Jakarta 22 November 2024 – The Journey to achieve Indonesia’s energy independence and security could be supported through utilization of renewable energy as one of the sources of electricity supply. Through President Prabowo’s directives mentioned during his Inauguration Speech (20/10/2024), Indonesia will focus on renewable energy management to achieve energy independence and security in accordance with ‘Asta Cita’. This directive serves as the primary reference for the formulation of the National Medium-Term Development Plan (RPJMN) 2025-2029, particularly in the electricity sector.
According to the Ministry of Energy and Mineral Resources (MEMR), Indonesia owns a vast potential of renewable energy, reaching a massive 3,668 GW. Evenmore, a study by the Institute for Essential Services Reform (IESR) indicates an even larger potential of over 7,800 GW, with solar energy covers for more than 75% of that potential. Despite these large numbers, renewable energy, especially in remote areas, is significantly overlooked.
Although Indonesia’s electrification ratio almost approaches 100%, there are several challenges, including: uneven quality of electricity services across the country, high dependency on fossil fuels, insufficient exploration of local renewable energy resources and a spatial mismatch between renewable resources and areas with high energy demand.
According to the (MEMR), until November 2024, there are 86 villages without access to electricity. Therefore, promoting the development of renewable plants based on local potentials of each region, rural electrification and constructing distributed and isolated grids are essential.
The application of renewable electricity may reduce energy imports and contribute to achieving infrastructure stock targets in economic growth. Increased individual consumption of electricity can indicate a country’s economic growth. Furthermore, to provide better access to clean electricity, Indonesia needs to develop better electricity infrastructure, supported with digital technology to support increased connectivity and integration of productive clean electricity.
Nevertheless, achieving a better electricity infrastructure both at national and local level will cost a fortune. To support these initiatives, the Government of Indonesia continues to explore private sector investment.
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Ervan Maksum, Deputy for Infrastructure and Facilities at the Ministry of National Development Planning/Bappenas, mentioned the importance of regulation and policy framework to mobilize private financing and investment. Ervan further stated that Indonesia’s state budget (APBN) and regional budget (APBD) won’t be able to cover the whole process of energy transition to achieve the country’s target. Therefore to achieve the energy transition target, Indonesia needs alternative financing from non-governmental sources and to involve private capital.
“Collaboration with various private companies and capital owners is essential. One initiative that can be offered to companies is the use of environment, sustainability and governance (ESG) funds directed to support renewable energy projects in villages, as a corporate obligation to reduce carbon emissions from business activities,” Ervan emphasized.
Taufiq Hidayat Putra, Director of Electricity, Telecommunications, and Informatics at the Ministry of National Development Planning/Bappenas, stated that Indonesia’s electricity sector planning encompasses quality electricity access, not only for industries but also for all segments of society, especially in remote areas.
“The Indonesian government and all stakeholders must work together to achieve the energy transition in the electricity sector. We must support our communities who live in remote areas, especially to enjoy clean, safe, and affordable electricity using the potential of renewable energy in their respective regions. With better electricity quality, communities living in remote areas can receive benefits in various fields, one of which is modernization in agricultural activities, often referred to as electrifying agriculture. Meanwhile, in maritime regions, access to quality electricity enables the provision of cold storage to preserve fresh fish catches for longer. To produce reliable electricity in remote areas, the challenges faced are related to the spatial mismatch between the location of renewable energy sources and the location of industrial centers and economic activities, as well as communities, needs to be addressed through holistic, integrated, and comprehensive planning with the development of transmission and distribution networks integrated with renewable energy power plant development plans,” said Taufiq.
Fabby Tumiwa, the Executive Director of the Institute for Essential Services Reform (IESR), emphasized that the Indonesian government needs to prepare a roadmap for the energy transition with the most cost-effective options, ensuring optimal supply reliability and equity. According to Fabby, through the renewable energy transition, Indonesia can increase its ambition to reduce greenhouse gas emissions in line with the 1.5-degree Celsius target set by the Paris Agreement.
“Reducing emissions is very important for Indonesia, as an archipelagic country, communities in 3T areas (Outermost, Outermost, and Most Backward) are very vulnerable to the impacts of rising global temperatures. Providing reliable, affordable, and clean electricity in rural areas and 3T areas is very possible by utilizing local renewable energy potential to replace 3 GW of scattered diesel power plants. With this, in addition to more equitable access to electricity, emission reductions and electricity supply costs can be achieved,” said Fabby.
On the other hand, to increase attractiveness to investors, Deni Gumilang, Project Lead of Clean, Affordable and Secure Energy for Southeast Asia (CASE for SEA) in Indonesia, GIZ Energy Program for Indonesia/ASEAN, underlined the importance of developing policy derisking instruments aimed at mitigating transaction risks, considering that challenges in policies and regulations are still considered as the main obstacles in the development of renewable energy in Indonesia. In addition, financial risk mitigation instruments also need to be developed in parallel to create momentum that allows for the optimization of fund disbursement from investors, to drive the growth of the renewable energy market.
“Indonesia has enormous potential in the development of renewable energy, which attracts many investors. However, the high risks in renewable energy projects have become a barrier to investment. The implementation of policy and finance derisking instruments is expected to open up opportunities for real financing implementation for Indonesia,” explained Deni.
