BACKGROUND REPORT

Overview of Policy Instruments for the Promotion of Renewable Energy and Energy Efficiency in Indonesia

BACKGROUND REPORT

TABLE OF CONTENTS 1. 2.

Indonesia’s Energy Sector: An Overview..................................................................... 4 Renewable Energy..................................................................................................... 10 2.1 Biomass ............................................................................................................. 11 2.2 Solar energy....................................................................................................... 14 2.3 Wind energy ....................................................................................................... 17 2.4 Small hydropower .............................................................................................. 17 2.5 Geothermal energy ............................................................................................ 18 3. Energy Conservation Activities .................................................................................. 20 3.1 Demand Side Management ............................................................................... 20 3.2 Labeling programs ............................................................................................. 21 3.3 Award program .................................................................................................. 21 3.4 Standardization program.................................................................................... 22 3.5 Information dissemination .................................................................................. 22 4. Existing Renewable Energy and Energy Conservation Policies ................................ 23 4.1 Main national policies on RE & EC .................................................................... 23 4.2 Objectives of policies on RE & EC ..................................................................... 27 4.3 Institutional Structure and Financing.................................................................. 28 5. Potential of Renewable Energy and Energy Efficiency .............................................. 31 5.1 Biomass potential............................................................................................... 31 5.2 Solar energy potential ........................................................................................ 36 5.3 Wind energy potential ........................................................................................ 37 5.4 Small hydropower potential................................................................................ 38 5.5 Geothermal energy potential.............................................................................. 43 6. Constraints of the Application of RE & EC ................................................................. 45 6.1 Biomass energy ................................................................................................. 46 6.2 Solar energy....................................................................................................... 47 6.3 Wind energy ....................................................................................................... 48 6.4 Small hydropower .............................................................................................. 48 6.5 Geothermal energy ............................................................................................ 50 References ........................................................................................................................ 52 Attachments....................................................................................................................... 54

LIST OF FIGURES Figure 1: Growth of primary energy demand (thousand BOE). ........................................... 5 Figure 2: Growth electricity supply by PLN.......................................................................... 6 Figure 3: Growth of final energy consumption by sector (1970-2003) (Thousand BOE). .... 7 Figure 4: Distribution of final energy consumption (2003). .................................................. 8 Figure 5: PLN’s electricity supply facilities........................................................................... 8 Figure 6: Electrification ratio (1980 – 2003)......................................................................... 9 Figure 7: Energy intensity and energy per capita of various countries. ............................... 9 Figure 8: Total power plant installed capacities by type of energy (2003). ........................ 11 Figure 9: Framework of energy conservation policy and measures in Indonesia. ............. 26 Figure 10: Potential market of biomass power generation. ............................................... 32 Figure 11: Composition of waste in different cities in Indonesia. ....................................... 34

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LIST OF TABLES Table 1: Key socio-economic indicators. ............................................................................. 4 Table 2: National primary energy supply (ktoe). .................................................................. 4 Table 3: Energy production and supply (2003).................................................................... 5 Table 4: Fossil energy reserves in Indonesia (2004)........................................................... 5 Table 5: Energy consumption (2003)................................................................................... 6 Table 6: Final energy consumption by sector in 2002(ktoe). ............................................... 7 Table 7: Renewable energy potential (2003)..................................................................... 10 Table 8: Potential and installed capacity of RE in Indonesia. ............................................ 10 Table 9: Total power plant installed capacities by type of energy (2003). ......................... 11 Table 10: Indonesia’s biomass utilization in selected industries........................................ 12 Table 11: Installed hydropower capacity per province....................................................... 18 Table 12: Installed capacity of commercial geothermal power plants (MW)..................... 19 Table 13: Production and utilization geothermal steam..................................................... 19 Table 14: Energy Saving Lamp of PLN Branch Jakarta DSM (2003)................................ 20 Table 15: Industries Participation in Partnership Program ................................................ 21 Table 16: Partnership Program - monitoring report (2003)................................................ 21 Table 17: Standard of energy conservation Indonesia*..................................................... 22 Table 18: Energy conservation potential by sector (2003). ............................................... 22 Table 19: Main national policies to renewable energy and energy conservation. ............. 23 Table 20: Target of national energy mix 2025. .................................................................. 28 Table 21: Major potential biomass residue ........................................................................ 31 Table 22: Potential for biomass-based power generation. ................................................ 33 Table 23: Comparison of waste generation per inhabitant. ............................................... 33 Table 24: The total estimated potential for biogas per province. ....................................... 35 Table 25: Biomass pilot project results. ............................................................................. 36 Table 26: Potential wind energy classification of Indonesia. ............................................. 37 Table 27: Mini-hydropower power projects planned or under construction (1999)............ 39 Table 28: Total potency of micro-hydropower power per province.................................... 40 Table 29: Indonesia’s proven geothermal resources......................................................... 43 Table 30: Projects recommended until 2010. .................................................................... 44 Table 31: PLN’s ESC prices. ............................................................................................. 52

