US-Indonesia Renewable Energy Cooperation Races Ahead
Jonathan Elkind of the US Department of Energy on how the US and Indonesia are working together on cleaner energy
By Mary R Silaban
Monday, March 14, 2016
On the sidelines of the event, held in Nusa Dua on February 11-12, AmCham Indonesia spoke with delegation leader Jonathan Elkind, Assistant Secretary for International Affairs with the US Department of Energy, on why clean and renewable energy cooperation is of vital importance for both Indonesia and the US.
AmCham Indonesia: What is the agenda of the US government in supporting clean and renewable energy in Indonesia?
Jonathan Elkind: In general our engagement in renewable and in other clean energy resources here is focused on both global objectives and the objectives of Indonesia’s development. President Obama in June 2013 laid out his climate action plan, which consist of three main areas: domestic efforts to reduce the emission of greenhouse gases, domestic efforts to improve the resilience of our economy toward the changing climate, and the third, importantly, is collaboration with major international partners, and Indonesia is one such partner.
The choices that Indonesia makes about where it wishes to go are important. Obviously Indonesia has a need for significant growth in the energy sector. It is experiencing a time of change with the decline of oil and gas production, with a significant increase in electricity consumption. There’s also a significant number of people who are unserved or underserved by modern energy systems.
Energy services are fundamental to the development of any society, so if the US wishes to see Indonesia succeed in its economic aspirations for the people, we have to support and to engage in the development of Indonesia’s energy sector. But we wish to do so in a way that is consistent with not only Indonesia’s economic and social objectives, but also in an environment perspective. That is why we are emphasizing clean energy in our engagement in Indonesia.
The US is a long time supporter of fossil fuel. How are you going to change this perception in the light of promoting clean and renewable energy technology?
I think that there’s a complex reality that exists in the American economy today. It’s true that the US has been a major energy consumer and there’s no question about that. And yes, indeed, we’ve historically placed a lot of emphasis on the development of fossil fuel resources. Those resources are an unavoidable necessity for today’s energy, but we are seeing great improvement in energy efficiency.
But we are now seeing rapid acceleration in the application of clean energy technology across the United States. Does that mean we have all the answers? No, no single country has all the answers. But if you look at the improvement that has been made in the efficiency of lighting in the American economy, the efficiency of vehicles where President Obama has instituted new standards for automobiles that will result in roughly doubling our vehicle fleet by 2027. If you look at the track record, now 40 years of experience in efficiency in our appliances and equipment, this is a major area of American leadership.
Through a series of regulations, the Obama administration has set minimum efficiency standards for big energy consuming devices such as electric motors, heating and cooling and ventilations systems. The Obama administration will yield cumulative savings of 3 gigatons of carbon emissions avoided by 2030 based on the standards put in place only during the Obama administration, so this is a major area for the US. And if you look at the pace of the development of onshore wind in the US, which has tripled in scale, solar photovoltaic has increased twenty-fold during the Obama administration, and this ranges from very big companies like GE and other corporations to the smaller companies that are very active in solar installation for utility-scale projects and rooftop solar. These are some of the most innovative companies in the world because they bring not only the technology but also innovative business models that can help those technologies to be within reach for many-many different sets of consumers that are in the developed and emerging economies
What did the US and Indonesian governments discuss? And what are the challenges of working with international partners?
Obviously the context of the visit by my delegation is the kick-off of the Bali Clean Energy Center of Excellence. We are in discussions with the government of Indonesia on how we can best support Indonesia’s aspirations to deploy renewable energy across the country. We are working through our national laboratories to help the Center of Excellence to have access to the best globally available research.
In regards to challenges in working with international partners, I guess the central challenge is how to make sure that we are targeting correctly in engaging with our international partner. Indonesia has objectives for scale, time frame etc. If we do our jobs well, we engage in the way that is synchronized with those objectives. Now, obviously the energy arena is just like any other sphere -- the United States and Indonesia may have different perspectives that are a result of our different history, different experiences. We acknowledge those differences, and we seek to be respectful of the differences in our societies. We seek to identify along the way where it is productive for us to collaborate.
What is the status of the US Exim Bank in this field?
The export credit agencies: OPIC [Overseas Private Investment Corporation], the Exim Bank, and the US Trade and Development Agency [USTDA] are interested strongly in engaging with Indonesia in support of both commercial opportunities for US companies and Indonesia’s energy development. When I was here last August, there was a cloud hanging over [the re-authorization of Exim Bank]. I was therefore very pleased in December, when as part of the omnibus budget bill for fiscal year 2016, the Exim Bank was re-authorized, finally. This means the essential tools to support the activities of US companies in Indonesia are back in place. OPIC also has been very active in Indonesia, especially in the rural energy space. OPIC, by providing loan guarantees to private investment helps to do two important things: to mobilize private investment in countries and projects, and also to help achieve development progress.
Indonesia’s remote areas suffer from energy scarcity. Demand for new and renewable energy at the household level is very high. Are there any plans from the US government to help with small-scale renewable projects in remote areas?
Yes, of course, and that is what is so exciting about the energy world. There are so many solutions for different settings. We have, through the Department of Energy, piloted small-scale renewable energy systems that have been particularly important for parts of the world that are not served by the main power grid systems. Some of these pilots are extremely well-suited to distributed power generation technology such as solar and wind; sometimes they involve hybrid systems so there is back-up power from diesel or other conventional sources.
When you put those systems together with highly efficient appliances, you end up providing services, whether it’s lighting, refrigeration or charging for mobile devices. You provide services that otherwise would take forever to come if you are waiting for a big grid system. It’s important to know that some of this technology has applications that are important in the US as well. If you see villages in Alaska, they suffer from the same broad challenges. It’s very expensive to move fuel to a remote setting. If renewable energy sources can help you to avoid the need to import so much diesel fuel, that’s a win for everybody.
I think it is also important to note that one of the critical shortcomings of many traditional power generation systems is that they end up causing lower air quality in the cities where they are used. If you look at some of the major energy consuming countries across the Asia-Pacific region, where conventional coal power has been brought on to the grid, you see, unfortunately, some devastating impacts on air quality. That translates into real-life health issues for kids and the elderly especially. This is why we emphasize that clean energy systems are important not only for US companies but also for the people who are using the technology.
What kind of support is being given by the US government to US businesses in bringing US products and technology to Indonesia?
What we have been doing and what we are trying to do, for example this week, is a constant example of how the US government is trying to engage with Indonesia by seeking clarity about what Indonesia’s objectives are, how different policies in Indonesia fit together. What are the realities? What does it take for a project to be built? We are trying to set an environment where companies can put their capital, not in a risky business environment. For example if you look at the Power Working Group that was established by the US Commercial Service in Jakarta, this is an effort that focuses on trying to understand what Indonesia’s priorities are, but then understand how US companies can interact with those policies and priorities.
The energy sector is a very concrete world. If you don’t translate the lofty goals down into what it means for a company to get approvals and where there are certain benefits like tax and tariff treatments available, then it would be too theoretical.
From your discussions with US companies, what are their concerns in doing business in Indonesia?
US companies want to understand the practicalities of how national policy objectives translate into on-the-ground reality. There are challenges in many different settings. Another thing we hope is that Indonesia achieves policy clarity in a way that is stable and favorable for companies making investments. The scale of needs in Indonesia for energy services is enormous. It far exceeds any government’s ability to provide it. So for Indonesia to move quickly requires private sector participation. We think our companies can help a lot with their technology, investment, and management skills if the circumstances allow them to come in and engage.