Evaluation of Power Wheeling Proposed Concept in
Indonesia
Abdur Rouf Marchel. P. Rumlaklak
Engineering Dept. Master of Management Student
PT PLN Enjiniring Universitas Trisakti
Jakarta, Indonesia Jakarta, Indonesia
abdur.rouf@plne.co.id rumlaklak_marchel@yahoo.com
Abstract—The power wheeling concept is an
approach to collectively utilize the electricity
network through an open access to electricity
transmission and distribution networks. Nowadays,
there are so many pros and cons about this concept
especially between stated owned utility company
(PLN) and Private Sector. In the other hand, the
government has target to achieve more and more
renewable energy penetration which is become
very challenges to accomplished. Not only the
double, but also multiple increasing of RE
implementation specifically in energy sector.
However, the limitation of the PLN to invest and
build their own generation appeared as big
obstacles to do it. It can be denied that private
sector participation is one of success key. The
optimum solution between power capacity that can
be transmitted, and distance of transmission line
become two main considerations to determine the
power wheeling tariff. By simulating these two, it
can be obtained that the power wheeling
economically viable to implement in Indonesia
which has steepness system more than 150 MW
and distance in range 50-300 km. This concept has
advantages for private sector to reduce to cost
without build the transmission lines and can supply
their own demand, while in PLN side, it can support
renewable energy penetration, additional income by
rent the transmission line to private but it still under
control because the maximum power has been
limited.
Keywords — Power Wheeling, economically
viable, renewable energy penetration
I. INTRODUCTION
Indonesia’s energy mix in year 2020 was still largely
comprised of coal and crude oil & products, which made
up more than half of total mix. Lack of high penetration
of renewable energy in national energy mix is primarily
due to high cost associated with exploration, licensing,
feasibility studies and commissioning of projects in
renewables. Geothermal for example, costs up to 15 US
cent per kwh, significant difference with coal which
costs only half of it. Other form of renewables such as
solar PV, hydropower or wind are also facing their own
challenges to compete with fossil fuel. Constantly
Deky Angora Leo
Planning Dept.
PT PLN (Persero) UID Suluttenggo
Manado, Indonesia
deky.leo@pln.co.id
changing regulation is the main challenge for
renewables to play a bigger role in Indonesia energy
sector. The regulatory framework for renewables is
currently under deliberation process in the parliament,
however the result is most likely remaining the status
quo of the energy sector largely controlled by the
government through PLN and transition to renewables
will be most likely to take longer than targeted
timeframe in 2060.
Issue of national sovereignty should not be
misinterpreted and misused in energy sector, as many
parties in domestic politics use the energy security
argument to indirectly push out private sector players,
or make unattractive to attract major investment.
Argument of national sovereignty is irrelevant as more
strategic industries such as rare earth minerals mining,
oil & gas, water, are all liberalized. These industries
have finite reserves, which will impact defence and
geopolitical aspects – aspects that contradict with
renewables, where there is virtually infinite resources
and minimum impact to defence and geopolitical
spectrums.
Gradually opening and liberalization of the energy
sector will create a more attractive energy ecosystem in
Indonesia, which in turn will attract investments
specifically in heavy industries such as steel, cement,
or hydrogen production – all need stable and massive
power supply. Currently there is gap of more than 1GW
excess power in Java Bali grid. This will soon become
deficit as government initiated the policy of coal-fired
power plants early retirement and economic activities
ramping up post-Covid19 pandemic.
The most commercially feasible and environmentally
viable way of initial step into full electricity market
liberalization is enabling power wheeling concept as a
public private partnership scheme. This scheme will
enable private company to setup agreement with PLN
to transmit electricity generated from independent
power producer, for its own consumption and potentially
to retail market soon.
With growing number of populations sustained by heavy
reliance on fossil fuel, the country’s capability to
gradually liberate the electricity market with active
involvement of renewables will create a more attractive
investment ecosystem for heavy industries with
minimum risk of pollution and environmental
degradation.
FIGURE 1. Indonesia Renewables Potential
(Mustaba Ari Suryoko, Directorate of VNRE, Indonesia MEMR)
II. SCOPES AND ISSUES
Scope of this project is limited to power wheeling pricing
mechanism between public and private entities, using
existing transmission line. The power generated by
private sector asset would be consumed internally by
the company itself (captive power). The issue on this
scheme is, the renewable energy power generation
plant owned by a certain private entity is located at a
considerable distance from its own manufacturing
facility. This situation creates unfavourable business
landscape because the company must create its own
transmission line to connect both points of power
generation and consumption.
Setting up and commissioning a new transmission line
configuration is challenging not only from cost
perspective, but more from permit/licensing aspects, if
the transmission line would be located on the natural
reserve, heritage designated zone, highly populated
and other special protected zones. Private company
utilizing existing PLN transmission line would be win-
win solution for both parties, as PLN will get revenue
from the wheeling tariff, while the private company
would transfer the cost of transmission line
establishment and O&M to PLN.
Main challenge of setting up this scheme is to first win
the buy-in from Indonesian government, firstly is the
support by Seventh Commission of Indonesian House
of Representatives/Dewan Perwakilan Rakyat (DPR),
overseeing energy, research, and technology.
Subsequently, the support from other key elements in
the government, particularly Directorate General of
New, Renewable Energy, and Energy Conservation
(EBTKE) of Ministry of Energy & Mineral Resources
(MEMR), Ministry of Industry, Ministry of Finance,
Coordinating Ministry of Economic Affairs, and
Coordinating Ministry of Maritime & Investment Affairs.
III. OBJECTIVES
There are two objectives of this project, one is tactical
and other of strategic objective. The tactical one is to
create opportunity for private sector to disentangle main
aspect of its business model from state-owned
electricity company PLN, except for usage of PLN
transmission line, hence the need to establish wheeling
pricing/tariff.
The strategic objective is to nudge the Indonesian
electricity market towards total privatization of electricity
market. To speed up transition to Net Zero Emission
(NZE) and 100% renewable energy mix in the national
energy, the Indonesia national electricity market cannot
be left to be monopolized by PLN only. Overreliance on
PLN to dictate, operate and regulate Indonesia
electricity market is not only unfavourable towards
industry competitiveness, it would also undermine the
effort to execute a rapid and smooth energy transition
to renewables.
To facilitate this transition to fully liberated national
electricity market, the ecosystem should be in place to
encourage private sector players, be it national or
international companies, to be able to see there is
strong business case to enter the sector. Most of
existing players in non-renewables consist of long-time
operators that keen to gradually switching to
renewables because of market and policy pressures to
reduce climate change impact. Should power wheeling
concept makes business case for both PLN and private
operator, this would trigger a chain reaction that can
spark further investigation into benefits of electricity
market liberalization.
On below figures there is information of countries
already implementing power wheeling including
Norway, Germany, UK, Australia, US and Japan. Japan
is recently liberated their market, as can be reviewed
from displayed timeline.

