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RI lags behind peers in renewable energy
Indonesia, despite its status as the Southeast Asian country with the largest renewable energy potential, lags behind other major ASEAN countries in its lack of investment appetite for renewable energy, with its neighbors leaping at the commercial possibilities available
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ndonesia, despite its status as the Southeast Asian country with the largest renewable energy potential, lags behind other major ASEAN countries in its lack of investment appetite for renewable energy, with its neighbors leaping at the commercial possibilities available.
Persistent problems have hampered renewable energy investment and development in Indonesia, such as inconsistent regulations, land procurement obstacles and a lack of incentives, said Arie Rahmadi, the Agency for the Assessment and Application of Technology (BPPT) technology services head.
Inconsistent regulations, combined with the long payback period for renewable energy investments as a result of a low subsidized-energy price in Indonesia, have created uncertainties for investors seeking to develop renewable energy for commercial purposes.
“We change regulations on renewable energy quite often […] The government should provide incentives and open a tender for renewable energy power plants only after the land is secured. It would help bring down the investment costs,” Arie told The Jakarta Post over the phone on Saturday.
According to the ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2025 — a guideline for energy cooperation among ASEAN members — renewable energy is expected to account for 23 percent of the region’s energy mix by 2025.
However, the region lacks experience and expertise in capital intensive renewable energy projects, leading to a decline in investment. Southeast Asian countries attracted only US$2.7 billion in investments for solar, wind, biomass and geothermal projects last year, according to the investment guidebook on renewable energy, which was recently released by think-tank The Habibie Center.
The figure is down 16 percent from the amount invested in the region in 2014, which amounted to $3.2 billion. Amid such circumstances, ASEAN countries are offering incentives to compete for investment in the clean energy industry.
Thailand has offered financial incentives in the form of low-interest loans and grants of up to 50 million Baht (US$1.49 million) to encourage the development of renewable energy projects. It also offers tax incentives, import exemptions and feed-in tariffs.
Meanwhile, the Philippines offers zero percent value added tax on renewable energy sales and purchases as well as subsidies equivalent to 50 percent of universal charge on missionary electrification (UCME), among other incentives.
Arie said that an insufficient regulatory framework and complex bureaucracy were just some of the many challenges Indonesia must overcome in order to attract renewable energy investment.
“Indonesia does not currently have any solar photovoltaic [PV] factories. This is unlike Malaysia and Singapore, which already operate them and supply solar PVs for ASEAN member countries,” he said.
The government has called on state electricity firm PLN to increase the rate at which it absorbs output from renewable energy power plants, under a feed-in tariff to compensate for the costly investment. Other breakthroughs have yet to be seen.
Sunandar, the assistant deputy for energy to the Coordinating Economic Minister, said Presidential Regulation No. 22/2017 — which provides a road map for Indonesia to increase the share of renewable energy in the national energy mix to 23 percent by 2025 — allows the government to provide up to 4 million hectares of land for 15.6 million kiloliters of biofuel production in 2025 and 54.2 billion kiloliters in 2050.
Other steps detailed in the regulation include developing infrastructure for biogas production up to 47.4 million standard cubic feet per day (mmscfd) by 2025 and strengthening research and development in the renewable energy sector, among others.
By 2025, the government expects to operate renewable energy power plants with a capacity to generate 45.1 Gigawatts (GW), in order to increase the share of renewables in the national energy mix to 31 percent by 2050. (mrc)
