The high cost of green energy
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Biaya mahal energi hijau
06 October 2021
By: Lucky Leonard Leatermia
The government’s ambition to boost the domination of new renewable energy in Indonesia can become a double-edged sword. Besides increasing clean energy mix and suppressing carbon emission, the plan can also burden the state’s finances.
New renewable energy domination is affirmed in the 2021-2030 electricity procurement plan (RUPTL) of PT PLN (Persero). For the first time, the power plant construction plan for the next 10 years is dominated by new renewable energy as it reaches 51.6% of the total power plant capacity that will be constructed.
However, amid the plan, the economic factor of new renewable energy power plants still acts as a challenge that must be faced. The economic factor can increase the tariff of electricity produced by the green power plants.
To anticipate electricity prices increasing due to the increase in new renewable energy mix, subsidies and compensations will continuously be provided. Based on PLN’s 2021-2030 RUPTL, the fund required reaches Rp72 trillion in 2021, then it will increase by Rp186 trillion on average per year from 2025 to 2030.
Meanwhile, investments required in the electricity sector for the next 10 years reach Rp128.7 trillion. The investments required will allocate Rp56 trillion per year for private companies and Rp72 trillion per year for PLN.
Energy Watch Executive Director, Mamit Setiawan, reckoned that, in new renewable energy development, the high electricity price was the main problem. According to him, as new renewable energy electricity price that is more expensive, there are two possibilities that can occur, which are electricity base rate increase or subsidies for new renewable energy electricity from the government.
“Both of these options will impact citizens whether the price will increase or if the state needs to provide subsidies. Moreover, the lack of electricity consumption growth will continuously cause PLN to be oversupplied,” he said on Tuesday (5/10).
He said that new renewable energy’s intermittent trait could also cause future issues for electricity supply in the future. As the new renewable energy portion is bigger, then a reliable reserve is required.
As it is intermittent, this means that the energy supply will not be steady or will rely on certain conditions. For example, solar power plants (PLTS) can only produce electricity in the afternoon.
According to Mamit, the energy crisis in China and Europe shows that electricity supply from new renewable energy power plants cannot be relied as a primary energy source as it can cause new problems instead.
Meanwhile, Energy and Mineral Resources Minister, Arifin Tasrif, said that the growth of coal-fired power plants (PLTUs) that were currently the backbone of national electricity supply would be limited. According to him, this will provide space for new renewable energy to fulfil electricity demand in the future. PLTU construction will no longer be an option. “Except for PLTUs that are already committed or is being consumed,” he stated.
As new renewable energy is intermittent, Electricity Director General of the Energy and Mineral Resources Ministry, Rida Mulyana, added that transmission construction would be continuously strengthened. The government is also planning to build distribution networks to provide electricity for citizens who do not have access to electricity, which is set to be 100% complete by 2022.
Moreover, PLN President Director, Zulkifli Zaini, is optimistic about the 2021-2030 RUPTL carried out optimally. Several strategies have been prepared, such as accelerating the commercial operation dates (CODs) of geothermal power plants (PLTPs) and hydropower plants (PLTAs) as well as implementing
The role of private companies
Indonesian Private Electricity Producers Association (APLSI) stated that they supported PLN’s 2025-2030 RUPTL as the private sector is more involved.
APLSI Chairperson, Arthur Simatupang, reckoned to, to sustain the involvement of the private sector, incentives from the government were required. He said that subsidies needed to be allocated to clean energy power plants so that they could be more competitive compared to fossil power plants.
When they were asked for a response, the managements of the two issuers in the electricity sector, PT Bukit Asam Tbk (PTBA) and PT Teregra Asia Energy Tbk (TGRA), agreed that larger new renewable energy portion would encourage both companies to develop clean energy.
Bukit Asam Corporate Secretary, Apollonius Andwie, said that this was in line with PTBA’s transformation to develop new renewable energy business.
TGRA Finance Director, Daniel Tagu Dedo, said that the company was developing water-based new renewable energy power plants where there were already seven projects under construction.
