March 15, 2023
JAKARTA – President Joko “Jokowi” Widodo showed off Indonesia’s plan to accelerate the transition from fossil fuels to renewable energy at the Group of 20 Summit in Bali last November, announcing a new energy transition mechanism to achieve a target of 34 percent renewable energy mix by 2030, compared with a mere 11 percent at present.
That is indeed an ambitious target for a country, which, according to the Institute for Essential Services Reform (IESR), still depends on fossil energy, mainly coal, for 85 percent of its electricity as the new energy mix requires the phasing out of 8.6 gigawatts of coal plants and the building of 28 GW of renewable energy.
The government also seems to realize that given the availability of resources and funding, solar power should play a very important role in contributing up to one third of the renewables target. We have indeed plenty of solar power to meet the bulk of our electricity needs and solar photovoltaic (PV) costs have fallen and this trend is expected to continue as the growing demand for PV panels increases and the production costs decline as well.
The modularity of PV units allows them to be installed instantly on any surface, land, water or rooftops, as well as on agricultural land, without compromising productivity. The most simple and fast solution is to install solar panels on roofs. According to a 2019 IESR study, residential buildings alone can generate between 195 and 565 GW and hundreds of GW more from industrial building rooftops.
The government also has amended regulations and offered incentives for the harnessing of renewable energy, notably solar power through rooftop solar systems. The net metering feed in tariff for rooftop solar has been raised from 65 percent to 100 percent. But why has our rooftop solar power development been so utterly slow, totaling only about 50 MW as of 2022? Vietnam, according to media reports, generated more than 9 GW of rooftop PV in 2020 alone.
The main problem facing Indonesia is the conflict of interests of the debt-ridden electricity monopoly (state electricity company PLN). Because of the acceleration of coal-fired power plants since 2014 PLN already has a surplus power capacity in Java and most of Sumatra.
Consumers who apply for PV installations have been complaining about PLN’s decision to limit capacity installation way below that requested.
This is, we think, where President Jokowi should assert his leadership, if he is really serious about achieving the renewables target he flaunted at the G20 Summit in Bali. He should demonstrate his full commitment to implementing the Just Energy Transition Partnership he signed in Bali.
Hence Jokowi should instruct PLN to fully abide by the latest regulations on rooftop solar power installations, rather than waiting for the House of Representatives’ approval of the renewable energy bill, which no one can predict when it will happen. Wherever land is the problem, notably in Java, the President should offer generous incentives for the development of floating PVs on reservoirs and dams, in the way Indonesia-Singapore joint ventures are doing in Batam.
The production costs of PV panels also could be lowered significantly if the President eased the local-content requirement imposed on new investors in the PV panel industry. Prematurely imposing such rigid local content rules before the domestic industry is able to manufacture at least 50 percent of the PV panel components is stifling the development of the industry due to lack of investment.
Consumers have been complaining that because of the tough local content rule and the limited capacity of the domestic industry the costs of local PV products are 30 to 40 percent higher than imported ones. The domestic solar PV industry is currently only capable of assembling solar modules using imported solar cells, glass and other components.
Only a competitive manufacturing industry can cut down the unit cost of PV panels. But the industry can become competitive only when the number of PV panel users has become sufficiently large to create economies of scale.