustainable Development Agenda.
Wikarsa, M. T. (2010). Studi analisis program percepatan 10.000 MW tahap I pada operasi sistem tenaga listrik Jawa Bali. Universitas Indonesia.
Yusgiantoro, P. (2000). Ekonomi Energi: Teori dan Praktik (1st ed.). Pustaka LP3ES.