Participants in this Roundtable agree that community-based energy approaches like solar and microhydro are often the most appropriate choices for improving the lives of poor people, especially women, in rural communities. However, I would like to examine the ways in which energy policies of a different sort have failed to serve the interests of Indonesia's rural residents and ultimately its government.
Starting with Indonesia's oil boom in the 1970s, the government's approach to rural electrification was to supply generators running on diesel fuel to sub districts around the country. But the government was forced to subsidize oil prices, and the policy proved a burden. Worse, considering that a major factor in poverty is often a community's inability to benefit from resources that are locally available, communities became heavily dependent on fuel provided from elsewhere.
Then, in 1992, the government partially privatized the power sector by allowing the establishment of independent power plants (IPPs) for electricity generation. Multinational companies typically owned the IPPs in joint ventures with Indonesian firms. This became a major problem when the Asian Financial Crisis struck in 1997 and the rupiah suffered a sharp devaluation—the independent power plants had to be paid in US dollars for the electricity they produced, but Indonesians paid their power bills in local currency. The government was left to make up the difference.
Meanwhile, IPPs were only willing to expand their service to new areas if doing so brought a profit. That left the government still responsible for providing power to unprofitable places. The result was that many rural areas continued to lack electricity.
The government might have avoided all this if it had focused all along on establishing community-based supplies of electricity. Such an approach would also have reconnected communities with local resources, encouraged independence, supported economic activity, and empowered people.
A community-based energy source like microhydro provides villages good electricity service at an affordable price. It contributes to environmental conservation because it impresses on community members that preserving resources in their water catchment area secures electricity supply. It does not require long transmission lines. It is for all these reasons that IBEKA, the nongovernmental organization of which I am executive director, has since the 1990s concentrated on introducing microhydro projects to rural areas.
But microhydro is successful only if communities are adequately prepared to manage an electricity system once it is in place. Fortunately, microhydro is a user-friendly technology that community members can understand easily and, with some technical and managerial training, oversee on their own. From a technical point of view, communities must have the ability to operate and maintain their generation and transmission equipment. From a managerial point of view, community members must form a cooperative and learn to handle issues such as collecting payments from customers and putting money aside for maintenance. If money is left over, cooperatives can devote funds to pursuits that generate further income. This often comes in the form of women processing agricultural products—something they are only able to do because electricity is available in the first place.