Promotion of least cost renewables in Indonesia
Title: Promotion of least cost renewables in Indonesia (LCORE-INDO)
Commissioned by: German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB)
Lead executing agency: Directorate General of New, Renewable Energy and Energy Conservation (NREEC)
Overall term: 2012 to 2017/2018
Despite their huge potential, renewables have so far played only a minor role in Indonesia’s energy supply. The lack of political will and the absence of policies designed to promote the use of renewables have held back their development to date, as too have their prohibitive cost and the heavy subsidising of fossil fuels. However, increases in the cost of generating and distributing electricity in remote regions, such as the islands outside the Java-Bali distribution network, together with voluntary commitments towards climate protection, such as the Paris Agreement on Climate Change, have seen the focus of attention switch to renewables.
In the long term, the country aims to guarantee the energy supply and the complete electrification of off-grid communities, while also increasing the use of renewables. These measures are designed to enable Indonesia to achieve its climate change objectives.
The Directorate General for New and Renewable Energy and Energy Conservation (DG-NREEC) is strengthened. Economic solutions are developed and tested in order to replace fossil fuels with renewables.
Efficient technologies are being introduced as a result of partnerships with German companies.
Through joint activities, the project is assisting the DG-NREEC in analysing and refining existing guidelines and support programmes on a step-by-step basis. The aim is to find ways of tapping into the potential of renewables more efficiently. To this end, the partners seek to involve the private sector as investors in renewable energy facilities and their operation.
The project team and the DG-NREEC are focusing on the following areas of application: using waste biomass from the agricultural industry; replacing diesel fuel with on-grid renewables, especially solar energy; and adopting innovative business models for off-grid electrification using renewables. Together with the DG-NREEC, the project is developing renewable energy strategies and policy instruments that take account of the financial circumstances.
In order to disseminate renewables successfully, the project operates in a number of different areas: It advises the DG-NREEC and the Ministry of Energy and Mineral Resources (MEMR) on policy-making and legislation as well as on renewable energy financing policies and mechanisms that are in line with market requirements. It assists institutions in meeting these new challenges. The project also cooperates with the partner to collect the data needed to integrate electricity from renewables into the grid. Specifically, this includes the following:
- Studies in three selected areas of application are a realistic way of examining the technical and economic potential of renewables and the related potential for reducing CO2. They demonstrate ways to increase this potential further.
- Pilot projects in three selected areas demonstrate the feasibility of the technologies and business models applied.
- In seminars and training courses, public and private decision-makers and other stakeholders are informed of the findings of the studies and pilot projects; they are also taught about renewable energy technologies to enable them to identify the potential that these technologies can offer.
- The project team is constantly assessing ongoing activities and feeding the lessons learned into the policy-making process.
- Action plans, guidelines and other information setting out ideal ways to disseminate the demonstrated technologies and business models more widely are being developed in cooperation with public and private actors.
The project team has made a precise calculation of the energy potential that can be harnessed in the agricultural industry and of the potential for grid-connected use of solar energy, and has published this information in studies. It has supported the project partner in drawing up regulations. Key economic indicators for the bioenergy feed-in law have been prepared on a joint basis, transparent permit procedures have been developed for renewable energy investors and technical guidelines have been drawn up for solar power plants.
Cooperation agreements have been signed with private project developers to serve as models. Pilot measures have been jointly developed for using biogas and biomass from waste generated by palm oil and tapioca starch mills, as well as for using solar power in the tourism sector and the fishing industry. These measures are being implemented with the help of investment from the private sector. The power generated is either used by companies internally or is fed into the grid of the government-owned energy provider to finance the commercial development and operation of the facilities.
A pilot project on solar energy in the tourism sector has been developed with German and Indonesian companies. The savings on diesel fuel will mean that an investment in a hybrid solar plant will pay off within about eight years for a diving club operator.
In the biogas sector, benchmarks have been developed which improve the management and energy efficiency of existing plants, thereby reducing costs and increasing earnings. Local operators in Indonesia have access to safety guidelines for biogas plants.