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Challenges Amidst in the Rise of Investment in Renewable Energy

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Jakarta, 22 September 2021 – Electricity is projected to become the predominant energy resource in future energy systems due to electric vehicles and the electrification of the industrial sector. For this reason, it is essential to ensure that the energy source in the electrification of the sector comes from clean energy. However, the development of renewable energy in Indonesia still faces various challenges, both from a technical perspective, as well as from a regulatory, economic, social, and environmental perspective.

It was explained by a senior researcher of the Institute for Essential Services Reform (IESR), Handriyanti Diah Puspitarini on the third day of Indonesia Energy Transition Dialogue (IETD) 2021, Wednesday (22/09/2021). Yanti said that from the regulation, Indonesia does not have comprehensive policies in fully supporting the development of renewable energy.

“Until now, no comprehensive regulations are supporting fully renewable development related to the tariffs, incentives, subsidies, and risk reduction. It has been prepared but not yet launched,” said Yanti at the event organized by the Indonesia Clean Energy Forum (ICEF) and IESR

Moreover, analyzing the investment, Yanti explained other challenges, such as the lack of availability of funding from local financial institutions and the limited number of bankable renewable energy projects. She said that to overcome these challenges, firstly need clear regulatory support. On another hand, public awareness also needs to increase to support the potential of renewable energy.

Responding to the statement, Director General of New Renewable Energy, and Energy Conservation of Ministry Energy and Mineral Resources of Indonesia, Dadan Kusdiana conveyed that in Energy and Mineral Resources studies, it was explained that technical solutions can be solved as long as the new renewable energy in Indonesia is economical.

“Because we have the technology and resources to absorb emissions, we can maximize what we have to reduce emissions,” said Dadan.

Furthermore, Dadan also revealed that related to project funding, currently, many investors are already queuing up to invest in renewable energy. To make effective financing, in his opinion, the government still needs to prioritize the types of renewable energy that will be developed.

“In the National Electricity Supply Business Plan (RUPTL) (green-ed) that has been signed, we will give a wider focus to solar PV. Meanwhile, existing projects such as geothermal projects will continue to be expanded, as well as hydropower projects,” he explained.

In line with Dadan, CEO of Pertamina Power Indonesia, Dannif Danusaputro confirmed that many parties want to invest in new renewable energy (NRE) projects in Indonesia. It is because funding support from investors is increasingly limited to invest in fossil energy projects by extending the climate commitments of many countries in the world.

“The problem is they are looking for a project that is quite big, and we didn’t have too many bigger projects, let say above 50 MW. The bigger project needs to be developed to become more bankable,” said Dannif.

Ulrike Lehr, Head of Socio-Economic and Policy, IRENA, highlighted that the average world economic growth is predicted to be higher in 2050 if it boosts low-carbon economic growth. The social problems that may arise related to job losses in the fossil mining and fossil fuel industries can be easily compensated by the creation of jobs in other industries that will grow faster.

“There are sets of policies that are needed, we believe that there should be holistic policies set combining the deployment policies that are mainly oriented at deploying the (renewable) technology, integrating policy to integrate it into the grid and new energy system, structural change and just transition policy, also civil society is buying into the energy transition and is providing a high level of acceptance,” said Ulrike.

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