Indonesia expands the grid to remote islands, but what about its climate goals?

SUMBAWA, Indonesia — The late afternoon sun was glaring over the remote fishing village of Kwangko in Sumbawa island. Braving the summer heat at the end of July, Anti sat outside, in front of a water tap, filling clear plastic bags with water.

Later, Anti would freeze the water bags and sell them to fishermen for 1,000 Indonesian rupiahs, or 7 cents, a piece. The water bags filled her entire fridge, except for the bottom shelf reserved for the day’s catches.

The ice packs and the fridge signify important milestones in this isolated village that’s roughly a three-hour drive from Sumbawa airport. Electricity took its time to reach this part of Indonesia. The village relied mostly on diesel-fueled generators, which provided at most four hours of light in the evenings. The lack of electricity has kept fishermen fearful of rotting fish, or selling their catch at reduced prices in the afternoon before they turn sour.

In 2017, the state-owned power company known as PLN finally succeeded in connecting the village to the grid. The Jokowi government has an ambitious goal for Indonesia: 100% electrification by 2024.

But the country’s energy push makes for a poor show of its climate goals. Under the Paris climate agreement, the country has pledged to reduce its carbon emissions between 29% to 41% by 2030. Yet Indonesia’s energy sector continues to rely heavily on oil, coal, and gas. The country has an energy mix of 39% oil, 33% coal, 20% gas, and 8% renewable energy sources combined in 2018, according to the Ministry of Energy and Mineral Resources of Indonesia.

To be sure, the government has set a goal to increase the share of renewable energy in the national energy mix to 23% by 2025, and Indonesia’s archipelagic structure is proving to be an opportunity to optimize renewable energy sources. Several projects have been introduced in parts of Indonesia to showcase the country’s renewable potential.

This includes Asian Development Bank-supported geothermal, solar, and wind projects in the country. Just last year in December, a wind project in South Sulawesi province co-financed by the bank began operations.

The bank has worked with the private sector in Indonesia on geothermal projects. But it’s also currently preparing a project on geothermal with the government, said Florian Kitt, ADB Indonesia’s energy specialist.

“We’re also looking forward in helping the government [on] its energy strategy to increase renewables. What we’ll exactly do there is yet to be seen,” Kitt said.

The bank’s efforts to support the government on grid development — as seen in Kwangko village — also has its links to helping the country increase its renewables. Currently, renewable energy sources contribute to 2.6% of total energy in Sumbawa island, an increase from less than 0.1% in 2018, according to Firman Sulistyawan, planning manager at PLN in Sumbawa.

“Really the focus was [on] expanding the grid to provide more access to people, so increased access, and enabling PLN to have stronger grids that enables the possibility to actually include renewables,” Kitt said.

Many of the grids in Eastern Indonesia are “not strong enough” to take on large-scale renewables, he said.

The projects seem to echo ADB energy director Yongping Zhai’s statements in 2018 about the bank’s commitment to helping its member countries embrace renewable forms of energy, in which he ensured that “as we meet our own climate finance targets, ADB’s lending portfolio has no place for ‘dirty energy.” In 2017, he said the bank approved over $2 billion for renewable energy and energy efficiency projects.

But for Indonesia to achieve its national determined contributions in line with the Paris agreement, at least in the energy sector it shouldn’t just focus on remote areas, as demand for electricity in these places are often much lower than in more developed regions, said Ery Wijaya, senior analyst at the Climate Policy Initiative of Indonesia.

“The contribution wouldn’t [be] too significant as the demand of electricity in the remote area is very small compared to demand in [the] Java-Bali area,” he told Devex.

Barriers to Indonesia’s renewable energy push

There are however real barriers hindering the country from tapping into more renewable energy sources. Apart from weak grid infrastructure, there’s the issue of finance, space, and making renewables an attractive investment for the private sector.

A costing done in 2015 by the Indonesian Ministry of Energy and Natural Resources estimated the required investment for the country to meet its 23% renewable energy target is at over 1 trillion Indonesian rupiah — over $70 million.

Introducing renewables also requires large swathes of land. One to two hectares of land will be needed for example for a megawatt of solar energy, Kitt said. That’s more than twice the size of a standard FIFA football pitch.

Indonesia has a huge geothermal energy potential, but it comes with a lot of risks.

“You don’t know what’s going to come … out of it. So you need to be very careful. My colleague who processes the geothermal project, her first item of priority is nobody should die,” he said.

And there’s the cost question.

“It will cost millions and millions and millions … investments right before you can actually specify what is there,” Kitt said.  “The problem for developers, if you drill into the ground and there’s nothing, then you’ve just lost $20 million to $50 million,” he said.

The government’s current policy on geothermals stipulating power purchase agreements can only be made once a resource has been found also leaves little incentive for developers to explore, according to a 2018 report by the International Institute for Sustainable Development’s Global Subsidies Initiative.

Its coal subsidies are also proving to have huge market advantages over, and disincentives for renewables. The government has put a price cap on coal consumed for public power generation to keep costs low amid increasing global coal prices, Wijaya said. This while the government imposes tariffs for renewable energy projects designed to lower local generation costs.

“Despite the obligation of PLN to purchase power from small scale renewable energy (up to 10 MW), [independent power producers] of renewable energy are still struggling to achieve financial close at current electricity tariff,” making Indonesia’s renewable energy development growth move “slowly” toward the target, he said in an email to Devex.

Indonesia’s financial market, dominated by banks, also often lend in the short-term, can be unfamiliar or have limited knowledge of renewables, and therefore more cautious in their lending to the sector. Insurance companies and pension funds meanwhile “typically invest in liquid financial instruments through the bond market,” which, Wijaya said, is “not interested to play in [a] new high-risk market such as [a] renewable energy project.”

The relevance of renewables

With the energy sector ranking second to forestry in contributing to the country’s carbon emissions, Wijaya said ordinary citizens should pay attention.

“Ordinary citizens are forced to deal with the air pollution from surrounding coal plants, diesel generators, and increased frequency of irregular weather. If Indonesians care about quality of life, then they must care about this issue,” he said.

Where Indonesia is sourcing its energy however seemed a mute discussion for communities that have waited so long for some power. In Kwangko, low-income households also get energy subsidies from the government, with households paying an average of just 50,000 Indonesian rupiahs, or roughly $4, for a month of electricity.

Syaiful Baharudin, who aggressively pushed for Kwangko village’s electrification when he was still the village head, said in jest to a group of visiting journalists, ADB staff, and PLN representatives: “We can now understand the meaning of independence because we’re also free from darkness.”

And the electricity paved the way for a number of things: roads, easier water access, increased livelihood opportunities for the villagers, and dreams.

Anti said she no longer needs to pay 500 Indonesian rupiahs to watch a couple of movies or travel some distance to bring back water to the household. Her husband, Wahidin who now heads the village, hopes that an asphalt road and street lights will follow the electricity.

“Hopefully in 2020 we’ll see improvement,” he said.

Editor’s note: The reporter traveled to Sumbawa with the support of ADB. Devex maintains full editorial control of the content.