Amidst increasing national energy needs, Indonesia is again placing diesel power plants (PLTD)as a key pillar of electricity supply, especially in remote and island areas that are not yet fully covered by the main transmission network. Even as the world moves towards renewable energy, the role of diesel power plants remains crucial.fast, flexible and reliable energy sourceto support community and industrial activities.
This program has become increasingly widespread in recent years. The government, through PLN, has been aggressively building and strengthening the diesel-powered electricity network outside Java as part of its “energy equity” strategy. Furthermore, numerous private projects have also entered this sector, both as independent electricity providers (Independent Power Producer / IPP) as well as supporting the industrial, port and mining sectors.
However, behind these significant opportunities, there are risks that cannot be ignored. Diesel power plants involve high-value investments, complex infrastructure, and significant potential operational risks: from construction delays, fires, machinery failures, to lawsuits due to environmental pollution. Any disruption, no matter how small, can result in significant financial losses, tarnished reputations, and even project shutdowns.
That’s why project protection through insurance is a crucial element. It’s not just a formality, but part of a risk management strategy that determines the sustainability of an investment. Without proper protection, these risks can erode profits and leave investors and contractors facing significant losses alone.
L&G Insurance Brokers is here to be your trusted partner in protecting energy projects.With extensive experience in the energy, infrastructure, and large-scale projects sectors, L&G is ready to help design an insurance solution tailored to the specific needs of your diesel power plant project. Contact us at 08118507773 for a free consultation and ensure your energy investment is maximally protected.
Development of Diesel Generator Program in Indonesia
Indonesia’s electricity demand continues to increase in line with economic growth, urbanization, and industrial expansion in various regions. Furthermore, Indonesia’s archipelagic geography presents unique challenges: not all areas are accessible by the main electricity grids of the Java, Sumatra, or Kalimantan interconnection systems.
It is at this pointdiesel power plants (PLTD)play a vital role. Diesel-powered plants are relatively easier to build than larger power plants like coal-fired power plants (PLTU) or hydroelectric power plants (PLTA). Furthermore, diesel-powered plants can be placed in remote locations with shorter construction times and lower investment costs than other large power plants.
The government throughPLNThe country continues to rely on diesel-powered plants (PLTD) as a fast-acting electricity supply solution, particularly in the 3T (frontier, outermost, and disadvantaged) regions. In fact, according to PLN’s strategic plan, there are still dozens of diesel-powered plants (PLTD) projects designed to support both emergency and permanent electricity needs by 2025. For example:
- In the area of Papua and Maluku, PLTD is still the backbone of electricity due to geographical conditions that make it difficult to reach transmission.
- From Sulawesi and Kalimantan, PLTD is widely used as backup for industrial areas, ports, and mining projects.
- On development of the Indonesian Capital City (IKN), PLTD is also part of the short-term solution before the EBT (New Renewable Energy) based energy infrastructure is completed.
Apart from PLN,private investment also increased. Many energy companies, EPC contractors, and service providers Independent Power Producer (IPP) are beginning to explore opportunities for diesel-powered plants (PLTD) projects, both for industrial needs and regional electricity supply. This is driven by market certainty: electricity demand never declines, and diesel-powered plants can be a flexible solution amid the transition to clean energy.
However, this trend also brings new challenges. In the 2025 era, when energy transition and sustainability are in the global spotlight, diesel power plants (PLTDs) are often criticized for their fossil fuel reliance. This requires project owners to be more careful in managing risks, both technically, financially, and environmentally.
With the increasingly massive construction of PLTD, it is not an exaggeration to say that this sector is currently in a period of “bright prospects but also full of risks.”
Risks in Diesel Power Plant Projects
- Construction & Installation Risks
- Physical damage: Diesel engines, generators, transformers, or other components may be damaged during transportation, installation, or initial testing.
- Human error: Technical or installation errors could lead to fire or system damage.
- Force majeure: Natural disasters such as floods, earthquakes, or storms that damage the project.
- Operational Risk
- Engine failure: Diesel engines are prone to wear, overheating, or even breakdown total.
- Fire & explosion: One of the biggest risks is the use of fuel oil.
- Environmental pollution: Diesel or oil leaks can contaminate soil and water, giving rise to lawsuits.
