Energy Efficiency in Industry

This article provides a short teaser to companies in the fields of production and development of energy-efficient technology, energy infrastructure, energy management systems and energy evaluation systems for the application of energy efficiency technologies and services in the Indonesian industry.  

Indonesia, the fourth largest country in the world with around 275 million inhabitants, has been experiencing continuous economic growth of around 5% per year for several years. Thanks to this positive economic development, the poverty rate has been more than halved within the last 20 years. With a GDP of 1,003 billion euros (2019), Indonesia is already one of the 20 largest economies in the world. By 2030, Indonesia is even expected to rise to seventh place. At the end of 2021, the country ‘s economy grew 3.7% as it recovers from the effects of the COVID-19 pandemic. 


This generally positive economic development goes hand in hand with its continuously increasing energy demand, especially in the industrial sector. Energy efficiency technology is not yet very widespread. This results in great savings potential, which the Indonesian Ministry of Energy (MoEMR) estimates at 10-30% for the key industries of chemicals, agricultural products, steel, textiles, pulp and paper and cement production. Overall, a wide range of energy efficiency technology is required. This includes automation and control technology, lighting, air conditioning and refrigeration technology, motors and heat management. 


In addition to the generally positive overall situation, there are some aspects that make it difficult to sell energy efficiency technology. This includes Low awareness of the benefits and necessity of energy efficiency technology among Indonesia’s industries. In addition, it is unclear to what extent the COVID-19 pandemic will affect the willingness of Indonesian companies to invest. 





Primary energy generation Indonesia by 2050 (in Mtoe)


Source: (Center for Energy Resources Development, Agency for the Assessment and Application of Technology (BPPT), 2015) 


In 2015, the Indonesian Agency for the Evaluation and Application of Technology (BPPT) forecast an enormous increase in Indonesian primary energy generation over the next few decades. According to this, production would quadruple to 1,009 Mtoe by 2050. The forecast value for 2020 was already achieved in 2017.26 


Forecast energy consumption of key Indonesian industries by 2050


Depending on the industry, the energy requirement is very different. The key industries were food (5.4 Mtoe), paper (3.3 Mtoe), metal (9.4 Mtoe), cement (10.4 Mtoe), fertilizer (4.9 Mtoe) and ceramics (1.4%) responsible for 34.8 Mtoe alone in 2018. That corresponds to more than four fifths of the total energy consumption in industry. With a growth scenario of 5%, significant increases would be expected by 2050. 


Energy-saving potential in Indonesia's industry


There is a significant energy saving potential in every sector. The textile industry in particular stands out with a minimum savings potential of 20% and a maximum savings potential of 35%. Even the food industry, with the lowest total of 13% (minimum savings potential) to 15% (maximum savings potential), offers great opportunities for reducing energy consumption. 




Despite the generally very positive overall situation for energy efficiency technology in Indonesia, there are a number of factors that have a negative impact on market opportunities. These include the existing Legal Framework, wherein some of the market participants expressed their wish in the direction of the government for improved regulation of the energy sector as a whole and for energy service providers in particular. This is especially true for Government Regulation No. 70/2009, which is the most important regulation in the field of energy efficiency but is also one that is criticized for not creating enough incentives and has also been considered, on occasion, as posing a hindrance. 


The same goes for MoEMR Minister Regulation No. 14/2012. The regulation stipulates that corporations with a consumption of more than 6,000 toe per year must introduce an energy management system. For some market participants, this regulation does not go far enough. In this regard, an expansion of the regulation is suggested so that companies with lower energy consumption are also obliged to use an energy management system. In line with this concern, the government plans to lower the reference value from 6,000 toe to 4,000 toe in 2021 


Another factor is the domination of state electricity supplier (PT. Perusahaan Listrik Negara / PLN) in the Indonesian market with a share of 70% of the total electricity generation. Despite higher energy prices in the past, the state electricity supplier PLN naturally has an interest in generating and selling as much electricity as possible. For this reason, there is a conflict of objectives on the part of the government between promoting energy efficiency and increasing the sales of the state-owned company and thus increasing state revenues. 


One recuring concern is the perceived prevalence of corruption and nepotism within the Indonesian economic system. Unfortunately, as in many other countries in the world, corruption is still widespread in Indonesia. According to Transparency International's corruption perception index, Indonesia ranks 85th out of 180 participating countries worldwide in 2019. It should be noted however that Indonesia was still in 111th place in 2009. In other words, Indonesia has nevertheless made remarkable progress in the fight against corruption in recent years. 


Lastly, many Indonesian companies are simply not very aware of the energy efficiency sector. Energy saving measures are perceived as an environmental measure and not as a means of reducing costs. Indonesian companies are often initially skeptical about new technologies, especially when these technologies are not yet widely used by other Indonesian companies. However, these concerns can often be overcome through personal contact and persuasion. 


Other factors that do not have a positive effect on market opportunities are regular exchange rate fluctuations in the Indonesian currency (Indonesian rupiah) and unattractive conditions from Indonesian banks for the financing of energy efficiency projects. 




With a GDP of 1,003 billion euros (2019), Indonesia is now the sixteenth largest economy in the world. The current global economic cuts brought about by COVID-19 is not expected to affect Indonesia as hard as other countries. As of the second quarter of 2022, Indonesia in fact seems to be recovering well from the pandemic, posting a growth of 5.44% year-on-year. 


According to the McKinsey Global Institute, the Indonesian economy should show constant growth of between 5 and 6% per year up to 2030 and move into seventh place in the ranking of the largest economies. If these forecasts come true, the largest country in Southeast Asia would also overtake Germany. Only China, the USA, India, Japan, Brazil and Russia would then position themselves ahead of Indonesia in this ranking. 


The positive economic development of the last few years can be seen, among other things, to a prosperous industrial sector. Despite the steadily increasing energy demand associated with the economic rise, the country’s industries had hardly taken any energy-saving measures, which is why there is a great need for energy efficiency technology. The Indonesian Ministry of Energy forecasts for the industries of petrochemical (17%), food (15%), steel (32%), textiles (35%), pulp and paper (20%) and cement (22%) considerable maximum savings potential. 


Indonesia offers excellent opportunities for the sale of energy efficiency technology to industrial companies due to the size of the Indonesian economy and the considerable savings potential. The economic strength and potential for savings more than outweigh the risks and disadvantages of the Indonesian market.



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