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Goverment Gets Serious About Renewable Energy Development

Following a major overhaul in the country’s fuel subsidy program, the Energy and Mineral Resources Ministry is now striving to explore new and renewable energy resources.

Indonesia is currently heavily dependent on fossil fuel, particularly oil and coal, despite possessing abundant potential sources of renewable energy, primarily geothermal and solar energy.

Located in the “ring of fire”, the country is rich with volcanoes providing abundant geothermal sources. In addition, the country also receives sunlight throughout the year, making it ripe for solar power development.

Despite this potential, efforts to exploit these resources have been few and far between.

Concerns have risen over the country’s energy security, particularly with the growing demand for energy amid declining supplies. To make matters worse, attempts to find new hydrocarbon sources appear to have been fruitless. 

Six months after taking office, Energy and Mineral Resources Minister Sudirman Said has revealed his plan to make significant changes to the management of the new and renewable energy resources, including by allocating more funds to related projects. 

“The ministry will no longer use the obsolete platform inherited from the past administration where new and renewable energy sources took a back seat. In the next state budget, we will propose a much higher budget for the new and renewable energy sector,” the minister said.

He added that the new and renewable energy sector would probably be allocated around 40 percent of the ministry’s total budget

In the 2015 state budget, the Energy and Mineral Resources Ministry received Rp 14.9 trillion, of which only Rp 1.69 trillion is earmarked for the development of infrastructure related to new and renewable energy.

“The money will be spent on a range of uses, possibly including state-owned enterprise investment in the new and renewable energy sector,” Sudirman added.

Apart from the greater allocation to the new and renewable energy sector, Sudirman is also planning to establish a new directorate general for energy conservation. 

Under the existing organizational structure, energy conservation is included in the remit of the directorate general for new and renewable energy and energy conservation.

Sudirman argued that the establishment of the new directorate general was necessary as conserving energy was as important as creating or finding new energy sources. 

He added that his ministry was currently working to propose the plan to the Administrative and Bureaucratic Reform Ministry.

A member of the House of Representatives’ Commission VII overseeing energy, Satya W. Yudha, claimed that legislators would support the ministry’s agenda to prioritize new and renewable energy because those energy sources were sustainable, unlike oil, gas or coal.

However, he said, the ministry would also need to encourage the sector through incentives such as tax exemptions.

“The problem with new and renewable energy is that its development is expensive. Therefore, the government should think about how to make it more economical, for example by offering subsidies. The economics of these projects are important, particularly amid declining oil prices, which makes the commodity far cheaper than renewable energies,” Satya explained

However, he disagreed with the ministry’s plan to establish a new directorate general for energy conservation. 

He argued that the Ministry needed only to improve the existing energy conservation section rather than increase its status to directorate general level.