Sumatra Blackouts Prompt Call for National Electricity System Reform

Indonesia's electricity market model needs a significant overhaul to effectively support the energy transition and bolster the reliability of the national power system, according to the Institute for Essential Services Reform (IESR).

The IESR argues that the current market structure, dominated by a single buyer, must adapt to new challenges. These include the increasing integration of renewable energy sources like solar and wind, and the heightened risk of system disruptions due to climate change. The institute emphasizes that reforms should not only focus on strengthening transmission and distribution networks but also on improving market governance to create a more flexible system capable of accommodating diverse energy sources.

"If we want to build a more flexible and reliable electricity system, the discussion should not only be about the electricity grid but also about how the electricity market design can incentivize system flexibility," said Deon Arinaldo, Director of Energy System Transformation at IESR, during a webinar. He explained that the growing use of solar and wind power necessitates market mechanisms that support energy storage technologies, flexible generation, and system balancing services to ensure a stable power supply.

IESR points to international examples where countries have adjusted their electricity market designs to align with rising renewable energy integration. They recommend that Indonesia begin similar reforms, alongside updating technical regulations like the Grid Code and Distribution Code. This, they believe, will provide business certainty and enhance the system's ability to anticipate changes in power generation and demand. The recent large-scale blackouts in Sumatra serve as a stark reminder of the urgent need for these reforms to build a more resilient grid capable of withstanding extreme weather and facilitating a clean energy transition.

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If we want to build a more flexible and reliable electricity system, the discussion should not only be about the electricity grid but also about how the electricity market design can incentivize system flexibility.