Energy Edge and Independence of Indonesia could be at risk as a result of Renewables negligence

Energy Edge and Independence of Indonesia could be at risk as a result of Renewables negligence

The government is disproportionately developing a domestic energy product industry from which other nations are pulling away from. For any nation, undergoing an energy transformation is now unavoidable. Even in the aftermath of the epidemic, the International Energy Agency (IEA) has found that deployed renewable energy, both with or without government funding, has risen exponentially to around 200 gigawatts (GW) worldwide. The energy transformation has progressed in specific markets at a speed that no one could have expected. There is no nation immune to the accelerated transformation of the global energy market. The technology versus economic discourse has been transformed by recent technological advances in both production and demand.

Renewables in most parts of the world are now cheaper than fossil fuel. No exception would be Indonesia. The sudden fall in energy demand attributable to the economy’s slower growth has caused the State Electricity Company (PLN) to carefully reconsider its investment strategies. Through a series of so-called breakthrough programs, PLN started rebranding itself to be a green(er) utility firm in the past semester. In the future, the state-owned utility business is committed to supplying Indonesia with renewable and reliable energy by government goals, a measure that is likely to be appealing to investors in the ESG (environmental, social and governance).

The government seems to favor the opposite approach, considering this pledge. Although nations around the world are competing to speed up the growth of potentially deflationary, solar wind and storage technology, the Indonesian government appears to be relying on centuries-old innovations that have historically struggled to achieve market share. As we reach 2021, three latest energy investment options with government backing need close review. The first one is the political drive for downstream technologies for coal.

To then be refined into methanol, dimethyl ether (DME), urea as well as other chemicals, the government needs to switch the unsellable domestic low-rank coal into the syngas (synthesis gas). DME will then substitute the imported liquefied petroleum gas (LPG), a product that weighs on Indonesia’s trade deficit to some degree. Although coal gasification technology is not fresh, only very few have ever implemented the technology due to its low financial outcomes. Furthermore, the zero-royalty incentive contained in the current Job Creation Omnibus  Law as well as the Mining Law to improve the production of DME, could undercut vital public revenue. On the surface, the development of DME may seem to provide energy protection and indeed benefit. Still, a more in-depth examination indicates that it is very vulnerable to the danger of oil prices and is likely to impose an extra burden on people’s resources.  A recent report by the Institute for Energy Economics and Financial Analysis (IEEFA) showed that it would end up losing $377 million per year if the US$2 billion DME program launched by PT Bukit Asam, which is state-owned, went forward.

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