Indonesia has the potential to be a vital renewable energy exporter in the region. But it has to first get its ducks in a row on the technical, financial and regulatory fronts.
The climate change story is filled with naysayers. The theory of Global Warming was initially dismissed by the majority of serious scientists. When the support for the theory grew, the fossil fuel industry funded research to cast doubts about the lack of scientific consensus. Even when a new norm compels individuals to express their acceptance of climate change, they quietly believe otherwise.
Denialism is omnipresent in the energy transition narrative. While individuals might support more renewable investment, critical actors have been sceptical of the ability of renewables in meeting the future energy demand of rapidly growing economies. These naysayers are either ignorant of the scientific research or selfish in protecting their financial interests.
Southeast Asia’s largest country by economy and population size, Indonesia, consumes 300 Terrawatthours (TWh) of electricity per year. This electricity came primarily from fossil fuels: coal (66 per cent), gas (17 per cent), and diesel (4 per cent). Renewables contributed only 13 per cent, of which 0.01 per cent was Photovoltaic solar cells. When Indonesia is completely electrified, fully industrialised and reaches high-income status, it will demand 9,000 TWh per year, 30 times higher than the current demand.
The naysayers are not wrong. The energy transition challenge is humongous. They are not wrong either to doubt the potential of renewables in filling the demand gap. The total combined potential of wind, hydro, geothermal, ocean energy, and bio-energy in Indonesia can only generate about 1,000 TWh.
To secure the energy demand while achieving carbon neutrality, 6.7 Terrawatt of solar capacity is needed. An annual 170 Gigawatt of solar panels have to be installed for the next 40 years. The naysayers are back again, asking where would the archipelago Indonesia place millions of solar panels? After all, Indonesia only has a land area of 1.9 million km2. Moreover, governments will be drawn into protracted negotiations concerning schemes to incentivise land and property owners to place solar panels on fields and rooftops.
Denialism is omnipresent in the energy transition narrative.
The game-changer is Indonesia’s unique maritime area of 6.4 million km2. Indonesia possesses a ‘maritime oasis’ for generating solar energy with relatively calm water and air. 708,000 km2 of maritime area with less than four meters of wave and 15 meters per second of wind is available to host floating PV. The Government of Indonesia also has full access to the maritime area. Indonesia could float the solar panels on 5,800 lakes and reservoirs as well as the vast inland seas. A coverage of 35,000 km2 of solar PV system is enough to generate the upper bound of Indonesia’s energy demand. Covering the whole maritime area could generate enough electricity to power not just Indonesia but the whole of Southeast Asia.
The naysayers with technical expertise may put forward the solar intermittency argument. Indonesia’s tropical maritime location is humid and overshadowed by clouds that would stay a while without strong winds. High storage capacity would help, but lithium-ion batteries remain unaffordable for Indonesia. The alternative option is to build off-river pumped hydropower storage across 26,000 suitable sites. It could provide 800 TWh storage capacity which dwarfs the 25 TWh needed to complement the downtime of the solar-dominant system.
Sceptics frequently lambast the green advocates for not confronting the economic costs to businesses and individual households. However, large-scale solar panels are becoming as price-competitive as new coal-fired power plants, especially when the playing fields between the two technologies are levelled. This requires a battery of regulatory changes including reduction of import duty and taxes for renewable equipment, issuance of capital grants and cheap loans, and removal of fossil fuel subsidies.
An even stronger economic argument for scaling up solar infrastructure is Indonesia’s potential as a critical renewable energy exporter in the region. ASEAN is forecasted to have an energy demand of 14,525 TWh, which is less than 10 per cent of the solar energy that could be generated in Indonesia. Australia could potentially sell 3.2GW of solar energy to Singapore via a 5,000 km undersea cable that passes through Indonesian territorial waters. Instead of earning an insignificant amount of wheeling charges, Indonesia could have cashed in on this trade opportunity, and decision-makers are acutely aware of it. Even Indonesia’s Energy Minister showed off his country’s excess capacity by stating that only 2.5 per cent of the 200 GW of solar energy has been used domestically.
The development of a mere 18GW of solar infrastructure would attract US$14 billion in investment. At last year’s G20 summit in Rome, Jokowi showcased the Kalimantan Industrial Park Indonesia as a hydropower model to its influential guests. When addressing the Davos Agenda 2022, he made clear that renewable energy is one of the six sectors ‘wide open’ for international investment of at least US$50 billion. Yet, Jokowi is delaying the planned removal of fossil fuel subsidies, giving more ammunition to the naysayers. In light of the recent visit by COP 26 President Alok Sharma, Indonesia needs to wake up to Vietnam being a formidable competitor for renewable investment from international companies.
Indonesia has to get its ducks in a row on the technical, financial and regulatory fronts. Then, it can defy the sceptics and project a consistent image as the region’s Solar Powerhouse.
Ryan Wong was Lead Researcher (Climate Policy) at the Climate Change in Southeast Asia Programme, ISEAS - Yusof Ishak Institute.
David Firnando Silalahi is a PhD student at the Australian National University.