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New renewable energy legislation, a chance for Indonesia to move away from coal

Unit 1 of Sorik Marapi geothermal plant, North Sumatra, Indonesia (source: KS Orka Renewables)
Alexander Richter 14 Feb 2020

Indonesia has prioritized new renewable energy legislation that could be a chance for Indonesia to move away from coal with renewable energy resources. With its great potential in the country, geothermal could benefit from it, but only with the right framework and support.

The parliament of Indonesia for the first time prioritizes passing a new law on renewable energy.  Currently depending largely on coal-fuelled power generation, the country also exports coal. At the same time the country has the largest geothermal energy resources in the world and great opportunities for solar generation due to lots of sunshine, as well as wind power generation with the longest coastlines of any country.

The question the country is asking itself is what energy resources will benefit the economy of the country the most.

The parliament has now announced a series of priority legislation for 2020, which for the first time includes a bill on “new and renewable energy”, as reported by Mongabay.

The current reliance on coal is challenging and problematic for the country both from an economic and ecological perspective. Rising costs, financial obligations and lower-than-expected electricity demand is creating challenges for state-owned power utility PLN.

With the new planned legislation, there is overall hope it means a transition from its reliance on coal to utilising clean energy technologies. Having pledged to cut emissions, it targets an 11% reduction in total CO2 emissions from its energy sector under the Paris climate agreement.

The new legislation seems to be part of those efforts to push renewable energy development. How far it lays a clear path for an energy transition in Indonesia, will have to be seen. In order to have a real impact, renewable energy development needs to happen fast.

The path for the draft legislation to become law is though long, as it will have to be introduced for public input before going to the government.

Experts hope the new legislation will establish a renewable energy market, as well as schemes incentivizing feeding renewable energy into the grid.

With current price caps and other preferential policies for coal, it is hoped that the bill will create a mechanism for market pricing and incentives to make renewables cost competitive to coal.

For an effective legislation, there is a need to require energy producers, and here particularly PLN, to diversify its power sources to include renewables. Elrika Hamdi, energy finance analyst at Institute for Energy Economics and Financial Analysis (IEEFA) points to an interesting element with regards to the energy system. Instead of installed capacity target (for renewable energy), it should have a penetrated capacity target.

In combination with changes already being worked on for geothermal, such as feed-in-tariffs and a cost recover contract scheme for geothermal exploration, this could be a positive overall step.

But we have seen efforts like this before that were watered down to a point that they did not achieve what they were set ou to do. So one will have to be carefully optimistic.

Source: MongaBay