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Government Invites Foreign Investors to the Renewable Energy Sector

renewable energy

Energy and Mineral Resources (ESDM) Minister Arifin Tasrif has said investment opportunities for new and renewable energy (EBT) in Indonesia are wide open for investors, both domestic and foreign.

He has invited foreign investors to enter the sector.

The minister was speaking at the launch of Net Zero World at the 26th COP in Glasgow, Scotland. According to Arifin, the great potential of the renewables sector in Indonesia can lie in the fact that it has not yet been optimized; renewables are only about two percent of the energy sector.

The first and foremost opportunity is that Indonesia has abundant new and renewable resources, especially diesel, followed by hydro, bioenergy, wind, geothermal, and tidal, with a total potential of 648.3 GW, including uranium potential for nuclear power plants,” he said in a written statement.

In addition, Arifin also highlighted the price of new and renewable energy sources, which are starting to grow competitive, especially the price of solar panels which are increasing in Indonesia whilst declining across the rest of the world.

The downward trend in prices is also supported by the development of new technologies, such as pumped storage, hydrogen, and battery energy storage systems (BESS), meaning they are more likely to be used in the future. “These prices can now compete with fossil energy,” added Arifin.

He explained that increasing demand for energy in the country has encouraged the government to continue to provide energy access to all levels of society, especially in outlying regions and underdeveloped areas.

The aim is affordable prices while still paying attention to the availability of local energy resources. This condition is in line with the government’s target for the electrification rate to reach 100 percent in 2022.

Of course, this is an opportunity for new and renewable energy development because the price of fossil fuels in remote areas can be very expensive, while renewable sources are available and can be utilised locally,” he explained.

Arifin also said the government will continue to strengthen the regulatory framework to ensure a successful energy transition in Indonesia. One activity is through the General Plan for the Provision of Electricity (RUPTL) of PT PLN (Persero) 2021-2030 which gives a larger portion to renewables.

In the long run, renewables will contribute more to total power generation capacity, which is 20.9 GW which will be 51.6 percent of the total generating capacity that will be built until 2030.

The government has also confirmed Presidential Regulation number 98 of 2021 concerning the economic value of carbon, which regulates the mechanism for carbon trading and taxes on carbon.

One of the main principles of the policy is to impose a carbon tax on activities that produce carbon and provide carbon-efficiency incentives,” said Arifin.

However, he admitted that the use of renewables as an energy source still has a number of challenges, such as intermittent solar and wind and the limited ability of the network to absorb electricity from new sources.

There is a lack of interest from financial institutions to invest in the renewables sector due to the high risk and high-interest financing, high investment costs for several renewables such as geothermal, as well as the limited capacity of the domestic industry, especially in the technology sector.

To anticipate these challenges, the government is trying to optimise the use of photovoltaic (PV) or solar panels.

He said that solar panels are feasible to be developed in Indonesia given the huge potential and relatively shorter construction period than other technologies and the prices are increasingly competitive.

“There are three main solar development programs, namely floating solar PV, solar farm, and rooftop solar PV. Solar PV will also be further developed for hydrogen production,” said Arifin.

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