- Financial & Project Risks
- Project delays: Delays in installation or commissioning may result in contractual fines (liquidated damages).
- Cost fluctuations: Rising fuel and spare parts prices could put pressure on profitability.
- Payment failure: Risk from the project owner or subcontractor who does not fulfill his obligations.
- Social & Security Risks
- Public protests: Related to environmental issues, noise pollution, or health impacts.
- Theft & vandalism: Project assets in the form of high-value diesel engines and diesel fuel are vulnerable to theft.
- Global Case Study 2025
- In early 2025, a diesel power plant project in East Africa was delayed by nearly 9 months due to heavy flooding that damaged the main engine logistics distribution line.
- In the Philippines, February 2025, a fire broke out at a medium-capacity diesel generator due to fuel leak, causing losses of tens of millions of USD.
From here we can draw a red thread that diesel power plant projects are indeed fully multidimensional, so that insurance protection becomes a necessity, not an option.
The Role of Insurance Brokers in Supporting Diesel Generator Projects
Amidst the massive development of diesel power plants in Indonesia, choosing the right insurance is no easy task. The complexity of projects, the high investment value, and the diverse risks mean that project owners, contractors, and investors need a truly knowledgeable advisor, not just an insurance provider. This is where the role of insurance brokers becomes very crucial.
- Comprehensive Risk Analysis
Each power plant project has unique characteristics. For example, power plants in coastal areas are more susceptible to corrosion and tidal flooding, while those in remote areas face logistical delays. Insurance brokers play a crucial role in conducting a thorough risk assessment before selecting a policy. This ensures that the coverage provided is tailored to the project’s specific needs, not just a standard template. - Designing an Integrated Insurance Program
It’s not uncommon for companies to purchase only one type of insurance, even though a diesel power plant project ideally requires several complementary policies: from CAR/EAR, IAR, Machinery Breakdown, to Business Interruption. Brokers help develop a comprehensive insurance program, ensuring no risks are overlooked. This ensures all stages of the project—from construction to operation—are well-protected. - Negotiation with Insurance Company
With policy values reaching billions to trillions of rupiah, negotiating premiums and clauses is crucial. Brokers act as a bridge between clients and insurance companies, ensuring competitive premiums, relevant coverage extensions, and fair policy terms. Without a broker’s expertise, companies risk paying higher premiums for coverage that could potentially be improved. - Claim Assistance
When a risk actually occurs, the claims process is often the most stressful. Many cases involve claims being rejected because the technical details in the policy don’t match the actual incident. Brokers are there to assist clients, from preparing claim documents to negotiating with the insurance company, ensuring smooth and consistent claim payments. This is a significant advantage that distinguishes brokers from mere policy sales agents. - Providing Ongoing Consultation
A diesel power plant project doesn’t stop after purchasing a policy. Regulatory changes, energy market conditions, and geopolitical factors can impact risk. Insurance brokers ensure clients receive updates, adjust policies, and provide new recommendations to ensure optimal coverage.
Conclusion and Recommendations
Diesel power plant development in Indonesia is currently experiencing massive momentum. This program is not only part of the effort to meet national energy needs but also a driving force for the economy in various regions. However, behind these significant opportunities, the risks are also increasingly complex: from potential equipment damage and operational disruptions to the threat of natural disasters that could cause billions of rupiah in losses.
It is in this context that proper insurance coverage is key. Without thorough protection planning, projects risk facing significant obstacles that could jeopardize sustainability and even business viability. Insurance is not merely a formality, but a crucial instrument for maintaining investor confidence, ensuring project sustainability, and protecting a company’s financial stability.
For developers, contractors, and owners of diesel power plant projects, working with an experienced insurance broker is a strategic step that cannot be postponed.
L&G Insurance BrokersWe are your trusted partner in designing a comprehensive, efficient, and tailored insurance program tailored to your project’s specific needs. With extensive experience in the energy and infrastructure sectors and an extensive network of national and international insurance companies, we are ready to assist you with everything from risk analysis and policy drafting to premium negotiation and claims assistance.
📞 Contact us at 08118507773 Get a free risk consultation now. With L&G Insurance Brokers, ensure your diesel power plant project is protected with the best insurance solutions—so you can stay focused on your business and your investment can grow without disruption.
