Investor-friendly pricing ‘crucial’: Industry group

Renewable and alternative energy producers have called on the government to provide more incentives and apply investor-friendly pricing policies to make the sector more appealing for investors.

The chairman of the Indonesian Renewable Energy Society (METI), Hilmi Panigoro, said Friday that it required strong commitment from the government and consistent regulations to boost the utilization of renewable and alternative energy in Indonesia.

“In terms of policies to develop renewable and alternative energy in the country, we can adopt many of the best practices from other countries that are relevant to the needs of our country,” he told the last plenary session of the Indonesian Petroleum Association (IPA) 35th Annual Convention and Conference at the Jakarta Convention Center.

Hilmi cited several examples of successful practices, including Brazil developing bio-ethanol, Germany promoting the utilization of solar energy and India providing incentives for several schemes and tax holidays for renewable and alternative energy developers.

The government should also gradually lift subsidies for fuels because cheap fuels would compromise the incentives of developing renewable and alternative energy, he said.

The Energy and Mineral Resources Ministry has planned to ramp up the utilization of renewable and alternative energy sources from the current 5 percent of the country’s total energy mix to 17 percent by 2025.

According to METI data, in 2010 investments in clean energy reached US$243 billion, which was up 30 percent from 2009 and 630 percent from 2004. The data marks the growing importance of clean energy in the world.

The director general of new and renewable energy and energy conservation at the ministry, Luluk Sumiarso, promised that the government would do its best to ensure that clear regulations were put in place in all sectors of renewable and alternative energy.

Indonesia has abundant resources of renewable and alternative energy, particularly geothermal. The ministry claims that 40 percent of the geothermal resources in the world are located in the Indonesia. The country’s geothermal potential is estimated at around 28,543 megawatts, but only 1,189 megawatts, or only 4 percent of the total potential, is currently being utilized.

For the development of geothermal resources, Supreme Energy president director Supramu Santosa said that since the required funds to develop the resources were huge, the government should be able to invite the private sector to invest.

“Most of the investments must come from private companies, presenting huge investment opportunity,” he said.

He praised the government for issuing a ministerial decree ordering state electricity company PT PLN to buy geothermal at a ceiling price of 9.7 cents per kilowatt-hour (kwh). He said that ensuring that geothermal consumers would buy the energy at market price was very important for investors.

The Energy and Mineral Resources Ministry has announced that it would set aside Rp 350 billion ($41 million) to compensate for failures in geothermal exploration starting this year. This policy is expected to encourage more investment in the sector.

Besides geothermal, PLN has also started to develop solar panels to provide electricity in remote areas where generating electricity by using oil-based fuels is very expensive.

The company aims to install solar panels for 340,000 new customers in eastern Indonesia this year with a total investment of around Rp 1.2 trillion.