G

lobal renewable energy development has seen an upward trend in recent years, thanks to alternative funding and investment avenues offered by international financiers in the sector.

The development of geothermal power plants is one of the government’s top priorities in increasing the renewable energy share in the country’s power generation to 23 percent by 2025 from 13 percent at present.

However, renewable energy development in Indonesia could screech to a halt due to its costly nature, which has been exacerbated by the lack of a special government subsidy crucial to ensuring financial sustainability.

State electricity company PLN executive vice president for corporate planning Doddy Pangaribuan said on Friday many investors, who initially saw potential in geothermal investment, decided to withdraw due to the high financial risks in investing in a geothermal energy project.

“There are at least two reasons why green investment is unattractive to most investors. First, the latest technology for renewable energy is still relatively expensive and the second one is due to geographical challenges where most of the geothermal source is mostly located in a remote area,” Doddy said on the sidelines of a renewable energy conference in Jakarta.

In addition, the price of electricity of between 7 and 16 US cents per kilowatt hour is still too low.

As a result, many investors chose to back out from the offer after learning about the financial clause for geothermal energy development, according to Doddy.

He called on the government to provide a special subsidy for renewable energy in an effort to alleviate financial risks and to accelerate growth in the sector.

“We would greatly appreciate the subsidy because we don’t want to charge our customers as a result of the expensive geothermal energy production,” Doddy said, citing an example in India where the central government subsidized land allocated to solar panel development.

Indonesia is estimated to control about 40 percent of the world’s total geothermal reserves, but it is only able to produce 1,948 megawatts (MW) from geothermal power plants, or about 10 percent of the potential.

The chairman of the Indonesian Geothermal Association (API), Prijandaru Effendi, previously said PLN should guarantee it would buy all the electricity produced from geothermal power plants so that investors would
not have any doubt in their investment.

“At present, their is no binding agreement until the [geothermal] exploration is completed,” Prijandaru added.

Meanwhile, the Finance Ministry is cooperating with the Green Climate Fund (GCF), which is part of the United Nations Framework Convention on Climate Change (UNFCCC), and the Global Green Growth Institute (GGGI) to finance renewable energy projects.

The ministry has so far received $850,000 in grants from its annual $1 million quota for technical assistance.

To date, there are four renewable energy projects in Indonesia, which are currently awaiting approval from the GCF.

The projects include climate-resilient coast communities and ecosystems by the International Union for Conservation of Nature (IUCN); geothermal resource risk mitigation by the World Bank; ecofriendly tourism at Lake Toba, North Sumatra, and rapid transit bus development in Semarang, Central Java, by state-owned infrastructure financing company PT Sarana Multi Infrastruktur.

As of May this year, the CGF approved 74 projects worldwide worth $12.1 billion with an anticipated equivalence of 1.3 billion tons of CO2 avoided. (rfa)