Figure 2. Power wheeling in other countries
((Data Collection Survey: JICA, TEPCO, Indonesia MEMR, PT PLN Aug
2016))
Figure 3. Timeline of Japan liberalization of electricity market
((Data Collection Survey: JICA, TEPCO, Indonesia MEMR, PT PLN Aug
2016))
IV. OUTPUTS
Expected deliverable of this project is wheeling tariff
pricing concept summary in PowerPoint format, for
review by private investor in heavy industry. The pricing
concept should be condensed to high level concept
only, with granular description to be left for later
development, depends on market development and
political landscape in Indonesia. Research for the best
pricing scheme and calculation for industrial usage, are
using various secondary data analysis from countries
already implementing power wheeling. In particularly
the focus are on South Africa and Japan proposed
concepts from electricity energy expert.
In essence, the power wheeling concept envisioned by
this project depicted on diagram on figure F.1, with
pricing options on following tables. The power is
produced and captured by private operator for its own
use. The location of power generation and consumption
(industrial complex) is different with significant distance
between the two, hence the need to wheel power using
existing PLN transmission line.
There are several pricing scheme options for wheeling,
depends on business model, distance, and regulatory
environment of certain country. However, being the
scheme has to be commercially feasible, the options for
deal between generator and off-taker are narrowed
down to four main types which are fixed, time-of-use
(TOU), load-based, and bid-based.
Furthermore, there are two approaches available in
market for wheeling tariff calculation formula, that is
applicable for deal between generator and wheeler.
Options are embedded-cost-based and marginal-cost-
based. The embedded-cost based consists of several
transmission cost allocation methods of postage stamp,
contract path, distance-based MW mile, power-flow-
based MW mile. While marginal-cost based consists of
short-run marginal, and long-run marginal cost. These
pricing methods need to be tested against various
scenarios to determine its applicability, commercial
advantage/shortcoming, and technical implications of
operations in Indonesia.
Benefits for each stakeholder involved in power
wheeling are described in table F.1, that in overall
shows there is strong business case and merits to
implement the concept in Indonesia.
Figure 4. Power wheeling operational concept for heavy industrial
usage (Own elaboration)

