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tate-owned electricity company PLN is planning to keep increasing the utilization of new renewable energy to generate power despite the challenges encountered so far.

Company director Nicke Widyawati said the use of new-renewable energy was part of the company'€™s move to comply with government policy.

'€œIt'€™s a national policy that PLN has to follow. New-renewable energy is not about price, [it'€™s about] the environment,'€ Nicke said.

According to PLN data, around 55.7 percent of electricity generation in 2015 was fueled by coal, 25.3 percent by gas, 8.2 percent by diesel fuel, 5.9 percent by hydropower plants and around 4 percent by geothermal energy.

The use of coal and gas for power generation in 2015 was higher than a year earlier. Diesel fuel usage was lower, as was the use of hydropower plants, while the use of geothermal energy was relatively stable.

In 2014, 52.6 percent of electricity generation was fueled by coal, 24 percent with gas and 11 percent with diesel fuel. Around 7 percent of power generation in 2014 was from hydropower plants and 4.4 percent from geothermal power plants.

'€œThe trend for diesel fuel usage will continue declining and it will be zero under our target by 2025. The portion of gas utilization also increased slightly. Coal is now cheaper and there are a lot of resources available,'€ Nicke said.

The country is struggling to meet its target of 23 percent renewable energy utilization. PLN'€™s target is slightly higher at 25 percent, according to Nicke.

Indonesia is thought to have abundant and various renewable energy resources, from hydro to geothermal power. However, development of renewable power plants is much costlier than coal-fired power plants. Environmental issues have also hampered development.

Earlier this month, PLN and fellow state-owned firm Pertamina disagreed over the price of steam used to generate Kamojang geothermal power plant, with PLN wanting a lower and Pertamina a higher price. The issue was settled after the State-Owned Enterprises Ministry stepped in.

'€œIt'€™s also an issue for us because we have to increase the portion of renewable energy at the same time as our subsidies [from the government] are falling,'€ Nicke said.

The Energy and Mineral Resources Ministry earlier said that it planned to establish another entity like PLN to handle renewable energy.

Under the plan, the new entity will be a buffer in the purchasing of electricity from independent power producers, selling the power to PLN under a certain price that will not burden the state-owned firm.

Another issue is PLN'€™s commitment to absorb alternative energy such as liquefied natural gas (LNG). Last year, the floating storage and regasification unit (FSRU) Lampung operated by state gas firm PGN had to run far below its capacity as PLN'€™s gas absorption was lower due to weakening growth in electricity demand.

'€œFSRU Lampung is expecting to receive five cargoes of LNG this year,'€ PGN spokesperson Irwan Andri Atmanto said.