May 31, 2018 Read More →

Government Policy Thwarts Uptake of Renewables in Indonesia

Mongobay:

Demand for energy in China and Indonesia continues to drive the resurgence of the latter’s coal industry, setting back efforts in both countries to shift to a greater share of renewable energy.

Mining, freight and trade executives were largely upbeat at what was billed as the coal industry’s biggest event of the year, the 24th Coaltrans Asia, on the Indonesian resort island of Bali earlier this month. Analysts who attended the three-day conference said the outlook in China was still very strong, especially for coal from Indonesia, one of the world’s biggest exporters of the fossil fuel.

A major factor behind this trend is the growing domestic demand. At present, Indonesia’s coal-fired power plants require about 80 to 90 MMT of coal per year, or roughly 80 percent of the locally mined coal that is allocated for the domestic market.

“Slowly but sure, we’re starting to prioritize domestic needs,” said Bambang, the energy ministry’s coal chief. “Based on the national development plan, the domestic market [for coal] has increased 27 percent each year, and in 2019, we hope it’ll increase by 60 percent.”

Elrika Hamdi, an energy finance analyst from the Institute for Energy Economics and Financial Analysis (IEEFA), a Cleveland, Ohio-based think tank, noted that the 10-year business plan from state-owned power utility PLN indicated it was on a building spree: “there are going to be many new coal-fired plants operating in 2020 and 2021,” she said.

Coal producers, she added, are “trying to dig as much coal as they can while it’s still possible. They’re capitalizing on the moment [when] the coal price is high, with the [Coaltrans Asia] conference saying the price will be stable or even have an upward trend.”

The bullish outlook for coal, driven in large part by government policy, could spell trouble for the renewable energy market in Indonesia, which is already struggling to compete with the ubiquitous fossil fuel, analysts say.

Indonesia will miss its target of generating 23 percent of its energy from new and renewable sources by 2025 unless it makes significant policy and regulatory changes, according to a report from the Geneva-based Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD).

“Many stakeholders we spoke to hold this view and have expressed concerns that the current policies do not provide enough incentive to grow renewables,” Richard Bridle, a senior policy adviser at GSI, said at the launch of the report in March. “More friendly regulations will be a critical first step to boosting renewable energy development in Indonesia and building a business case for investment.”

But right now, the momentum and policy framework are not in favor of renewables — so much so that the coal industry players at the recent Bali conference said they didn’t see renewables as a competitive threat in the Indonesian market.

“While speakers at the conference see renewables as a threat because prices for renewables have declined in the past 10 years, it’s not [considered] a threat for Indonesia,” Elrika said. “Even the government of Indonesia says it will still use coal as the base load power source.”

More: In export- and domestic-driven coal boon, Indonesia neglects renewables

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