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ESDM to rethink renewables strategy amid lower-than-expected economic growth

Posted by on 03 Oktober 2019

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Indonesia must restrategize to meet its 2025 renewable target, the Energy and Mineral Resources (ESDM) Ministry said on Sept. 25 at a discussion on the country's renewable energy outlook in Jakarta. 

“So what is our strategy to reach that target? With the implementation of the [30 percent] B30 biodiesel policy, we expect to increase the renewable energy mix by 3 percentage points,” ESDM geothermal director Ida Nuryatin Finahari said during the discussion.

The ministry would also increase output at biomass power plants by 5 percentage points and the production of biogasoline and bioavtur by 2 percentage points each to meet the 23 percent target, she said.

The ministry has decided that it would focus more on developing bioenergy over other alternatives in meeting the government’s 23 percent renewable energy target, as stipulated in the long-term National Energy Plan (RUEN). This was particularly because bioenergy aligned with the government's plan to promote biofuel consumption in the transportation sector and thus, reduce carbon emissions and oil imports.

The decision came after the Agency for the Assessment and Application of Technology (BPPT) released its Energy Outlook 2018 late last year, which concluded that Indonesia would reach a new and renewable energy (NRE) mix of only 13 percent by 2025, much lower than the target.

It reported that, despite continual increase, the country's renewable energy development could still not compete with fossil fuels and thus, “the target for NRE usage set by the Government [...] will be difficult to achieve”.

“When we were drafting the RUEN, we were very optimistic about Indonesia’s economic growth, expecting 7-8 percent growth, but our current growth is only around 5 percent,” said Ida, explaining that the government had overestimated its growth projection for renewable energy production.

The BPPT's Energy Outlook 2018 arrived at its 13 percent NRE growth projection by assuming consistent economic growth of 5 percent.

President Joko “Jokowi” Widodo announced in August that the government was bringing forward the implementation of its B30 policy to January 2020, and that state-owned energy holding company Pertamina was conducting a production trial run (PTR) of palm oil biodiesel at its Plaju refinery in South Sumatra.

However, three renewable energy experts The Jakarta Post interviewed agreed that biofuels alone would not be enough to meet the government's 23 percent NRE target.

“To reach the [national] energy target, renewable energy development should involve biofuel to power vehicles, as well as renewable power plants such as geothermal, hydroelectric, nuclear, solar and wind,” said BPPT head Hammam Riza.

Hamman also noted that biofuels were a particularly lucrative energy source because the price of palm oil – a common biofuel ingredient – had been declining since the European Union (EU) decided to phase out palm oil imports.

Diversifying renewable energy sources was also necessary, as the production of palm oil biodiesel was frequently criticized for causing severe deforestation, which could offset the RUEN’s other target to reduce Indonesia’s greenhouse gas emissions by 29 percent by 2030.

Separately, Indonesian Renewable Energy Society (METI) chairman Surya Darma concurred with Hammam's views, although Surya had reservations about nuclear power.

Energy analyst and Indonesian Geothermal Association advisor Abadi Poernomo said that the RUEN also projected that 65 percent of the 92 million tons of oil equivalent (mtoe) in renewable energy consumption projected for 2025 would be consumed as electricity, while only 32 percent would be biofuel.

“This means that the 23 percent renewable energy target is not achievable with just biofuel,” he said.