T

he new administration under President Joko '€œJokowi'€ Widodo needs to jump start the development of new and renewable energies by reducing its dependence on fossil fuels and subsidizing the renewable energies sector, an expert says.

A significant percentage of subsidies should be channeled toward developing new and renewable energy programs, as the government has subsidized fuel for too long, energy economist Darmawan Prasodjo said on the sidelines of the Pertamina Energy Outlook for 2015 event in Jakarta last week.

Darmawan, who is also a member of the government'€™s oil and gas reform team, said that the government, not the state-owned oil firm PT Pertamina, should spearhead development and financing of the programs.

'€œThe subsidy mechanism should be similar to how Pertamina has been supported to provide subsidized fuel. The government should bear the burden of subsidy because the new and renewable energies programs will create [more benefits, including] huge clusters of industries, just like in other countries,'€ he said.

In the 2015 state budget, Indonesia has allocated Rp 344.7 trillion (US$27.9 billion) in subsidies;
Rp 276 trillion for fuel and liquefied petroleum gas (LPG) and Rp 68.7 trillion for electricity.

Darmawan said the government should direct a certain percentage of subsidies toward the development of new and renewable energies, especially given the fiscal room created by last month'€™s slashing of the fuel subsidies.

He added that with a sustainable mixed-energy program, Indonesia could achieve an electricity-usage ratio of 100 percent, up from 82 percent last year.

Previously, Energy and Mineral Resources Ministry'€™s director general for renewable energy, Rida Mulyana, said the government expected to double the amount of electricity generated from renewable resources within five years, a move that would require some $36 billion in investment.

Rida said that as part of the new government'€™s plan to add 35 gigawatts (GW) to the power grid over the next five years, his office aimed to increase power generated from renewable energies to 21.5 GW from 10.8 GW.

To encourage the use of renewable energy, Darmawan said the government should incentivize automobile companies to manufacture vehicles with fuel tanks that could use new types of biofuel, such as ethanol.

The Brazilian government, he said, had imposed a tax on vehicles incompatible with biofuels. '€œThe automotive industry responded positively to the policy, because it created a huge incentive for them,'€ Darmawan said.

Japan-based Institute of Energy Economic'€™s chief economist and managing director, Ken Koyama, citing another example, said the Japanese government had successfully promoted biofuel '€” particularly bioethanol '€” which was now being sold at the same price as fossil fuels in the Japanese market.

However, the imported raw material for producing bioethanol is pricey. '€œSo, we try to find and develop other energies like solar and wind,'€ Koyama said.

Pertamina director Ahmad Bambang said the company always considered new and renewable energy programs. He cited a biomass-fuel program as a promising sector and urged the government to help build biodiesel facilities, as their construction is deemed cost-prohibitive for the manufacturing industry.

'€œWe have tried a corporate social responsibility program where we invite oil palm farmers to develop plasma as a raw material for biodiesel production,'€ he said.

'€”JP/Grace D. Amianti