All together now - Pertamina board members pose for photo session at recent Pertamina Energy Forum 2017. The main topic of the forum was on renewable energy. (Picture : TIS)

JAKARTA (TheInsiderStories) – Indonesia has so far been moving at a snail’s growth in the development of renewable energy, for various reasons. However, this could change in the next few years, as Indonesia is now trying to catch up with the rest of the world.

There is no doubt that compared with other countries, Indonesia is blessed with abundant resources of renewable energy, such as geothermal, hydro, solar, wind, tidal wave and others. However, only a small fraction of these renewable energy potentials has been utilized.

According to the Energy and Mineral Resources Ministry, Indonesia has renewable energy potentials of 443 GW; however, as of end 2016 only 8.8 GW has been tapped, mostly hydro-power plant and geothermal, equal to 7 per cent of the country’s energy mix.

Industry players have blamed high costs, complicated permit processes, the inconsistency of policies, rejection from the communities, lack of support from financial institutions and other reasons for the slow growth of renewable energy in the country.

At present, oil, gas and coal remain the dominant source of energy in Indonesia. Based on data of the Energy and Mineral Resources Ministry on the country’s energy mix in 2015, oil was still the largest contributor to the country’s energy mix, namely 46 per cent, followed by coal at 26 per cent, gas at 23 per cent and renewable energy 5 per cent.

The government, however, has set an ambitious target to increase the use of renewable energy in the country’s energy mix to 23 per cent by 2025, offsetting the decline of oil which is projected to settle to 25 per cent, gas at 22 per cent and coal slightly up, to 30 per cent.

Further changes are expected to take place by 2050. Renewable energy is set to lead in the country’s energy mix at 31 per cent, followed by coal at 25 per cent, gas at 24 per cent and oil at 20 per cent.

At present, renewable energy in Indonesia is mainly contributed by geothermal and hydro-power plants. As for geothermal, only less than 3 GW has been developed out of a potential of 27 GW.

Changing Landscape

Globally, the landscape of energy is changing. Huge investments pouring into renewable energy mean that it will continue to play a significant role in the world’s energy consumption.

Toshiyuki Shirai, an analyst at International Energy Agency (IEA), noted that there will be changes in total primary energy demand to 2040, by source. Southeast Asia, India and China will become the engines of future energy demand growth, together accounting for almost 60 per cent of the global increase to 2040.

“Renewables play an increasingly important role to in meeting rising demand in Asia. Renewables are to supply around 30 per cent of primary energy demand growth in China, India and Southeast Asia to 2040,” Shirai said at the Pertamina Energy Forum 2017 on Tuesday (12/12).

Governments in this region have played a significant part in driving the use of renewable energy. The reason for this is, among others, increasing scarcity of fossil fuels and the second, most important reason, is the poor quality of air in major cities in Asia, forcing governments, including the Indonesian government, to move for cleaner energy.

In Indonesia, the biggest hurdle is in the details, as the old phrase goes, the ‘devil is in the details’. Take a look at the development of even one geothermal project. Often, it takes years and years from discovery to commercial exploitation. An investor or developer has to get various permits from various agencies both at the central and local government level. Let alone, protests from local communities, which often delay project development.

The other issue is the tariff of renewable energy projects. In the past, the costs to develop renewable energy projects, in particular, solar and wind-power, have been expensive, which has led to high tariffs purchased by the state electricity company PLN, usually above US$ 0.12 cents. This burdens the company as well as the State Budget.

Nevertheless, we now see the wind of change. The government has issued a number of policies to encourage the development of renewable energy projects. The costs to develop renewable energy projects have slowly come down, thanks to the improvement of technology, as seen in the cost to produce solar panels.

Looking at the global trend, Energy and Mineral Resources Minister Ignasius Jonan wants the tariff for renewable energy to be pushed down to US$ 6-7 cents, but that is not going to be easy.

In Indonesia, some major renewable energy projects are being and will be developed. One example is the large-scale wind farm in Sidrap on Sulawesi Island, with an installed capacity of 70 MW in the first phase. The wind farm will be followed by a wind farm project in Jeneponto, also on Sulawesi Island.

The two major state-owned energy companies, PLN and Pertamina, have played a major role in driving renewable energy development in the country. Recently, a subsidiary of PLN tied up with a company from the Middle East to develop large-scale floating solar panels on the Cirata dam in West Java. This will be the first major floating solar power plant in Indonesia.

PLN also signed letter of intent early this week to develop a 70-MW wind farm in Tanah Laut in South Kalimantan, in partnership with a consortium of Pace Energy Pte Ltd and PT Juvisk Tri Swarna, 50-MW solar farm in Kubu Regency, Bali with Equis Energy Indonesia and PT Infrastruktur Terbarukan Fortuna and solar farm (PLTS Bali 2) in Jembrana, Bali, with Aquo Energy Indonesia. These projects are scheduled to be completed around 2020.

Pertamina has also started to widen its renewable energy business to other renewable energy resources, instead of only geothermal, although geothermal, in terms of capacity, is expected to remain significant.

Director for Gas of Pertamina Yenni Andayani said that as a state-owned company, Pertamina is committed to continuing to increase the portion of new and renewable energy in the national energy mix, on the back of shifting of energy business towards the development of renewable energy.

Pertamina has also undertaken several business transformations that will pave the way to speed up development of renewable energy. At the moment Pertamina is conducting various feasibility studies on potential renewable projects, in partnership with universities and private companies.

“We may appear to be slow in the next two-three years. However, be sure that we will start the sprint after three years,” Yenni Andayani said at the Pertamina Energy Forum (PEF) 2017 on Tuesday (12/12).

Deputy Minister for Energy and Mineral Resources (EMR) Arcandra Tahar noted that the government is stepping up efforts to realize Indonesia’s commitment to participate in the ‘Global Sustainable Action’ as conveyed by President Joko Widodo at the 21st COP 2015 in Paris, by reducing greenhouse gas emissions by 29 per cent in 2030.

“A number of measures are being implemented by the government to implement this target and achieve a 23 per cent renewable energy mix target by 2025; among others by issuing various regulations to improve the investment climate and accelerate the use of renewable energy, in the form of fiscal and non-fiscal incentives,” said Arcandra Tahar at the Pertamina Energy Forum.

However, this target will only be achieved if there is strong political will from the government, that will be reflected in policies and regulations, support from private sector and investors, support from financial institutions, improved communications among the stakeholders, as well as a changing mindset of customers. Indonesia may be late in developing renewable energy, but it is better late than never.

The positive side is that Indonesia is starting the develop renewable energy in a massive way when the technology is more advanced, improving the efficiency of renewable energy projects. If things go ahead as planned, Indonesia will have a more balanced energy supply and consumption in the future. (*)

Written by Roffie Kurniawan, Email: roffien@theinsiderstories.com

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