IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2022-03-8.html
   My bibliography  Save this article

Local Content Requirements Policy in Indonesia s Power Plant Development

Author

Listed:
  • Rislima Febriani Sitompul

    (National Research and Innovation Agency, Jakarta, Indonesia.)

  • Mesnan Silalahi

    (National Research and Innovation Agency, Jakarta, Indonesia.)

  • Ophirtus Sumule

    (Hasanuddin University, Makassar, Indonesia)

  • Friga Siera Ragina

    (Indonesian Institute for Energy Economics, Jakarta, Indonesia.)

Abstract

One of the elements that can increase national resilience is the strength of the domestic industrial sector. A proven and reliable electricity supply is very important in supporting the operations of the industrial sector. Accordingly, a reliable electricity supply is an important and strategic element in the realization of national security. To reduce dependency on imported materials, the Government of Indonesia (GOI) has imposed Local Content Requirements (LCR) mechanism in the electricity sector, especially for the major components of power plants, namely steam turbines, and generators. The ambitious electricity infrastructure development program which dominantly relies on the Coal-Fired Power Plant (CFPP) requires reliable electrical components that support upstream industries which face problems if LCR should be applied. The objective of this study is to analyze the opportunity costs of replacing the required import of steam turbines and generators, as well as to provide recommendations on how LCR would be best be applied in Indonesia, despite its controversies to support the economic development of a country. The result of the study shows the total value of opportunity cost that GOI is likely to gain from imported steam turbines and generators cost for CFPP is ranged at USD 2,896,152,000 - 7,362,750,000 throughout 2019-2028.

