Indonesia is mixed up about the energy mix, and the underlying problem is the shortage of energy. Latest long range projections from the Ministry of Mines and Energy (CADES-ESDM) show growing dependence on coal, rising from 36.5 percent now, to 52 percent in 2025 and 86 percent by2050.
Athough government and people seek a green future, the future will be black, or coal will have to be greened. What has happened to all this renewable energy we are supposed to develop? To paraphrase Humphrey Bogart in the famous movie Casablanca “It doesnt seem to amount to a can of beans”.
The number of Gigs (GW) or bundles of 10,000 megawatts (MW) that Indonesia needs toÂ install only for the Java-Madura-Bali system run by state power firm PLN is projected to rise from 36 GW in 2010 to 94 GW by 2025, leaping to an astounding 519 GW by 2050.After 2025 demand for power will grow geometrically, needing 8 GW per year until 2030: 10.5 GW per year until 2035 and 15 GW per year up to 2040. This does not include the needs of 82 million Indonesians representing 35 percent of the domestic power market with no electricity. Nor the estimated 20,000 tiny, small, medium and getting much larger captive power stations run by everything from big industry to remote communities, which need to be upgraded and replaced.
As the Standard Chartered BankÂ said in a recent report, Indonesia is bound to bound to overtake the UK, Japan and Germany by about 2045 and become the seventh or eighth largest economy in the world.Â Â Â When a transitional economy grows this fast its demand for power does not grow pro rata to its economic growth rate of 6 or 7 percent, but grows at aÂ disproportionately high speed as personal incomes take off. By mid-century about 285 million
Indonesians will be struggling for a better life and higger incomes and will not be denied their shopping centers, electronic and white goods and hybrid electric cars.
The long range estimates predict by 2025, 4.5 GW of hydro, 4 GW of nuclear power and 3 GW of geothermal and no mention of wind, solar and biomass. This simply isn’t good enough, with renewables including nuclear supplying only 12 percent of total energy needs for the Java Bali system, and this falls to 6 percent by 2050. But Indonesia has an estimated 27 GW of geothermal reserves, and could do much better on expansion of renewable and nuclear energy. The long range projections say the two combined will only contribute 6 percent of energy by 2050 and two thirds of this will be nuclear. Renewables will contribute 2 only percent. This is peanuts!
Total estimated world capacity for geothermal development might be 70 GW for the 21st century. Indonesia will need this much between 2035 and 2040.Â Â Looking at these figures Hilmi Panigoro, Chairman of Medco, Indonesia’s largest local power company, now focusing on upstream oil and gas, predicted that by 2015 more than half of its energy development businesswould be outside Indonesia in countries like Libya, with a big push at
home into renewables, especially geothermal, alongside diversification into agriculture for fuel crops and food.
Asked why so much emphasis on overseas energy development, and did that reflect falling energy resources, or a poor business environment, Hilmi replied, “A bit of both”. Hilmi said the Indonesian power sector needs certainty, clearer fiscal policies and better energy pricing. After all in the Donggi-Senoro gas field case the government effectively said to Medco, that you can’t sell abroad, you must sell in Indonesia probably at a lower price and you must wait for us to install the infrastructure so you can do it.
But you dont have to wait to invest in Libya. You do not have to be a rocket scientist to work this out. So Indonesia needs new energy policies, more renewables, more energy efficiency, better regulations, more certainty, better energy pricing, green incentives instead of fossil fuel subsidy disincentives, more liberalization, a bigger role for the private sector. And much faster government decisions.
(Terry Lacey is a development economist who writes from Jakarta on modernization in the Muslim world, investment and trade relations with the EU and Islamic banking.Â© Copyright Co-operation for Development (C4D) www.c4d-info.org))