Figure 5. Power wheeling concept on a hypothetical location
(Own elaboration)
Figure 6. Comparison between IPP scheme and Wheeling Scheme
(Data Collection Survey: JICA, TEPCO, Indonesia MEMR, PT PLN
Aug 2016)
Table 1. Wheeling stakeholder merits table
(Data Collection Survey: JICA, TEPCO, Indonesia MEMR, PT PLN Aug 2016))
Table 2. Pricing scheme options, between Generator and Off-Taker
(SWOT breakdown)
Own deliberation based on:
(ESKOM Wheeling Factsheet https://www.eskom.co.za/distribution/wheeling/)
(Jurnal SUTET STT PLN Vol.7 No.1 Jan-Mei 2017)
Table 3. Tariff formula options for transmission cost allocation,
between Generator and Wheeler
Own deliberation based on:
(Data Collection Survey: JICA, TEPCO, Indonesia MEMR, PT PLN Aug 2016)
(Hiromu Hamada & Ryuichi Yokoyama (2011) Wheeling Charge Reflecting the
Transmission Conditions based on the Embedded Cost Method)
Table 4. Tariff formula options for transmission cost allocation,
between Generator and Wheeler (SWOT breakdown)
Own deliberation based on:
(Data Collection Survey: JICA, TEPCO, Indonesia MEMR, PT PLN Aug 2016)
(Hiromu Hamada & Ryuichi Yokoyama (2011) Wheeling Charge Reflecting the
Transmission Conditions based on the Embedded Cost Method)
Hiromu Hamada & Ryuichi Yokoyama on their paper on
Journal of International Council on Electrical
Engineering argued that embedded-cost-based
approach is more beneficial due to its ability to recover
invested cost. The in-depth investigation by modelling
the application test system using IEEE 30 Nodes Test
System found that distance-based MW-mile and power-
flow based MW-mile methods are commercially more
viable as they dictate wheeling pricing based on
distance and/or power flow, instead of flat pricing in
postage-stamp and contract-path method. A flat tariff
structure would undermine the transmission line owner
business case, as there is no difference of wheeling
tariff regardless of distance nor power flow.
Leshan Moodliar, Innocent EA Davidson, and Elutunji
Buraimoh on their paper in South African Association of
Municipal Electricity Utilities argue that industrial time of
use (ITOU) pricing scheme is a win-win solution for deal
between generator and off-taker involved in wheeling
concept for industrial sector, as the scheme adjust the
pricing according to live usage that fluctuate based on
time.
Therefore, by combining above findings, the author
argues the commercially ideal concept for power
wheeling in Indonesia is combination of industrial
Time of Use (ITOU) and Load Based pricing scheme
with Distance-based and Power-Flow based MW-
mile tariff calculation formula. However, the Time of
Use in some cases are not relevant, because the
electricity tariff in Indonesia regulated by Government in
fixed price in certain times.
Further technical investigation needs to be done by
parties involved in wheeling transaction to determine
which MW-mile tariff will be used, either distance-based
or power-flow based, or combination of both. Aim of this
project is to provide basic commercial framework for
both private operator and Indonesia state-owned
electricity company PLN to devise a workable plan in
power wheeling sector. Without sound commercial
outlook, the concept would be stillborn and exist only in
academic paper without real industry implementation.
Table 5. Industrial Time of Use (ITOU) tariff structure – South Africa
((Wheeling of Electricity: A Friend or Foe in the Energy Transition, AMEU,
Leshan Moodliar)
Figure 7. IEEE 30 Node Test System
(Hiromu Hamada & Ryuichi Yokoyama (2011) Wheeling Charge Reflecting the
Transmission Conditions based on the Embedded Cost Method)
Figure 8. Comparison of Wheeling Charge
(Hiromu Hamada & Ryuichi Yokoyama (2011) Wheeling Charge Reflecting the
Transmission Conditions based on the Embedded Cost Method)
V. STUDY CASE
To quantify the advantages between PLN as state-
owned utility company and private sector, it can be
simulated some model and optimizing by technical and
financial aspects.
Technically, PLN avoid the power wheeling because
lack of control on their assets to control supply and
demand. In this case, we can make the limitation of the
power which shall be delivered by using transmission
line that will rent by private company. For example, if
one system in PLN has steepness system 50 MW/Hz or
every loss of 50 MW generation will be decreasing the
frequency by 1 Hz. If we check on the Indonesian Grid
code, the system still in stability if the normal frequency
varies between 49,5 up to 50,5 Hz. So, the maximum
power wheeling can be transferred by rent the
transmission assets just 25 MW. Otherwise, if the
private sector wants to propose the power wheeling in
150 MW, they shall look on system with steepness
minimum 300 MW/Hz or above to avoid instability in the
system.
In this study case, we try to simulate several values of
power 50, 100, 150 and 300 MW Hydro Power Plant
(represent the renewable power plant) and variating
transmission distance from 50, 100, 150 until 300 km.
The summarize of the financial assumption can be seen
on the table below:
 No Description Unit Value Remark No Description Unit Value Remark
1
Net Plant
Capacity
50 or 100 or
150 or 300
MW assumption 17
Equity
Portion
20 % assumption Tarif Structure (Rp/kWh)
Capacity Loan
2
Factor
Number of
60 % assumption 18
Portion
80 % assumption
Power A B C D
Cost of
3 hours per
year
8760 hours assumption 19
Equity
11 % Calculation
Capacity component Component Component Component
Depend on

