Challenges Amidst in the...

Challenges Amidst in the Rise of Investment in Renewable Energy

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21 September 2021

Jakarta, 22 September 2021 - Electricity is projected to become the dominant 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 environmentally friendly 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.


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


“Regulations have not comprehensively regulated the tariffs, incentives, subsidies, and risk reduction related to all new and renewable energy development activities. Several related regulations, such as tariffs, are being prepared but not yet launched," said Yanti at the event organized by the Indonesia Clean Energy Forum (ICEF) and IESR.


In addition, from the investment side, Yanti explained other challenges, such as the lack of availability of funding from local financial institutions and the limited number of renewable energy projects that are bankable or meet bank requirements to obtain business loans. In her opinion, to overcome these challenges, clear regulatory support is needed first. As well as the public also needs to increase their awareness 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 was explained that technical solution can be found as long as the new renewable energy in Indonesia was 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. In order for the financing to be effective, in his opinion, the government still needs to prioritize the types of renewable energy that will be developed.


“In the Electricity Supply Business Plan (RUPTL) (green-red) that has been signed, we will give a wider focus to Coal-fired Power Plants (CFPP). 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 currently many parties want to invest in new renewable energy (NRE) projects in Indonesia. This is because funding support from investors is increasingly limited to invest in fossil energy projects by strengthen the climate commitments of many countries in the world.


“The problem is they are looking for the project that a quite big size, and we didn’t have too much project with bigger size, let say above 50 MW. The project such as above it 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 expected to be higher in 2050 if it encourages 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.


“Of course it requires a set of policy to support the development of new renewable energy, intergrated to the regulation in network system, structural changes, and an equitable energy transition policy, as well as gaining support and acceptance from the wider society for renewable energy," said Ulrike.