T

he government has reiterated its commitment to develop renewable energy as the country’s proven oil reserves of 3.8 billion barrels are only enough to meet national consumption for just over a decade.

Indonesia has abundant energy resources, from hydropower to solar energy. The country is even estimated to have 28 gigawatts (GW) of geothermal potential and 75 GW of hydropower potential, almost twice the country’s electricity demand at present.

In total, potential renewable energy in the archipelagic country is estimated to reach more than 300 GW.

However, Indonesia is still dependent on fossil fuels, which have shrunk drastically after long decades of exploitation. At present, Indonesia produces 830,000 barrels of oil per day (bopd), with an annual rate of decline of around 10 percent.

“But if we put aside the decline, our oil reserves can only supply national demand for the next 12 years. Hence, developing renewable energy is a must,” Energy and Mineral Resources Deputy Minister Arcandra Tahar said on Thursday.

In 2015, hydropower and geothermal power plants contributed just 5.9 percent and 4 percent, respectively, to the country’s electricity power, according to data from state-owned electricity company PLN. Coal dominates electricity production, at 55.7 percent, followed by gas (25.3 percent) and diesel fuel (8.2 percent).

The government hopes to realize US$870 million in investment in new and renewable energy in the first half of this year, 63.5 percent of a total target of $1.37 billion. The biggest chunk of that investment, at $560 million, went into geothermal energy.

With the large investment value, the electricity produced from renewable energy sources is usually sold at a higher price compared to electricity produced by non-renewable energy sources to cover the hefty amount of investment.

“Indeed, it’s more expensive. That’s a fact. That’s why there is no country that has started the development of renewable energy without state assistance in the process,” Arcandra said.

Therefore, he further said, the government needed to incentivize such development so that it could eventually compete with fossil fuels.

The Energy and Mineral Resources Ministry’s new and renewable energy directorate general (EBTKE) has recently received approval from the Finance Ministry to get Rp 1.2 trillion in cash to plug any price gap between electricity from renewable energy and conventional sources that state-owned electricity company PLN cannot cover next year.

However, the ministry also announced in August that it would slash Rp 900 billion from its budget this year, with the biggest share, accounting for around a third of the proposed figure, to be taken from the EBTKE.

As a consequence, the percentage of electricity targeted to be generated by renewable energy by 2025 has decreased to 19.6 percent from an initial goal of 25 percent, according to the 2016-2025 electricity procurement business plan, submitted by PLN and finalized by the ministry.

The budget cut took place due to unexpected tax shortfalls this year that could reach up to Rp 219 trillion.