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RI likely to miss renewable energy target again
Indonesia is set to miss its renewable energy target again this year, but investors are optimistic about the future with a potentially game-changing regulation in the pipeline
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span>Indonesia is set to miss its renewable energy target again this year, but investors are optimistic about the future with a potentially game-changing regulation in the pipeline.
The Energy and Mineral Resources Ministry aims to boost Indonesia’s power production capacity to 74,800 megawatts (MW) this year, with only 14.5 percent to come from renewables rather than the 19.4 percent stipulated in the National General Energy Planning road map.
Against the backdrop of such underperformance, President Joko “Jokowi” Widodo is expected to reintroduce this year a fiscal incentive to boost renewables growth, namely a feed-in-tariff (FIT) scheme.
Indonesia has introduced at least two FIT schemes in the past, each eliciting a positive response from investors, but both were later canceled because the country’s largest utility company, state-owned PLN, was considered financially unable to bear the incentive.
“2020 is the year of recovering investor confidence after three years of almost no progress in many projects,” said energy analyst Fabby Tumiwa of the Institute for Essential Services Reform (IESR), “and investors are at the end of their patience”.
Southeast Asia’s largest economy is chasing an ambitious target of adding 50,000 MW of new power plants between 2019 and 2028 to fuel economic growth. However, in achieving the target, the government is prioritizing fossil fuel power plants, particularly coal plants, at the expense of its renewable energy promise.
Last year alone, Indonesia added 10 new coal-fired power plants with a combined capacity of 3,017 MW — eight times more than the total 376 MW in renewable energy capacity installed in the same year.
“Based on a rule-of-thumb calculation, those plants require 63.4 million tons of coal. That’s why domestic coal consumption increased,” said the ministry’s electrification director general, Rida Mulyana.
The potential game-changer for renewables is a planned presidential regulation on tariffs for electricity generated from renewable sources. The country had issued such a scheme through Energy and Mineral Resources Ministerial Regulation No. 31/2009, which stipulated that PLN would buy green electricity at fixed prices, depending on the region. However, the ruling was revoked three years later through Regulation No. 4/2012 that allowed PLN to negotiate prices.
“Last time, we set the same feed-in-tariff for all renewable energy sources, [but that] didn’t work. Some sources cost more than others,” said Energy and Mineral Resources Minister Arifin Tasrif.
“Renewables developers are waiting and seeing, particularly for regulations that would show whether or not the government is serious about supporting renewables,” said IESR researcher Agus Tampubolon.
Meanwhile, the government marches on to achieve its power production target. The largest plant slated to enter operation this year is the 2,000 MW Batang plant in Central Java. Jakarta-based coal miner Adaro Energy, which owns a third of the plant, expects the US$4.2 billion facility to consume 7.5 million tons of coal annually.
The energy ministry guarantees coal’s competitiveness for power production through the annually-adjusted domestic market obligation policy, which currently requires miners to sell one fourth of their output inside Indonesia at a maximum price of $70 per ton.
To meet its power production target, the government targets $12 billion in electrification investments this year. The target is unchanged from that of last year, which was achieved.
To meet renewable energy growth, the government aims to secure $2.3 billion in industry investments this year. The target is higher than last year’s $1.8 billion, only 83 percent of which was achieved.
The larger renewable energy projects expected to be completed this year include the 110 MW Jatigede hydropower plant in West Java. China and Indonesia began developing the $140 million facility in 2014.
The ministry’s renewable energy director general, Sutijastoto, reasserted that his office would focus on bioenergy to meet Indonesia’s renewables target. He said the 30-percent biodiesel (B30) policy would “be continually escalated”.
Arifin issued a decree that sets this year’s allocation for subsidized fatty acid methyl ester — a key biodiesel ingredient — at 9.59 million kiloliters, up 45 percent from last year, to support the B30 policy.
Biofuel industry stakeholders expect to begin tests on the usage of B40 biodiesel this year. Stakeholders include the Indonesia Biofuel Producers Association (Aprobi), the Association of Indonesian Automotive Manufacturers (Gaikindo), state-owned oil and gas holding company Pertamina and the energy ministry.
The ministry's research and development head, Dadan Kusdiana, said he expected to begin a five-month B40 road test ending “at the latest by August”. The test would involve driving several vehicles thousands of kilometers on such biodiesel to measure their performance, as stakeholders did with the preceding B20 and B30 policies.
Aprobi chairman Paulus Tjakrawan said in December last year, when Jokowi formally launched the B30 policy, that stakeholders were slated to “sit down together and discuss how and where to start the tests” sometime early this year.
Indonesia is also expected to push electric car usage this year. President Jokowi issued in August last year Regulation No. 55/2019 that lays the legal basis to develop a domestic electric vehicle industry.
