Indonesia and the acute energy crisis
The appointment of Arcandra Tahar as the energy and mineral resources
minister signaled strongly that the focus of President Joko "Jokowi" Widodo
had shifted back to oil and gas, as well as coal.
This can be observed by several steps taken by minister Arcandra in his
first 20 days working, including extending Freeport's license to export
concentrates, resuming negotiations regarding the Masela block and Indonesia
Deepwater Development (IDD) projects, as well as cancelling the launch of
feed-in tariff (FIT) solar power.
Arcandra was removed from his position in early August following the
revelation that he held US citizenship.
In the energy sector, many professionals and energy experts in both oil and
gas, and renewable energy associations agree that the decline in oil prices
in recent years has put pressure on economic growth, particularly in poor
and developing countries that produce and export oil.
On the other hand, there is an argument that Indonesia, as a developing
country and importer of oil, with high energy needs, has benefited from this
situation.
However, this argument cannot be proven. The buying and selling price of oil
may be lower, but the price for digging oil remains the same, if not higher.
The geological complexity of where new oil can be found is also very high.
Exploration costs of oil per barrel is too high even for a multinational oil
company, causing massive layoffs by oil companies and the cessation of their
operations in Indonesia.
The President is aware that the sector is in jeopardy, especially given that
a quarter of Indonesia's economy comes from oil and gas. Investment in this
sector has stagnated, starting from the development of the Masela block, an
IDD project, to a number of refineries that are getting old and inefficient.
Even foreign investors are demanding more concessions and guarantees from
the government. What needs to be avoided is for the President to try
reviving the ailing sector with the same approach taken by his predecessors
with failing results. It is valuable to see what had been done by other
countries that experienced the same or worse situation to prevent Indonesia
from repeating the same mistakes.
Venezuela relies heavily on hydroelectric power and uses petroleum as the
main source of exports. Nearly 60 percent of its revenues are derived from
the export of crude oil.
When a prolonged drought takes place, the electricity from the hydropower in
the country is not able to catch up with the increasing electricity demands.
The fall in oil prices, worsened by inadequate policies for many years, made
the economy of Venezuela collapse.
In a similar situation, Nigeria, which relies 90 percent of its economy on
crude oil exports, is facing various crises in the energy sector because of
corruption and terrorism.
Similar to Indonesia, both countries are oil-producing developing countries
with the ability to produce renewable energy. Venezuela has huge hydro
energy potential, but cannot survive long dry seasons as a result of
improper energy resource management. Nigeria is Africa's biggest economy
with high potential for solar energy, but the source of its energy mix is
not diversified enough.
Indonesia is fortunate that its economy is less dependent on the export of
petroleum products. However, Indonesia should take immediate action to
prevent the country from an energy crisis.
Indonesia needs to diversify the energy fuel mix for its power plants. The
President must continue his commitment to incorporate more renewable energy
sources in the 35,000 MW electrification program. Based on field
observations in border areas and the outer islands where electricity is
scarce, the lack of information and technology has led to low economic
outcomes.
To address this issue, an efficient electricity supply for the communities
in those remote areas would be to use local-based energy, supported by local
technology and networks of small-scale electrification, rather than building
high voltage subsea transmission cables.
If the government is serious about combating corruption, the country must
speed up the process of decarbonization of energy systems and move towards
renewable energy. Development of clean, new and renewable energies, followed
by the restructuring of the electricity sector such as system generation,
transmission and distribution to be more open and competitive, has been
shown to reduce corruption in the energy sector in many developed countries.
The combination of global trends such as increased climate change
mitigation, collaborative bottom-up community-based efforts to improve the
resilience of the environment and energy, as well as the affordability of
renewable energy have created a golden opportunity to develop clean-energy
technologies and reduce exposure to the increased social costs of fossil
fuels.
For example, the Dubai Electricity and Water Authority (DEWA) has proved
that economic solar power (3 US cents per kwh) can beat fossil fuel power
plants (4.5 cents per kwh), indicating that solar power has become more
affordable. The availability of international funds after the Paris
Agreement can be utilized by Indonesia to invest and make strides in the
development of a clean technology sector and to seize the opportunity to
accelerate the development of sustainable energy.
In the Bali Clean Energy Forum earlier this year, Indonesia committed to
supporting the development of clean, new and renewable energy. Such
development has huge potential not only for sustainability but also to
provide long-term solutions to address the problem of energy security. This
is the answer for Indonesia. The President should continue his support in
the interest of Indonesia's future.
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Ref:
http://www.thejakartapost.com/news/2016/10/06/indonesia-and-acute-energy-cri
sis.html
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John Diecker
APT Consulting Group Co., Ltd.
www.aptthailand.com
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