Indonesia's Government promises incentives for renewable energy projects
The government promises to provide incentives such as import-tax reduction to lure investors to the country’s untapped new and renewable energy potentials.
Speaking in his address at the opening ceremony of the annual conference of New Renewable Energy and Energy Conservation (EBTKE ConEx) and the International Geothermal Convention and Exhibition (IIGCE) on Wednesday, Energy and Mineral Resources Minister Sudirman Said promised to create a more conducive investment climate in the development of new and renewable energy.
“We need regulations that give more opportunities for investment, such as the elimination of import taxes for capital goods used for developing new and renewable energy,” said Sudirman.
He admitted that the reduction of import taxes would result in less income for the country. However, “In the long term, we will see added value in the sector,” he said.
As a tropical and archipelagic country, Indonesia has abundant resources, from hydro power to solar energy. Meanwhile, the country is estimated to have around 28 gigawatt (GW) in geothermal potentials that can generate electricity.
However, development of the potentials is sluggish, particularly due to financing issues, unfavorable regulations and other obstacles such as land acquisition.
Sudirman said that the country needed Rp 402 trillion in investment for a five-year period to utilize all of the potential to generate 8,750 megawatt (MW) of electricity. The number is equal to 25 percent of the total 35,000 MW power program currently being carried out.
The larger part of the total investment will go to the development of geothermal potentials, which will need Rp 106.3 trillion to generate around 2,400 MW within the next five years, according to Sudirman.
Despite the abundant geothermal potential of 28 GW, which is one the biggest in the world, the country currently only has around 1,403 MW in installed capacity of geothermal power plants.
State-owned oil and gas giant Pertamina, which also runs a business in the geothermal sector through subsidiary PT Pertamina Geothermal Energy, said that it had in the pipeline the development of 1.13 GW of electricity from new and renewable resources by 2019.
Most of the additional capacity will come from geothermal power plants with 907 MW, solar photovoltaic 60 MW, wind energy 60 MW, biomass 50 MW, mini or microhydro plants 45 MW and ocean energy 3 MW.
Pertamina president director Dwi Soetjipto said his company would set aside US$4 billion in capital expenditure for the development of new and renewable energy resources. Out of the total, as much as $2.5 billion will be allocated for geothermal power plant development and the remaining $1.5 billion for other resources.
“In the new and renewable resources sector, we have geothermal projects in place and already have the ability to carry out development as looking for geothermal potential is quite similar to searching for oil,” Dwi said.
On Wednesday, state-owned power firm PLN signed a number of power purchase agreements for 622 MW electricity generated from new and renewable energy resources. The agreements cover power produced from the 510 MW Batang Toru hydro power plant in North Sumatra, 3x13 MW Hasang power plant in North Sumatra, 70 MW Sidrap wind power plant in South Sumatra, 2 MWp Gorontalo solar power plant and 1MWp Sumba Timur soar power plant in East Nusa Tenggara. The five projects are estimated to cost $1.17 billion in investment.