Indonesia's energy program is going green

Indonesia's energy program is going green

Discussing Indonesia's key priorities within the renewable energy sector,
Rida Mulyana, Director General for New and Renewable Energy & Energy
Conservation (NREEC), also looks at the nation's development progress,
particularly towards ensuring energy security and essential infrastructure.


How would you assess so far the impact of the policy packages announced by
the President to tackle existing challenges and improve the business
environment?

The President of the Republic of Indonesia, Joko Widodo, targeted the gross
domestic product (GDP) growth rate to reach 7% year-on-year by 2019. To
reach this goal, the Government of Indonesia established policies that are
expected to boost economic expansion. In September 2015, the President
released his first installment of policy packages that focused on improving
industrial competitiveness through reducing red tape.

Indonesia's economic growth is expected to rebound as consumers and private
investors respond favorably to the government's public investment and
structural economic reform efforts. The government's ongoing policy reforms
are expected to further stimulate private investment, particularly over the
medium term. The government has unveiled 13 reform packages since September
2015. These facts, together with higher public capital spending, are
steadily improving the country's investment climate.


How is the Directorate General working with other governmental authorities,
namely the coordinating ministries?

Today, renewable energy accounts for a small but growing portion of
Indonesia's electricity portfolio. The Government of Indonesia has announced
a mid-term target for increasing the share of renewable energy in the total
energy mix to 23% by 2025. This means that massive new investment in
renewable-based power generation capacity is being developed. Indonesia is
also planning to significantly increase investments in the energy sector,
including in the renewable energy.

The direction of renewable energy development in Indonesia has been mandated
in the National Energy Policy. The government, under the coordination of the
Coordinating Ministers, is responsible for providing a platform for
potential investors to understand the key development issues of investing in
Indonesia's renewable energy sector.

The government is also responsible for information dissemination so that
potential investors could get updated on the new market directions,
opportunities and economic priorities of Indonesia's renewable energy
sectors, while at the same time building potential business networks with
local authorities and industry players.


One of the most compelling challenges Indonesia's government is facing is
energy security and development. How is the government addressing this
issue?

Data gathered by our Ministry's Data Center shows that energy demand
nowadays has been increasing faster than economic development and population
growth. Total energy demand is growing by around 7-8% per year, as the
transport and industrial sectors grow, and households become more affluent.
A large proportion of this demand has been met by fossil-based energy,
mainly oil. As a consequence, since 2004 Indonesia has become a net-importer
of both crude oil and refined products.

On the other hand, more than 30 million people-about 12% of Indonesia's 250
million inhabitants-lack access to electricity. These people mostly live in
rural areas and outer islands. In 2015 for instance, around 12,569 villages
or rural households still had no electricity, and the electrification ratio
was only 88.3%. Electricity is heavily subsidized and customers pay for
electricity at far below market price. The state-owned electricity company,
PT. PLN, however, is required to buy energy at the market price.

Subsidies, both on oil and electricity, have various economic implications.
The Coordinating Ministry for Economic Affairs admitted that indiscriminate
fuel subsidies have been a poor way to pursue welfare enhancement, because
the wealthiest 40% of households get 70% of the subsidies. Moreover-and very
relevant to the issue of climate change-subsidies lead to over consumption
of energy because the actual cost of that energy is not reflected in the
price that consumers pay. Many reports suggest that subsidies discourage
energy efficiency measures and the development of renewable energy sources
by way of low electricity tariffs. However, eliminating fuel subsidies has
never been an easy task. The majority of Indonesians hate the idea of paying
more for fuel, electricity and related services. Throughout the years, the
government has had some success at whittling away these subsidies but the
issue remains politically contentious.

The decentralized system of government and the resulting division of power
between Central and Local government s also impedes national coordination in
delivering a policy of transition to renewable energy. Under
decentralization, Local governments have been given the rights and
responsibility to issue concessions and licenses for renewable energy.
However, most local governments have very limited capacity or understanding
of the implications of various energy scenarios. Policy framework has to be
established through which to encourage local governments to pursue renewable
energy initiatives.


Could you tell us about the importance of delivering clean energy projects
within the country?

Today, clean energy projects-especially renewable energy projects-are viewed
not only as tools for improving energy security and mitigating and adapting
to climate change, but are also increasingly recognized as investments that
can provide direct and indirect economic advantages by reducing dependence
on imported fuels, improving local air quality and safety, advancing energy
access and security, propelling economic development, and creating jobs.


How are sources of renewable energy ensuring even development across the
archipelago, especially in remote provinces?

Energy is one of the basic needs in Indonesia and its availability greatly
affects the economy and community development. Indonesia as the largest
archipelagic state in the world has around 17,000 islands, with about 6,000
islands inhabited. Unfortunately, many of those islands, or around 12,659
villages (16%), do not have access to electricity. Some factors, such as
transportation and geographic conditions, are known to be the main reasons
why it is difficult to provide electricity access to people in those areas
using the "conventional" method (diesel engines).

