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Government Pushes for Renewable Energy Despite Cheaper Oil

The government has stepped up its efforts to reach the 23 percent targeted renewable energy utilization over the next nine years, by boosting regional partnership, research and clean energy investment despite cheaper fossil-based fuels.

“There are always factors concerning capital efficiency as most clean energy technology is more expensive than coal-fired, but we can decrease the gap with technology and cooperation,” Vice President Jusuf Kalla said in his speech at the Bali Clean Energy Forum on Thursday.

As a tropical and archipelagic country, Indonesia has abundant resources, from hydropower to solar energy. In the long-term, the increased use of the new and renewable energy will benefit the country as the costs incurred from the environmental damage caused by the exploitation of the fossil-based fuel will be also high.

The country is estimated to have around 28 gigawatt (GW) in geothermal potentials and 75 GW in hydropower potentials that can generate electricity. The total potential renewable energy is estimated to reach more than 300,000 megawatt (MW).

“In 10 years, Indonesia will build two times 35,000 MW, and the proportion of coal-fired power plants should fall to 50 percent from the current 60 percent, while the proportion of the renewable energy will increase to 25 percent from 11 percent,” he said.

According to data from state-owned electricity firm PLN, around 55.7 percent of electricity generation in 2015 was fueled by coal, 25.3 percent by gas, 8.2 percent by diesel fuel, 5.9 percent by hydropower plants and around 4 percent by geothermal energy.

The government has also aimed to add 35,000 MW of electricity over the next five years, with 25 percent slated to be sourced from renewable energy.

Kalla also said that the slumping oil price might not last long and the price could exceed the renewable energy cost in time.

Oil benchmark Brent crude was at US$30.54 per barrel on Thursday, according to Bloomberg figures, compared to $64.64 per barrel on April 28 last year.

Kalla cited that the diesel fuel electricity price once hit 30 US cent per kilowatt hour (kWh) compared to 10-12 US cents per KwH for clean energy, such as hydropower and geothermal.

Energy and Mineral Resources Minister Sudirman Said voiced the same concern, stating that the country should avoid the pitfall of overdependency on fossil fuels, which could lead to a so-called “corrosive energy policy”.

Sudirman also said that he aimed to capitalize on the country’s recent move to become an associate member of the International Energy Agency (IEA) and rejoin OPEC to boost the partnership in renewable energy development.

“We will form a Center of Excellence in Bali to aid the research, education, pilot project and investment facilitation of clean energy,” he said, adding that Bali would be a good exemplary project with its size as the government aimed to supply 90 percent of the island’s electricity through renewable energy sources over the next five years.

The government will also work with governors from six provinces, including East Nusa Tenggara and West Papua, on the clean energy program to provide electricity for 12,600 villages, in a program called Indonesia Terang (Bright Indonesia).

He also cited the government’s recent plan to establish an entity similar to PLN to handle renewable energy to buffer the purchasing of electricity from independent power producers and sell the power to PLN under a certain price, as well as a cooperation with Financial Services Authority (OJK) to boost the funding for renewable energy projects.