Renewable Energy – ‘There’s Something for Everybody’
William Sabandar, Chairman of the National Task Force for Accelerating New and Renewable Energy, welcomes investors
By Mary R. Silaban
Monday, March 14, 2016
With the plummeting crude oil price and serious concerns about fossil fuels and their effects on the environment, the Indonesian government is finally serious about rebalancing Indonesia’s energy mix in favor of new and renewable energy. And fast.
For many years, the development of new and renewable energy in Indonesia has been at a crawling pace, but times are changing. AmCham Indonesia spoke with William Sabandar, the head of National Task Force for Accelerating New and Renewable Energy, for his take on the challenges and advantages of redefining the nation’s energy focus.
AmCham Indonesia: What’s the story behind the national task force?
William Sabandar: The name of the office should tell you; to accelerate the deployment of clean and renewable energy. Indonesia wants to increase the use of new and renewable energy in the national energy portfolio to 23 percent by 2025 from the current 6-7 percent. This is mandated by the government and is very ambitious. We need to take revolutionary action to make it happen in such a short period of time of nine years. The revolutionary action I mention includes policy breakthroughs, financing breakthroughs, technology breakthroughs and human capital breakthroughs.
Let me explain them one by one. On policy breakthroughs, despite the fact that new and renewable energy has been on the national energy blueprint for many years, the regulations are not supportive. For example, land acquisition and feed in tariffs have been issues for new and renewable energy developers. The president issued a decree on electricity infrastructure to support the 35,000 megawatts electricity program that gives priority to new and renewable power generation. We are working on licenses that now should be easier to get. Aside from that, we are also preparing tariffs that are more attractive, tax holidays and special business zones. The second breakthrough is in financing. We need $135 billion for the next nine years to achieve the target of 23 percent new and renewable energy in our national energy portfolio. The maximum we can get from the state budget is $20 billion, if we push hard. We need to get the remaining $115 billion from state-owned companies and private investors. We are now working on an energy resilience fund and hopefully it can be realized this year. This is a way to help finance new and renewable energy projects. We are also working to build partnerships with the global community and private sectors.
The third is technology breakthroughs, which are very important. Policies and funding are not going to work without the technology. We want investors not to treat Indonesia [just] as a market, but we want to get sufficient technology. We have all the resources; solar, water and wind are all out there but the technology to convert them into power is expensive. So we are facilitating the diffusion of technology. The Bali Center of Excellence (for clean and renewable energy) is one tool to accelerate technology.
The last is human capital breakthroughs, which is one of the functions of the Bali Center of Excellence that involves education institutions, engages with communities and civil society in order to sensitize the community. It’s important to have the community understand and be involved in the process as this is not an initiative that government can do alone.
In regard to the technology breakthroughs, getting companies to share technology is not an easy task. What solutions are offered by government so companies are willing to bring technology to Indonesia?
The US companies must understand that the main competitor on the ground is Chinese technology that we all know is cheaper. In my meetings with some US corporations, I told them to bring the technology here, train the local talent to win the hearts of Indonesians. I believe once companies have won the hearts of the Indonesians, [a hefty] price tag will become less of an issue. But if corporations see Indonesia as just a country where they can sell their products, then the decision to buy products will be easily made based on price; those with a lower price will win the market. The US should see the new Indonesia differently than they did twenty or thirty years ago. In my meeting with local executives from GE and Chevron, they mentioned their commitment to build human capacity and bring their technology here. It shows their good deeds and I really appreciate it.
But I need to be frank as well that I am less worried about companies bringing their technology in. Indonesia is a big market. My worry is Indonesian industry and the local people are not ready to grab the opportunities. We need a changing mindset of both international corporations and local companies. The local companies who think that they should eat all of the cake and not share it with the international companies, will never survive. There’s something for everybody. The $135 billion should be enough for everybody and the government is providing the platform to make it happen. The only way to survive is by working together. From the perspective of the Indonesian government, we need to create a balanced energy mix.
How is the weakening crude oil price affecting the development program of new and renewable energy?
It is not affecting the program at all, because new and renewable energy is no longer an option; it is a must have. If we don’t do it today, we will only delay future failure of new and renewable energy. In places like California, China and Brazil, the price of solar energy ranges between 5 to 8 cents per kilowatt hour (kWh) as opposed to above 20 cents per kWH in Indonesia. If we still do business as usual, in the next 20-25 years when the world is becoming very advanced in new and renewable energy, Indonesia will be left behind. And I think the oil price will go up again one day so it is important for Indonesia to have new and renewable energy ready in order to create a balanced energy portfolio that is not controlled by fossil fuels.
What is the progress on the formation of a PLN-like company for new and renewable energy?
We are still working to find the right formula. The options are for PLN to create a subsidiary for new and renewable energy or to establish a new company. But we haven’t decided yet. It’s still in discussion. In regard to investment, we would like to treat investors nicely. Often investors come to Indonesia and face problems by themselves and they get very frustrated and they leave. We will help investors do business in Indonesia.