State power firm PT PLN and Malaysia's utility company Tenaga Nasional Berhad (TNB) have signed an agreement on the construction of a US$400 million power grid connecting the two countries.
The power grid will connect PLN's electricity system in Sumatra and TNB's system in the Malaysian peninsula, PLN's president director Fahmi Mochtar said.
He added the interconnection would help both countries to meet peak power demand.
"The peak time is in the evening for Indonesia and during the day for Malaysia. Thus, with the interconnection, Indonesia can get additional power supply from Malaysia at night and Malaysia can get additional power supply from Indonesia at midday," Fahmi said.
Bambang Praptono, PLN's planning and technology director, said with the grid connection in place Indonesia and Malaysia could each transfer up to 300 megawatts (MW) of electricity to the other.
Bambang said that the interconnection would enable PLN to reduce its oil-based fuel consumption during peak hours which will cut company production costs.
"We can save about Rp 1,300 per kilowatt hour (kWh)," Bambang said.
PLN expects the interconnection to start operation by 2015.
Fahmi said that the project would need about US$400 million in investment, including for more than 200 kilometers of deepwater cables.
"PLN and TNB are still discussing the financing scheme, but the World Bank will be involved in the project's financing," he said.
Fahmi added that PLN would continue studying the project, especially to bring it in line with the new electricity law.
The new electricity law allows both export and import of electricity. Both PLN and private power generators are allowed to export power to neighboring countries as long as domestic demand has been met, the law says.
As for imports, the law only allows PLN to import electricity from neighboring countries.
PLN has actually imported power already. Since January this year, PLN in West Kalimantan receives power supplies from East Malaysia's Sarawak Energy Bhd (SEB) to help cope with a local power deficit of 8 MW.
ASEAN countries have agreed since 1997 to cooperate in developing 11 cross-border interconnection points allowing them to exchange power during peak periods.