4 Energy Sales
capacity 50
or 100 or kWh assumption 20
Cost of
Debt
7 % Calculation 50 MW 2026,98 150,26 0,00 12,93
150 or 300

5 Lifetime
by CF 60 %
50 years assumption 21 WACC 6,57 % Calculation 100
long term
agreement
between
MW 824,16 150,26 0,00 12,93
Long PLN and
6 agreement
duration
20 years private
company
22
Commitm
ent Fee
0,50 %
typical
values 150
about
power
wheeling
MW 486,33 150,26 0,00 12,93
7
Depreciation
method
straight line - assumption 23
Upfront
Fee
0,25
400.
%
typical
values 300
Transmission typical Agency IDR/yea
8
cost
5 billion IDR/km
values
24
Fee
000.
000
r
assumption
MW 196,88 150,26 0,00 12,79
10% x
land of typical typical
9
transmission
transmission
cost
IDR/km
values
25 Insurance 6 %
values E Component (Rp/kWh)
Exchange typical typical
10
rate
15000 IDR/USD
values
26 interest
Interest
7 %
values
Power
Demand typical during typical
11
growth
4 %
values
27
constructi
on
7 %
values Capacity 50 km 100 km 150 km 300 km
transmission typical Repayme
12
loss
4 %
values
28
nt Period
Escalation
12 years assumption
50 MW 118,47 226,16 333,86 656,94
Construction of
13
Period
3 years assumption 29
electricity
tariff
3 % assumption
100
Regulation
about
electricity
MW 59,23 113,08 166,93 328,47
14
O&M
3 %
typical
30
Electricity 996,
Rp/kWh
tariff ESDM
No. 3
tahun 2020
150
escalation values tariff 74
about
Industrial
Load I4 -
MW 39,49 75,39 111,29 218,98
Tegangan
Tinggi 300
typical Discount
15

