CASE STUDY

Grid Unlocked: The Mechanics of Cross-Border Electricity Sharing

In many areas, trading power across borders is cleaner and more efficient than developing new power plants. Photo credit: ADB.
In many areas, trading power across borders is cleaner and more efficient than developing new power plants. Photo credit: ADB.

An electricity trading project between Indonesia and Malaysia is lowering power costs, raising revenue and cutting greenhouse gas emissions.

Overview

In West Kalimantan, Indonesia, oil fuels all power generation, negatively affecting both the environment and the economy. Because oil is the most costly fuel for power generation, its dominant use in West Kalimantan has resulted in high electricity costs. The average cost of power generation is more than $0.25 per kilowatt-hour (kWh).

This high cost presents a major obstacle to the ability of P.T. Perusahaan Listrik Negara (PLN), the state electric utility, to invest in new assets and maintain current assets, hampering electricity supply and economic growth, especially since West Kalimantan urgently needs additional electricity to meet increasing demand, which will reach 600 megawatts (MW) by 2020, from about 200 MW in 2012. Even if the country decides to develop its abundant coal resources, it will take time because development of this resource will require about 7-10 years.

Overdependence on oil exposes the country to price shocks. When global oil prices soared in 2007 and 2008, oil-based power generation became too costly for Indonesia. The government had shut down some of its oil-fired power plants, leading to rotating blackouts nationwide. Oil dependency also has environmental repercussions because fossil fuels emit greenhouse gases, contributing to climate change and harming health.

West Kalimantan explored cross-border power supply as a way to meet rising demand for electricity at a lower cost. To extend energy supply to the West Kalimantan grid, PLN aims to import 230 MW of low-cost (about $0.10 per kWh) hydropower-generated electricity from Sarawak, Malaysia, to the West Kalimantan grid. Through financing from the Asian Development Bank (ADB), the West Kalimantan Power Grid Strengthening Project helped Indonesia build a transmission line from Bengkayang, West Kalimantan to the Malaysian border. Malaysia will finance transmission line extension from the border to Mambong, Sarawak.

  • Geographical location: West Kalimantan
  • Type of energy project: Cross-border power trade-Regional interconnection


Project snapshot

  • August 2013: Loan approval date
  • January 2016: Project completion date
  • US$ 49.5 million: Loan amount

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Meet our expert

  • Sohail Hasnie   
    Principal Energy Specialist, Central and West Asia Department, Asian Development Bank

    Sohail is a firm believer that the solution to climate change lies in new technology, and has applied new technology to many ADB projects as an energy specialist since 2001 in Afghanistan, Cambodia, PRC, India, Indonesia, Malaysia and Mongolia, among other Asian countries. With an academic background in engineering, business and entrepreneurship, before joining ADB he worked on wholesale electricity market design, pricing regulation, energy efficiency and demand management for the state power utility and independent regulator in Melbourne, Australia.

   Indonesia, Malaysia, Energy, Regional cooperation and integration
   Last updated: February 2017

 




Disclaimer

The views expressed in these articles are those of the authors and do not necessarily reflect the views of the Asian Development Bank, its management, its Board of Directors, or its members.




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