U

nattractive energy pricing remains a key challenge for Indonesia in developing the renewable energy resources needed to broaden the country’s electrification ratio, a seminar heard.

Indonesian might achieve long-awaited renewable energy investment if it could deliver an attractive energy pricing policy, said Energy and Mineral Resources Ministry new and renewable energy director Hasrul Laksamana Azahari during a recent discussion.

“If the pricing is attractive, the renewable energy industry would run on its own,” he said on the sidelines of a meeting titled “Biomass and Beyond: Prospects for Synergies between Indonesia and Finland in Renewable Energies” held by the Embassy of Finland in Jakarta.

He said the government was now formulating an energy pricing policy that would better promote growth of renewable energy businesses.

Energy supply in Indonesia is still dominated by fossil fuel. About 95 percent of domestic energy consumption is generated by fossil-based resources — 46.9 percent from oil, 21.2 percent from gas and 26.3 percent from coal. Indonesia’s energy consumption has increased by an average of 7 percent per year.

Hasrul said renewable energy could be less expensive than energy produced by the PLN production process. Citing an example, the electricity price from a geothermal power plant in Lembata regency in East Nusa Tenggara could be 17 US cents per kilowatt hour lower than electricity from PLN in that area, he said.

The apparent problem is that there are very few business players interested in building renewable energy power plants due to the prolonged government subsidy on fossil-based fuel.

The subsidy has been blamed for distorting the domestic energy market and discouraging investment in renewable energy, which has been rendered less competitive than fossil fuel. Equally important, low energy prices attributed to the subsidy lead to excessive energy consumption.

Low carbon renewable energy has not been optimized because renewable energy is still seen as alternative energy. It accounts for only 4.4 percent of Indonesia’s total energy use.

Finland’s Undersecretary of State Esko Hamilo said the world would face greater risks of climate change without starting to reduce its dependency on fossil-based fuel.

He said Indonesia had huge biomass resources. Indonesia also has 40 percent of the world’s total geothermal resources.

Hamilo said Finland was committed to supporting Indonesia in developing renewable energy, especially in terms of technical assistance. “We have the most efficient renewable energy technology.”

Indonesia and Finland signed the Energy and Environment Partnership (EEP) last month to develop renewable energy resources. During the four-year program, the Finnish government will provide 4 million euro (US$5.6 million) to develop biomass energy in two provinces: Riau and Central Kalimantan. The program will be launched between May and June.

“We’d like to support the transition of developing biomass energy, not only at the household level, but also in small and medium-sized industries,” Finnish Embassy’s climate change advisor Krystyna Krassowska told The Jakarta Post.

Indonesian Chamber of Commerce and Industry (Kadin) vice chairman for environment and climate change Shinta Widjaja Kamdani said renewable energy businesses needed large investments. “Therefore, [Kadin] is working with the government in developing investment and funding policies, as well as other policies, including an incentive policy and an energy pricing policy,” she said.