16
VAT
Corporate
11

22
%

%
values
typical
31
rate
10 % assumption
MW 19,74 37,69 55,64 109,49
tax Funding values
LCOE (Rp/kWh)
Table 6. Financial Assumptions Power
(Own elaboration) Capacity 50 km 100 km 150 km 300 km
50 MW 2.308,63 2.416,33 2.524,03 2.847,11
100
The simulation running to these parameters as shown MW 1.046,58 1.100,42 1.154,27 1.315,81
150
in table below:
MW 689,00 724,90 760,80 868,49
Power Capacity Investment Cost (million Fixed Cost (million Variable Cost (million 300
No (MW) USD/MW) USD/MW) USD/MW)
1 50 3,21 1,86 0,16 MW 379,68 397,63 415,58 469,42
2 100 2,61 3,72 0,32 IRR (%)
3 150 2,31 5,58 0,48
4 300 1,87 11,16 0,95
Power
Table 7. Variation of Power Plany Capacity to CAPEX and OPEX Capacity 50 km 100 km 150 km 300 km
(Pedoman Investasi Pembangkit Listrik Tenaga Aneka Energi Terbarukan by 50 MW 6,31 5,87 5,47 4,49
DJEBTKE-KESDM, UNDP, agustus 2021) 100
MW 7,2 6,57 6,02 4,74
150
After running in financial simulation, it can be extracted MW 15,14 13,63 12,39 9,74
the result as described in table below: 300
MW 43,72 39,16 35,32 26,79
Table 8. Financial Result
(Own calculation)

The yellow one shows that for that case the IRR <
discount rates, Benefit Cost Ratio (BCR) < 1 and it
means that the project is not feasible to proceed.
Next analysis is to calculate to potential advantages of
the PLN and the private company.
For the PLN sides, they can get the additional revenue
by rent their transmission lines with tariff as shown in
table above in E component.
While the private sector can get the lower investment by
build their own power plant and rent the transmission to
PLN compare, they must buy electricity for 20 years.
Also, the lifetime of power plant is still 30 years left, and
the next stage can be renegotiated.
From table 8. financial result, the economically viable
for power wheeling with minimum 150 MW for all
transmission distance up to 300 km. So, for the next
phase, it can be focused on 150 and 300 MW by
variating the transmission distance.
The rough estimation of this benefit can be seen in table
below:
 Parameters Power Wheeling Concept Business as Usual Benefit

