Indonesia: Off-grid green energy: Revolution to evolution

Indonesia: Off-grid green energy: Revolution to evolution

Indonesia has reached a nearly 97 percent ratio of villages with
electricity, in which over 2,500 villages had no electricity in 2014. The
plan of state-owned electric company PLN to build more power plants is
merely to cover 504 villages up to 2019 (Central Statistics Agency [BPS],
2015), which implies that more than 2,000 villages will still not be
electrified by 2019. This poses both a challenge and an opportunity.

Then comes off-grid renewable energy (RE) development. It is where
developers create new supplies and micro-grid solutions that are
disconnected from PLN's grid. Based on the recent statistics published by
the International Renewable Energy Agency (IRENA) titled "Rethinking Energy
2017," the RE electricity generation in Indonesia in 2014 was 33,750
gigawatts per hour (GWh).

This is diminutive compared to China's RE generation of 1,253,230 GWh, India
with 185,569 GWh, and nearly half of Vietnam's generation of 66,489 GWh.

Ministerial Decree No. 38/2016 was devised to help expedite electricity
development in the remote villages across the nation. Shortly after,
Ministerial Regulation No. 12/2017 on new and renewable energy was
introduced, which put price caps on RE rates.

As such, the capping of RE rates may challenge profitability and
sustainability of RE providers. Some have argued that incentives should not
be offered and further suggested that Indonesia should also be able to
reduce the high prices in the sector to encourage further development,
especially in remote regions.

However, despite this sentiment, the reality is that the Indonesian
archipelago includes many remote regions that are not easily accessed. The
challenges of rural off-grid RE are, among others, due to the high cost of
equipment and personnel mobilization to remote sites, high costs for
operation and maintenance personnel costs and battery replacement
(particularly for solar photovoltaic). Viable business plans are required to
ensure the sustainability of off-grid community renewable energy.

There have been many prior community-based projects that have failed owing
to insufficient funds to operate and maintain the infrastructure. The
communities must be preconditioned to have ownership of the power plant,
through shares or other types of contributions. Despite the "warm glow" of
community RE projects, business is business and must be profitable;
especially so if the private sector is involved.

The RE-based electricity rate price caps promoted through Ministerial
Regulation No. 12/2017 is a top-down measure; which appeared to have missed
the points on the significance of taking into account bottom-up measures
such as the community's willingness (and ability) to pay, as well as viable
business plan that takes into account the expenses to be incurred and the
projected streams of revenues - not merely for consumption but also for
establishing lucrative production of goods and services.

Further to the discourse on the off-grid electrification to more than 2,000
unelectrified villages, the government could help to provide investment in
the following ways.

Central and provincial governments should support projects that ease access
for mobilizing equipment and personnel for energy development. In this
regard, road/sea/air infrastructure are of quintessential requirements.

The government would need to have sound establishment of inter-ministerial
and inter-sectoral coordination in to prioritize villages to be electrified
and the associated port, road, bridge investment.

This is also in sync with what was suggested in IRENA's recent report,
wherein the higher technology and financing risks associated with RE implies
the widely required public support for the development. It is especially so
in the developing countries, usually in the form of syndicated loans that
involve multiple development banks (IRENA, 2017).

In addition to the above points, proper incentives should be prepared to
lure investors in this sector. Otherwise, the business may not be able to
sustain given the high capital and operation expenditures that should be
incurred to mobilize, construct, and sustain the power plant.

In a similar line of statement by Ralph Nader; the shift of fossil fuel
energy to green energy is not yet much-tapped, because the industry sectors
do not own the sun, the wind, or the rivers. Turning from fossil fuel to
green is a foreseeable future, however all stakeholders must share the same
level of determination to achieve this overarching goal.

Moving beyond the green energy revolution that has already taken place, we
shall move forward to evolution for further development and widespread
application.

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Link to Original Article:
http://www.thejakartapost.com/academia/2017/04/12/off-grid-green-energy-revo
lution-to-evolution.html

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com