Suggested Citation

  • Rislima Febriani Sitompul & Mesnan Silalahi & Ophirtus Sumule & Friga Siera Ragina, 2022. "Local Content Requirements Policy in Indonesia s Power Plant Development," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 66-76, May.
    • Handle: RePEc:eco:journ2:2022-03-8
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijeep/article/download/12935/6738
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijeep/article/view/12935
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Thomas B. Johansson & Nebojsa Nakicenovic, 2012. "The Global Energy Assessment," Review of Environment, Energy and Economics - Re3, Fondazione Eni Enrico Mattei, October.
    2. Yoo, Seung-Hoon & Kim, Yeonbae, 2006. "Electricity generation and economic growth in Indonesia," Energy, Elsevier, vol. 31(14), pages 2890-2899.
    3. Poncian, Japhace & Jose, Jim, 2019. "Resource governance and community participation: Making hydrocarbon extraction work for Tanzania," Resources Policy, Elsevier, vol. 62(C), pages 84-93.
    4. Pablo David Necoechea-Porras & Asunción López & Juan Carlos Salazar-Elena, 2021. "Deregulation in the Energy Sector and Its Economic Effects on the Power Sector: A Literature Review," Sustainability, MDPI, vol. 13(6), pages 1-23, March.
    5. Burke, Paul J. & Stern, David I. & Bruns, Stephan B., 2018. "The Impact of Electricity on Economic Development: A Macroeconomic Perspective," International Review of Environmental and Resource Economics, now publishers, vol. 12(1), pages 85-127, November.
    6. Susan Stone & James Messent & Dorothee Flaig, 2015. "Emerging Policy Issues: Localisation Barriers to Trade," OECD Trade Policy Papers 180, OECD Publishing.
    7. Benedict Probst & Vasilios Anatolitis & Andreas Kontoleon & Laura Díaz Anadón, 2020. "The short-term costs of local content requirements in the Indian solar auctions," Nature Energy, Nature, vol. 5(11), pages 842-850, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andreas Baur & Clemens Fuest & David Gstrein & Philipp Heil & Niklas Potrafke & Aurel Rochell, 2023. "The Impact of the U.S. Inflation Reduction Act (IRA) on the German Economy," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 137.
    2. Rislima Febriani Sitompul & Endri Endri & Sawarni Hasibuan & Choesnul Jaqin & Arum Indrasari & Lia Putriyana, 2022. "Policy Challenges of Indonesia s Local Content Requirements on Power Generation and Turbine Production Capability," International Journal of Energy Economics and Policy, Econjournals, vol. 12(1), pages 225-235.
    3. Omri, Anis, 2014. "An international literature survey on energy-economic growth nexus: Evidence from country-specific studies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 951-959.
    4. Yiming He & Thomas M. Fullerton, 2020. "The economic analysis of instrument variables estimation in dynamic optimal models with an application to the water consumption," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(9), pages 413-423.
    5. Fleck, Ann-Katrin & Anatolitis, Vasilios, 2023. "Achieving the objectives of renewable energy policy – Insights from renewable energy auction design in Europe," Energy Policy, Elsevier, vol. 173(C).
    6. Dakpogan, Arnaud & Smit, Eon, 2018. "The effect of electricity losses on GDP in Benin," MPRA Paper 89545, University Library of Munich, Germany.
    7. Ondraczek, Janosch, 2014. "Are we there yet? Improving solar PV economics and power planning in developing countries: The case of Kenya," Renewable and Sustainable Energy Reviews, Elsevier, vol. 30(C), pages 604-615.
    8. Mukisa, Nicholas & Zamora, Ramon & Lie, Tek Tjing, 2020. "Assessment of community sustainable livelihoods capitals for the implementation of alternative energy technologies in Uganda – Africa," Renewable Energy, Elsevier, vol. 160(C), pages 886-902.
    9. Yuksel BAYRAKTAR, & Taha EGRI, & Furkan YILDIZ, 2016. "A Causal Relationship Between Oil Prices Current Account Deficit, And Economic Growth: An Empirical Analysis From Fragile Five Countries," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 5(Special I), pages 1-3, august.
    10. Wesseh, Presley K. & Lin, Boqiang, 2016. "Can African countries efficiently build their economies on renewable energy?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 161-173.
    11. Shahbaz, Muhammad & Mutascu, Mihai & Tiwari, Aviral Kumar, 2012. "Revisiting the Relationship between Electricity Consumption, Capital and Economic Growth: Cointegration and Causality Analysis in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 97-120, September.
    12. Simone Di Leo & Marta Chicca & Cinzia Daraio & Andrea Guerrini & Stefano Scarcella, 2022. "A Framework for the Analysis of the Sustainability of the Energy Retail Market," Sustainability, MDPI, vol. 14(12), pages 1-28, June.
    13. Muhammad Shahbaz & Mete Feridun, 2012. "Electricity consumption and economic growth empirical evidence from Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(5), pages 1583-1599, August.
    14. Holmatov, B. & Hoekstra, A.Y. & Krol, M.S., 2019. "Land, water and carbon footprints of circular bioenergy production systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 111(C), pages 224-235.
    15. Fei Teng & Frank Jotzo, 2014. "Reaping the Economic Benefits of Decarbonization for China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(5), pages 37-54, September.
    16. Jeuland, Marc & Fetter, T. Robert & Li, Yating & Pattanayak, Subhrendu K. & Usmani, Faraz & Bluffstone, Randall A. & Chávez, Carlos & Girardeau, Hannah & Hassen, Sied & Jagger, Pamela & Jaime, Mónica , 2021. "Is energy the golden thread? A systematic review of the impacts of modern and traditional energy use in low- and middle-income countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 135(C).
    17. Brand-Correa, Lina I. & Steinberger, Julia K., 2017. "A Framework for Decoupling Human Need Satisfaction From Energy Use," Ecological Economics, Elsevier, vol. 141(C), pages 43-52.
    18. Pérez, Claudia & Claveria, Oscar, 2020. "Natural resources and human development: Evidence from mineral-dependent African countries using exploratory graphical analysis," Resources Policy, Elsevier, vol. 65(C).
    19. Magnani, Natalia & Vaona, Andrea, 2013. "Regional spillover effects of renewable energy generation in Italy," Energy Policy, Elsevier, vol. 56(C), pages 663-671.
    20. Poncian, Japhace & Jose, Jim, 2019. "National resource ownership and community engagement in Tanzania's natural gas governance," Energy Policy, Elsevier, vol. 133(C).

    More about this item

    Keywords

    Coal-Fired Power Plant; Electricity Development; Local Content Requirements; Opportunity Costs; Power Plant Development; Steam Turbine and Generator;
    All these keywords.

    JEL classification:

    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • O39 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Other
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2022-03-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.