Transmissi Power Energy Investment on Rent the Total

(BAU)
Purchasing
(billion
IDR)
including changes in weather patterns, shifts in
on
distance
Capacity
(MW)
Sales
(GWh/ye
Power Plant
(billion IDR)
transmission
/PLN Revenue
(billion
IDR)
Electricity for 20
years (billion IDR) the economy, and changes in government
(km) ar) (Billion IDR)
50 150
300
788
1.577
5.198
8.415
623
623
5.820
9.038
28.386
56.772
22.566
47.734
policies. If the price of end-product
100 150
300
788
1.577
5.198
8.415
1.189
1.189
6.386
9.604
28.386
56.772
22.000
47.168
(steel/hydrogen/cement, etc) below the cost of
150 150 788 5.198 1.755 6.952 28.386 21.434
300 1.577 8.415 1.755 10.170 56.772 46.602 production, it could negatively impact the
300 150 788 5.198 3.453 8.650 28.386 19.736
300 1.577 8.415 3.453 11.868 56.772 44.904 financial viability of the business model.
Table 9. The rough estimation
(Own calculation) • Environmental risks: The construction and
It can be analysed that higher power capacity gives the operation of whole business model ecosystem
higher benefit for private sector but the reduce the can have significant environmental impacts,
benefit for longer transmission lines. On the other hand, including changes to water levels and habitat
for PLN sides, longer transmission lines will increase destruction. If these impacts are not properly
the revenue while the higher power capacity may have managed, the company could face legal
bigger impact on system stability. This solution shall be challenges or reputational damage, which
optimized by more detailed data and analysis, also could impact its ability to operate effectively.
need to be discussed comprehensively by two parties.
Above risks need to be addressed by the company
It is to ensure that technically and commercially the
using comprehensive enterprise risk management to
power wheeling concept will make win-win solution for
develop a risk register and ensure proper risk
PLN and private sectors.
management steps are taken including reduction,
VI. RISKS avoidance, transfer (for major risks) and acceptance for
residual risks.
There are various inherent risks of the project, with
separate risk management program required to map
out, mitigate and manage according to company
objectives. In general, there are various risks that
clustered into:
• Regulatory risks: The regulatory environment
for electricity generation and transmission is
complex and constantly evolving. Changes in
regulations or policies could have a significant
impact on the financial viability of the business
venture of renewable energy-based industry,
particularly if they result in changes to the rates
charged for the use of the state-owned
transmission line.
• Operational risks: The operation of a renewable
plant and heavy industry are subject to a range Figure 9. Risk Matrix clustering for Power Wheeling concept in
of risks, including equipment failure, weather- Indonesia
Own deliberation based on: (ISO 31000:2018)
related events, and human error. If the plant
experiences an extended outage or significant
downtime, it could impact the reliability of the
municipal transmission line, which could lead to
financial losses and commercial impacts.
• Financial risks: The construction and operation
of the whole components in the ecosystem bar
existing transmission line require significant
capital investments, which can be subject to
cost overruns and other financial risks.
Additionally, if the business concept is unable
to generate enough revenue to cover its
operating costs or debt obligations, it could face
financial distress or bankruptcy.
• Market risks: The price of electricity is subject Figure 10. ISO 31000:2018 Risk Management Framework
to fluctuations in supply and demand, which (https://www.researchgate.net/figure/Risk-management-process-ISO-31000-
2018_fig1_355197828)
can be influenced by a range of factors,
 VII. CONCLUSION
The distance of transmission and maximum power that
can be delivered by using transmission line which owned
by PLN will be the key parameters that need to be
considered most. Commercially, the power capacity
more than 150 MW will give feasible project to execute
as explained before that the IRR > discount rates (10%).
The higher power capacity of power plant will have
bigger benefit impact for private sectors, while the longer
transmission will reduce it. In the other hand, the bigger
power means the higher impact on system stability,
while the longer transmission distance will have most
advantages for PLN. However, these all things need to
be optimized techno-economically, so the win-win
solution for both parties can be achieved. The side
impact for PLN side, by implementing this power
wheeling concept is the penetration of Renewable
Energy (RE) can be pushed to support the RE target.
REFERENCES
[1] Data Collection Survey: JICA, TEPCO, Indonesia MEMR,
PT PLN Aug 2016

[2] Hiromu Hamada & Ryuichi Yokoyama (2011) Wheeling

Charge Reflecting the Transmission Conditions based on the
Embedded Cost Method, Journal of International Council on
Electrical Engineering

[3] ESKOM Wheeling Factsheet

https://www.eskom.co.za/distribution/wheeling/

[4] Jurnal SUTET STT PLN Vol.7 No.1 Jan-Mei 2017

[5] Wheeling of Electricity: A Friend or Foe in the Energy

Transition, AMEU, Leshan Moodliar

ISO 31000:2018

[6] https://www.researchgate.net/figure/Risk-management-
process-ISO-31000-2018_fig1_355197828

[7] Pedoman Investasi Pembangkit Listrik Tenaga Aneka

Energi Terbarukan by DJEBTKE-KESDM, UNDP, agustus
2021

[8] Permen ESDM No. 3 tahun 2020 Perubahan ke empat

atas peraturan Menteri ESDM No. 28 tahun 2016 tentang Tarif
Tenaga Listrik Yang disediakan oleh PT Perusahaan Listrik
Negara (Persero)