Energy & Mining

Greening Pains

Green Energy

Rapid urbanization has placed new demands on Indonesia's energy supply, but government officials are pushing for new green energy investments to meet demand and reduce negative externalities.

Indonesia is well aware that it is at a key point in time with regards to its clean technology. Already the world’s fourth-largest country by population, recent economic growth has placed steadily increasing demands on the nation’s energy grid, bringing a host of new problems. Thus far, Indonesia has responded by raising its usage of coal and petroleum imports, going from a net oil exporter in the 1980s to importing more than 800,000bpd in 2016. In response, the Indonesian government has embarked upon an ambitious green energy program with the goal of increasing the share of energy from renewables to 23% by 2025 and 31% by 2050. New regulatory bodies are being installed with the goal of taking advantage of Indonesia’s hydropower, geothermal, and solar potential, and industry officials are optimistic that the country could meet its long-term goals more than a decade ahead of schedule. The possible benefits are enormous; cost reductions combined with the public health gains from reduced emissions could save the country up to USD53 billion a year.

Increased demand is coming from everywhere, with industrial growth and urbanization leading to electricity consumption tripling from 2000 to 2014, and the transport industry seeing the number of motorcycles and scooters doubling between 2008 and 2015. Despite natural gas reserves of 149 trillion cubic feet and more than 32,270 million tons of coal, Indonesia has been unable to keep up with the surge in demand. In search of solutions, the Indonesian government has begun to assess the potential of a broad spectrum of renewable technologies. Total installed energy capacity is 57GW, of which 15% is renewable. Current estimates are that the country has more than 716GW of renewable power generation potential, with 532GW of this coming from solar photovoltaic (PV) cells. Indonesia’s climate makes it a natural fit for solar generation, and it is especially attractive to the government due to its potential to be utilized in both large-scale plants and in smaller residential settings. Current projections are for 6.4GW of solar PV cells to be installed by 2025, far below potential. While concerns remain about solar technology’s ability to meet fluctuating demand, the technology is expected to become one of the centerpieces of the Indonesian energy mix in the long run.
Hydropower has an estimated power generation potential of 75GW, but it is well ahead of solar in capturing this potential. The nation’s development plan calls for 18.3GW to be installed by 2025 and 24.3GW by 2030. Complicating matters, however, is the fact that many of the areas with the potential for hydro projects are either protected natural reserves or would require significant population displacements.
Bioenergy and geothermal are both smaller potential sources in absolute terms, but their potential in the industrial sector has made them a source of significant interest in the green energy community. Indonesia’s government has estimated that palm oil, solid waste, rubber, and corn could account for more than 22GW of bioenergy production, giving them the potential to transform the industrial sector. Government projections call for industrial applications of bioenergy and liquid biofuels to account for more than half of all renewable energy use in 2030.
Early reports on the rate of adaption of renewable technologies have been largely positive. The Energy and Mineral Resources Ministry reported in December 2017 that renewables accounted for 12.62% of the nation’s total electricity supply, above the government’s target of 11.96%. The government has taken steps to incentivize the adoption of renewables by raising electricity prices for industrial consumers, removing gasoline subsidies, and signing more than 60 public-private agreements in 2017 to produce renewable power plants. Aware that a range of solutions will be needed to meet the country’s energy needs, Indonesia has been testing pilot programs with different renewable strategies in remote areas to determine which technologies are most effective in which regions. International partnerships have played a role in the development of the sector as well, as Indonesia has worked closely with a coalition of US technology providers and engineers to install technologies and attract investment from US firms.

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