Reducing Economic Disparity in the Outermost and Border Regions: Assessing Barriers and Opportunities in the Electricity Sector

¹ Doctoral Program of Innovation Economics, Technische Universität Berlin – Germany
² MBA Program of Energy Management, Technische Universität Berlin – Germany

^* corresponding author: dhandy@bsn.go.id

Abstract

Economic disparity is still a major problem threatening Indonesia’s future prosperity. Spatial inequality between rural and urban areas remain to exist and is driven by unequal access to and unaffordable cost of the traditional electricity infrastructures. The national electrification ratio reached 91.16 % in 2016. This paper evaluates the feasibility of reforming existing regulations for Indonesia's electricity sector in its light to reduce economic disparities between-regions and intra- regions in Indonesia. A systematic review of the literature on the publications and research reports is used to provide inputs for revising the regulations of the electricity sector to address more focused mission-oriented objectives. Empirical models are discussed and established to predict the cost-saving from the reduction of CO₂ emission by applying the technological solutions for renewable energy and energy efficiency. This study finds a cost-saving of Rp. 135 trillion per 40.000 hours-use for the whole electricity consumers in Indonesia that can be converted into financial instruments to support the development of electricity infrastructure in the disadvantaged regions. In the end, the study concludes that there is a clear financial benefit, in the form of opportunity cost, for reforming narration of the electricity policy and further transforming the institutional arrangement.