Ignasius Jonan (JP/Wendra Ajistyatama)

With eight years remaining, the government has thrown in the towel for meeting a target of allocating 23 percent of the energy mix to renewable energy for electricity and transportation by 2025, despite having issued policies officials deemed favorable to investors.

Energy and Mineral Resources Minister Ignasius Jonan told The Jakarta Post recently that although the government would still push itself to meet the target, he was not convinced it could be met entirely because of time constraint and prices.

“It will not be easy. But we are trying to achieve close to 20 percent [of renewable sources in the energy mix] by 2025,” said Jonan, adding that he estimated by 2019 the government could only achieve 13 to 14 percent of the mix from the target of 16 percent.

He explained that what he meant by “trying hard” was by not fire-selling the procurement of renewable power plants or fuel mix at the expense of higher prices for the public, as electricity and fuel produced from renewable sources was still expensive.

Stipulations from the General Planning for National Energy (RUEN) and National Economic and Industry Committee (KEIN) required the government to source electricity at an affordable price, Jonan argued.

“We will not take [renewable energy development] at any price. We can achieve the target by allowing investors to produce electricity at a high rate. But is that something the public want?” he said.

Depending on the type and location, the lowest price for electricity produced by power plants fueled by renewable energy is 6.52 US cents per kilowatt hour (kWh), by independent power producers (IPP) to state power company PLN, as the sole buyer of electricity for distribution to the public.

In comparison, electricity produced by the latest generation of coal-fired plants has a lowest selling price of 4.25 cents per kWh, as offered by a consortium constructing a 2x1,000 megawatt (MW) plant in Serang, Banten, also known as Java 7.

PLN recently signed contracts with 11 IPPs engaged in renewable energy with a combined capacity of 291.4 MW. The lowest price sold to PLN was 6.52 cents per kWh for a micro-hydropower plant in Central Java, while the highest was 8.6 cents per kWh for a hydropower plant in North Sumatra.

In total, PLN has signed around 1,000-MW worth of renewable projects this year alone, and is expected to boost the percentage of electricity procured from renewable energy sources to 12.5 percent of all total energy mix from the existing 11.9 percent.

Jonan said he would not issue any new regulations for renewable energy in order to meet the 2025 target as he argued existing policies were more than enough to attract investors.

The Energy and Mineral Resources Ministry recently issued a revision to Ministerial Decree No. 12/2017 on renewable energy for electricity procurement.

The new decree, now decree No. 50/2017, maintains a much-criticized price cap on electricity from renewable energy sources at 85 percent, or 100 percent of the local electricity supply costs (BPP) if it is higher than the national average.

However, it also allows business-to-business negotiation between PLN and IPP over tariffs on electricity from solar, wind, biomass, biogas and marine power plants in Jakarta, Bali, Banten, West Java, Central Java and East Java. All these regions have a BPP under the national average.

Many investors and experts have lambasted the decree for making renewable energy projects economically unfeasible by forcing them to compete with traditional fossil fuels that are comparatively cheaper.

“There won’t be any new regulation. It [Ministerial Decree No. 50/2017] is the last one. We will wait for its impact,” said Jonan.

For Jonan, a former investment banker, CEO of state railway company PT Kereta Api Indonesia and transportation minister, the only stumbling block is limited time, as the government has only eight years remaining to meet the target.

The 23 percent renewable energy mix was arranged in 2009, and progress has been sluggish since.

“If I was the minister back in 2009, we could have surpassed the target. There’s no difficulties right now aside from the limited time available,” Jonan said.

“I have already been here for 10 months and I have achieved 1,000 MW in renewable energy [with IPP contracts]. This is unprecedented. I cannot accept if anyone accuses me of erecting barriers to the development of renewable energy. The facts say otherwise. Some even accuse me of threatening the IPPs to sign [the contract]. How can I do that?” said Jonan.

Jonan said even if the technology was available and the price was lower, development of renewable energy would still take time, as he cited the example of developing a geothermal power plant that usually took seven years for exploration and construction before beginning commercial operations.

He also dampened any idea of Indonesia going nuclear if the target could not be achieved as an alternative to high-cost renewable energy sources.

Indonesia has delayed nuclear development for years, with Jonan citing it as a “last resort,” with the government shelving its plan to build its first nuclear power plant following the Fukushima nuclear disaster in Japan, 2011.

Safety concerns have dominated the majority of discussions on nuclear power development as Indonesia lies within the volatile Pacific Ring of Fire.

“Japan and Germany have started to decommission many of their nuclear plants. Thus nuclear energy has a bleak
future, and for us it will be just a last resort [if the country has depleted its fossil fuel resources],” he said.

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