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An energetic transition

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Jakarta Post Editorial - September 24, 2024

Jakarta – It would not have come as a surprise to the informed reader that Indonesia is on course to miss its clean power target by a wide margin.

The writing has been on the wall as investment in renewable energy generation has been hampered by a host of factors.

A high-ranking official at the Energy and Mineral Resources ministry admitted earlier this month that the country would need to add 8.2-gigawatts (GW) of electricity generating capacity from renewable energy sources by the end of next year.

That will clearly not happen, as the energy ministry's own data suggests:

Indonesia only attracted US$580 million in new and renewable energy investment as of August, or around 47 percent of the $1.23 billion full-year target

Those figures are nowhere near where we need them to be.

Projects that are currently in the pipeline include solar, hydroelectric, micro-hydro and wind power plants with total capacities of 2.83 GW, 1.7 GW, 787 megawatts and 527 MW, respectively.

The investment for those projects alone is estimated at US$14 billion, so even if we did achieve this year's investment target, it would be less than a tenth of the amount needed for those projects.

In short, we need a significant increase in the investment currently going to renewable energy development in this country.

Achieving that will require not only supportive regulations for private investors, but also a favorable market environment, where the forces of supply and demand incentivize capital expenditure.

Taking a look at regulations first, the renewable energy bill has been in limbo for far too long. Investors understandably hesitate to engage in any industry while the rules are still in a state of flux.

When the bill finally does get passed, it will hopefully include stipulations on power wheeling that allow independent power producers to sell electricity directly to consumers through PLN's transmission network.

According to the latest reports, the regulation is to accommodate this, but it has been a contentious issue with some back and forth in the course of the bill's deliberation. The details on costs and conditions need to be accommodative for private investors, but also for consumers who want to procure clean power.

As the electricity distribution monopolist, state-owned electricity company PLN must not exploit its market position to the detriment of independent power producers.

As for the market environment, coal-fired power clogging the Jawa-Bali grid has long been an impediment to renewable energy investment. Plans for the early retirement of coal-fired power plants seems to be discussed almost daily, but change on the ground is measured in years.

International sponsors have promised to help our emerging economy in this costly undertaking. Promises alone will achieve little, however. It took years to even get to an honest debate about money, and the discussion has been awkward since.

It feels a bit like a first date in which both people realize after sitting down at the fancy restaurant that neither has enough cash in their pocket, which is guaranteed to ruin the evening even if the food is good.

Yet, we must not be ashamed to talk about money, including at the United Nations Climate Change Conference (COP) in Azerbaijan in less than two months.

Global clean energy investment is expected to rise in the double digits to $2 trillion this year, according to the International Energy Agency, but a disproportionately small share of that goes to emerging economies, excluding China.

The incoming government, with the help of advanced economies, needs to redouble the country's efforts to attract more investment to clean energy, particularly in the power sector.

The encouraging part is that increased investment in clean power generally brings down the cost of power production, which we have already seen in the solar power segment, where the levelized cost of electricity is competitive even with coal.

There is no reason why we should not be able to achieve similar growth in other renewables, but we must remain energetic in our transition.

Source: https://www.thejakartapost.com/opinion/2024/09/24/an-energetic-transition.htm

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