In that matter, the Directorate General of NREEC initiated the Bright
Indonesia Program (Program Indonesia Terang), which aimed at increasing the
electrification rate in the eastern part of the archipelago (mainly in
Papua, West Papua, North Maluku, Maluku, East Nusa Tenggara and West Nusa
Tenggara) using local energy resources. We know those areas have such
abundant renewable energy potential (i.e. hydro, wind, solar and marine
energy), therefore the program will utilize those sources to generate the
power.

The people living in remote and isolated areas do not have to depend on the
very expensive diesel engines (genset) or hoping that someday PLN will
expand the electricity grid to their areas. The Bright Indonesia Program in
particular, and the Renewable Energy Development Program in general, can
become a feasible and realistic way to provide the electricity access to
those people using their own resources.

Hopefully, by meeting the basic needs of electricity (such as house
lighting), we can provide more support for their economic activities and
community development in the future.


With the goal of developing infrastructure and boosting economic growth the
government is aiming for the 35 GW program. How is the directorate general
contributing towards the achievement of this project?

In general, the 35,000 MW Project is a strategic planning for electricity
generation in 2015-2019. The project opens market opportunities on renewable
energy in Indonesia. From the 35.000 MW power plant target, 25% of it (8,750
MW) should be based on renewable and it needs USD 30 Billion of total
investment. To achieve this target, the government needs to initiate and
introduce various incentives to attract investors. We are currently
preparing Feed in Tariff (FiT) Regulation for Wind and Rooftop Solar as well
as drafting the energy fund. Geothermal Power Plant and Hydro Power Plant
will provide the largest contribution to achieve the 8.750 MW target.


What are your key priorities as the Director General for New and Renewable
Energy & Energy Conservation (DGNREEC) for 2016-2017?

The Directorate General of NREEC has high commitment to increase the
utilization of clean and renewable energy in Indonesia, as stated by
Indonesia's law, namely Energy Conservation (to increase energy efficiency
on supply and demand side) and Energy Diversification (to increase the share
of new renewable energy use in the primary energy mix).

Through energy diversification, it is projected that in 2025, our NRE share
in the National Energy Mix will be 23% (based on National Energy Policy).

To achieve this target, the government has set up various programs such as:

i. The construction of 35,000MW additional power capacity, and
25% of it should be based on renewable energy power generation.

ii. The mandatory implementation of B20 on biofuel, which started
in 2016 (particularly in the transportation and power plant sectors).

iii. Enhancing the development of NRE-based power plants by
releasing FiT. So far, the Directorate General of NREEC has released FiT
regulation for (mini and micro) hydropower plants, solar photovoltaic power
plants, biomass and biogas power plants, and municipal solid waste power
plants. The FiT regulation for wind and rooftop solar are currently still in
progress, and hopefully will be released this year.

iv. The Directorate General of NREEC continues to develop rural
energy and rural electricity based on renewable energy, particularly through
the Bright Indonesia Program (Program Indonesia Terang).

v. The DGNREEC is currently drafting the energy fund that will be
allocated for renewable energy development.


How is the Directorate General collaborating with the private sector and
what are your prospects for PPPs?

The key for a successful development of renewable energy in Indonesia is the
holistic approach between consciousness of present boundaries, visions of
the future existence, and innovation to overcome possible challenges. Thus,
sustainability will require new leadership skills and mindsets in all
development components; and solving sustainability challenges will require
public and private sector collaboration. Many Indonesia-based companies have
made tremendous progress in becoming more eco-efficient in terms of energy,
water and resource use. Progress in eco-efficiency may have to give way to
radical changes in business systems. This is the reason why innovation in
policymaking is urgently needed as much as the technology innovation itself.


What are the key investment opportunities for foreign investors and what is
the role of the Invest in Remarkable Indonesia program?

Invest in Remarkable Indonesia is a worldwide campaign launched by BKPM (the
Investment Coordinating Board of Indonesia) around 2010 to attract foreign
investment in Indonesia. The Indonesian Trade Promotion Center and/or
Indonesia Investment Promotion Center in many of Indonesia's partner
countries all carry a mission to facilitate and to promote foreign
investment in various sectors in Indonesia.

This campaign emphasizes that Indonesia is a remarkable destination for
investment in trade and tourism. Indonesia is not only diverse in its
culture; our land is also blessed with diverse renewable energy resources.
In a way, we may say that Indonesia is a remarkable place to invest in
renewable energy, because the opportunity is wide open for future
developers.

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Link to Original Article:
http://www.theworldfolio.com/interviews/indonesias-energy-program-is-going-g
reen/4262/

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com