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Rp 1.4 Quadrillion Investment Needed for Clean Electricity

Indonesia will need Rp 1.4 quadrillion (US$107 billion) to meet its clean electricity target while developing the country’s large new and renewable energy potential, government estimates show.

The hefty investment would be needed to reach the government’s 23 percent target of national electricity being produced using clean energy, according to the Energy and Mineral Resources Ministry’s Directorate General for New Renewable Energy and Energy Conservation.

Directorate general secretary Dadan Kusdiana said an attractive investment climate must be developed in order to encourage foreign investment, as it was impossible for the government to amass such a large sum of money.

“What we’re trying to do now is create a good investment climate. For example, we are trying to set prices that will encourage investment. Right now, all geothermal permits are processed by the BKPM [Investment Coordinating Board]; it’s all done in one place,” he said on Monday afternoon.

New and renewable energy sources have been neglected throughout the years in favor of fossil fuel despite the potential large reserves in the country.

However, government commitment to cleaner energy has been pledged again amid the depletion of fossil fuel reserves and rising awareness of the need for environmental conservation. At last year’s Paris climate talks ( COP21 ) the government pledged a carbon emission reduction target of 29 percent by 2030.

Investment in new and renewable energy amounted to $870 million in the first half of this year, 63.5 percent of the total target of $1.37 billion. The biggest chunk of that investment at $560 million went into geothermal energy.

Furthermore, non-tax revenue from new and renewable energy sources reached Rp 283.25 billion during the first six months of the year, less than half of the full-year target of Rp 630 billion. Revenue so far has been solely from geothermal energy projects.

A Rp 1.2 trillion subsidy has been approved for the Energy and Mineral Resources Ministry in next year’s budget to plug any gaps between the price of electricity from renewable sources and conventional sources that state-owned electricity company PLN cannot cover.

Despite the government’s efforts, however, the future of clean energy sources in the country looks a little bleak. In its most recent 2016 to 2025 electricity procurement business plan (RUPTL), the 23 percent target of 2025 has been decreased to 19.6 percent as it was deemed unachievable unless 3.6 gigawatts were procured from nuclear power plants.

Moreover, the ministry also announced that it would slash Rp 900 billion from its budget this year, the biggest cut being in the allocation for the Directorate General for New Renewable Energy and Energy Conservation, which will be left with Rp 1.7 trillion.

Institute for Essential Services Reform (IESR) executive director Fabby Tumiwa said the government could not rely on investment alone to boost development. The government also needed to increase efficiency efforts, he said.

“In order to save energy, we need better technology. However, we are still highly reliant on new and renewable energy technology from abroad. On top of that, our current regulations have not been implemented well to allow for more use of these new technologies,” Fabby said.