W

ith an abundance of almost every renewable energy source '€” including 40 percent of the world'€™s geothermal reserves '€” Indonesia can be a global clean energy leader. By tapping this stockpile, it can also avert a looming energy crisis and realize its huge economic potential.

The key task is to diversify the power generation mix toward renewables such as geothermal, solar, wind and biomass.

The government'€™s ambitious plan to raise renewables'€™ share to 23-25 percent by 2025 from just 6 percent now would expand access to electricity, support industrial growth, and reinvigorate the country'€™s less developed regions.

But this will only happen if the government'€™s laudable vision is followed by action. Targets need to translate into real projects and stable private sector investments.

Despite our competitive edge on renewables reserves, we lag behind neighbors such as Thailand and Malaysia in developing policies to entice the technology and investment needed to reap the potential benefits.

There'€™s no time to lose. Not so long ago, Indonesia was a net energy exporter. Now it is short of electricity, forced to import oil, and may become a net importer of gas over the next decade.

Several cities suffer regular electricity brownouts and many rural areas have little or no access to electricity.

High fossil fuel import bills amid rising energy demand hampers Indonesia'€™s efforts to expand manufacturing and services to create more and better jobs.

A dependence on imported fuels also widens the trade deficit and threatens energy security.

If this continues, our dependence on coal-powered electricity '€” expected to reach up to 65 percent by 2019 '€” will become an unchallenged fixture of our energy mix.

Coal is an important fuel, but over-dependence on it poses environmental risks such as higher carbon emissions.

This could jeopardize the government'€™s commitment to reduce greenhouse gas emissions by 29 percent unilaterally by 2030, and by 41 percent with international support.

There'€™s also the public health risk. The World Health Organization(WHO) has estimated that around 7 million people died globally in 2012 from air pollutants such as particulate matter emitted by diesel vehicles and coal-fired power plants.

What can Indonesia do to make renewables a frontline energy source?

To start, we need more detailed assessments of existing renewable resources, especially geothermal, wind, solar, and biomass.

Currently, for example, geothermal projects are producing less than 40 percent of the yield predicted by surface studies.

The focus should be on consolidating quality data and enabling the resource assessments and feasibility studies that must precede any large investment in renewable energy projects.

Tariff structures and regulatory guidance for clean energy could also be improved. The government has established preferential tariffs for geothermal, small hydropower, solar energy, and waste-to-energy, and new regulations for wind and solar PV rooftop power are planned.

Regulatory frameworks should be stable and sensitive to market and private sector needs. The private sector can find ways of resolving risks as they arise after investing, but regulatory certainty is needed for that to happen.

Better coordination between local and central governments is a must. Providing energy for such a vast archipelago is too huge a task for a few central government ministries and state-owned companies.

Local governments and municipalities should be empowered with knowledge and resources to address their local renewable energy needs.

Permit and licensing processes need to be well coordinated and transparent to reassure private sector investors.

Concessional and innovative financing is crucial to scale up renewable energy use, electrification projects, and provide power to poor and remote communities.

Options include project bonds, risk mitigation instruments, and viability gap financing '€” which reduces high initial risk and capital costs associated with renewable energy.

Engaging with development partners and global climate funds can leverage additional funding and international expertise.

Energy efficiency must go hand-in-hand with renewables as Indonesia pursues low-carbon growth. Planned regulations will establish standards and labeling for appliances, and provide the basis for energy service companies.

They need to sit within a comprehensive energy efficiency ecosystem involving testing laboratories, progressively tighter standards, awareness programs, and penalties for offenders.

Encouragingly, the government is thinking ahead on clean energy. It recently announced the establishment of a Center of Excellence on Clean Energy to gather knowledge, facilitate investments, and help deploy technology solutions.

The center will provide a much-needed venue for collaboration between government ministries, national agencies, energy and research institutions, and the private sector.

More bold thinking is needed to turn Indonesia'€™s energy challenge into an opportunity. The welfare of the country'€™s economy, and its citizens, depends on it.
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The writer is vice president for knowledge management and sustainable development, Asian Development Bank. This is a personal view.