Solar PV-based Renewable Energy Mini-grids for Small Islands or Remote Areas Electrification in Indonesia

Mini-grids are electricity systems that combine electricity generation and distribution at the small-scale, usually below 10 MW. In Indonesia, 99% of mini-grids in small islands or remote areas use diesel gensets (DG) as their source of power generation. In the mini-grids, coal power plants are simply not feasible. Moreover, gas turbine power plants such as small-scale LNG power plants, are complicated and may not even be the lowest cost due to the logistics. Since the Indonesian government through PT Perusahaan Listrik Negara (PLN), the only national electricity utility company, has to provide affordable electricity to all cities and villages, PLN many times has no choice but to build DG in isolated mini-grids. It’s fast, reliable and getting things done, although it’s very expensive and very polluting.
In 2016, electrification ratio in Indonesia is 88%. Accordingly, it means that around 9,600 villages of total around 80,000 villages don’t have access to an electricity grid. Almost all of those non-electrified villages are in small islands or remote areas. Ordinarily there are two ways to electrify those villages. One way is that PLN extends transmission from the nearest electricity grid to the villages. The other way is that someone develops mini-grids for the villages. That someone could be the PLN itself, or private sectors (off-grid developers and investors). However, the main difficulty for private sectors to do an off-grid power generation business for villages in Indonesia is that for social reasons PLN always sells the electricity at a same price anywhere in Indonesia, which is now around 11 cents USD/kWh. Consequently, because of its monopoly position, in a grid where Levelized Cost of Electricity (LCoE) is low- 5 cents USD/kWh for example- PLN gets many profits. However, in mini-grids where LCoE is high- 15 cents USD/kWh for example- PLN absorbs the losses.
Accordingly, this unique situation makes off-grid developers and investors cannot compete with PLN in developing mini-grids. How can private sectors absorb losses per kWh they generate? To mitigate the losses, if a company sells electricity in a village at a high price- at 20 cents USD/kWh for example- then it becomes problematic when other villages around it can buy from PLN for only 11 cents USD/kWh. Depending on grants to absorb the losses is not a repeatable business practice.
As mentioned above, even though DG is expensive and polluting, it’s hard to replace them with coal or gas turbine power plants in mini-grids. So how do we mitigate this high cost and high pollution level of DG in mini-grids? The answer is that we have to make the new minigrids, and turn the existing ones into, solar PV-based renewable energy mini-grids. Nevertheless, if we’re fortunate enough, in the mini-grids we may found consistently high wind speeds, suitable rivers or plenty affordable feed stocks, so we can develop wind turbine, mini-hydro and/or biomass power plants even though the development and construction time takes a few years. However, in the case of those renewables are not available, fortunately in Indonesia we can almost always encounter a coordinate inside the mini-grids which has a Global Horizontal Irradiance more than 1,600 kWh/m2/year, which is adequate to make a viable solar PV plant. Moreover, the construction time is fast, less than a year.
Let’s look at the real LCoE of a 100% DG mini-grid, and then we examine it with a Solar PV-based mini-grid. For example, in Sabu Island, Nusa Tenggara Timur, the DG-based mini-grid minimum daytime load is 800 kW, nighttime peak is around 1.2 MW. The DG produces around 21.6MWh per day. For example, at Specific Fuel Consumption (SFC) 0.28 and 60 cents USD diesel cost, the LCOE is 18.8 cents USD/kWh (including the O&M). In a year the DG consumes 2,209 kilo liter which costs USD 1,32 million, and produces 5,929 metric tons CO2eq emissions. Ordinarily, we can only install 160 kWp PV plant without disrupting the stability of the grid. But with a hybrid technology we can install 1.5 MWp PV plant while maintaining the grid stability (i.e. frequency and voltage quality). Savings in a year- compared with the 100% DG- is 700 kilo liter, USD 420,000.- and 1,879 metric tons CO2eq emissions. Since the cost of the 1.5 MWp PV plant- including the hybrid technology- is less then USD 2.2 million and the PV system works for 25 years, we see no reason why we shouldn’t develop the PV plant in the Sabu Island mini-grid.
In the next 3 to 5 years after the installation, because of the decreasing cost of the PV system, we can increase the PV system (including the BESS) in the mini-grid so the energy from the PV covers 70-80% of the total load. During that years, we may have develop other renewable energy technologies such as wind turbine, mini-hydro, and/or biomass to cover the remaining 20-30% of the load in the mini-grid. Consequently, the DG will just become a backup system, or we can just simply remove it. The DG-based mini-grid will become a solar PV-based renewable energy mini-grid. With a Power Purchase Agreement with PLN which comply with the latest Energy and Natural Resources Minister Regulation number 50/2017, financing the capex of the renewable energy wouldn’t be a problem. Moreover, this kind of mini-grids development is repeatable and even scalable.
Notwithstanding, more than 300 isolated DG mini-grids exist in Indonesia, and we need at least 200 new mini-grids to electrify the non-electrified villages. These 500 mini-grids shouldn’t be DG mini-grids, they should be solar PV-based renewable energy mini-grids. Inside the mini-grids, we should install Internet of Things (IoT) on the Energy Storage Systems, each PV plants and other power generators, each substations, and biggest load points. With all these IoTs connecting to a Network Operation Center, PLN has the infrastructure to make these grids into smart renewable energy mini-grids. Today, the technology is economically feasible and the political will of the Indonesian government, including the PLN, is here already.

Presented by Aria Sulhan Witoelar, Founder and CEO of PT Arya Watala Capital (Watala) at UNFCCC COP23 in Bonn, Germany, Nov.17th 2017.
Watala is developing utility-scale solar PV-hybrids as Independent Power Producers in 12 mini-grids in the Nusa Tenggara islands of Alor, Timor, Rote, Sabu, Adonara, Flores, Sumba, and Sumbawa with an aggregate of 20 MWp.