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1.

Indonesia’s Energy Sector: An Overview

Indonesia is an archipelago country covering an area of approximately 1.9 million square meters in Southeast Asia with a population of more than 210 million in 2003. Indonesia's real gross domestic product (GDP) grew at a rate of 4.1% in 2003, a slight increase from 3.7% in 2002. The real GDP growth in 2005 is forecasted at 5.0% (EIA, 2005) which is higher than the estimation value 4.9% in 2004 (CIA, 2005). Following the economic collapse and political instability in 1997, currently the country is still in recovery phase. The key socio-economic indicators as of end of 2003 are shown in Table 1. Table 1: Key socio-economic indicators Indicators Area (million square km) Population (millions, 2003) Population density (pop./square km) Urban (%) Population growth rate Gross Domestic Product (at current price, 2003) Value (Rp) billion Per capita (Rp, million) GDP growth (%) Inflation CPI (%) Exports (US$ million) Current account balance (US$ billion)

1.9 215.3 114 42% 1.49% 1,786,691 8.3 4.10 5.06 45,805 7.34

Source: Renewable Energy in ASEAN website: www.aseanenergy.org (December 2005)

As a net oil exporter, Indonesia gives a significant contribution to world’s energy market through oil and natural gas (LNG) product (MESDM, February 2005). Indonesia’s export of oil and gas share contributes more than 30% of the domestic revenues (Table 2). As of 2003, the archipelago’s energy production and supply is given in Table 3. Table 4 shows the fossil energy reserves as of 2004. Table 2: National primary energy supply (ktoe) Primary Energy Supply Indigenous Product Import Export TOTAL PES Coal Crude oil & petroleum Natural gas Hydropower Geothermal

1998

1999

2000

2001

2002

179,114 15,701 106,730 88,044 8,830 38,693 67,555 1,160 3,309

182,300 21,529 113,761 89,922 11,056 38,713 69,584 1,119 3,349

183,995 21,403 103,804 101,236 10,956 51,023 65,798 862 4,187

168,460 25,696 99,943 94,213 14,822 48,488 50,189 916 5,082

175,743 29,310 104,074 100,796 15,873 50,841 55,246 855 5,364

Source: Energy Data and Modelling Center, IEEJ (2005)

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Table 3: Energy production and supply (2003) Primary Energy Production Crude oil Natural gas Coal Hydropower Geothermal Primary Energy Supply Crude oil Natural gas Coal & lignite Hydropower Geothermal GDP energy intensity (BOE/ US$’000) GDP oil intensity (TOE/ US$’000)

(Mboe) 417.0 566.4 460.2 14.5 10.0 358.6 235.6 130.9 23.4 12.3 7.83 2.82


Table 4: Fossil energy reserves in Indonesia (2004) Energy Type Oil Gas Coal

Total Reserves 86.9 billion bbl 385 TSCF 50 billion Ton

Proven Reserves 5 billion bbl 90 TSCF 5 billion Ton

Production 500 million bbl 2.9 TSCF 100 million Ton

Source: Ministry of Energy and Mineral Resources (2004)

The growth of energy demand from 1970 to 2003 is approximated at 8.5 % per year (Figure 1). In 1970, oil was the primary source of energy with as much as 88% of the total sources. In 2003, consumption of gas and coal went up to as much as 20% each while oil consumption went down to about 50%. Still, the role of oil is dominant.

Thousand BOE

Figure 1: Growth of primary energy demand (thousand BOE)

900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0

Geothermal

Hydro Coal

Gas Oil

1970 1975 1980 1985 1990 1995 2000 2003 Year Source: Ministry of Energy and Mineral Resources (2004)

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The energy demand, especially the need for electricity energy in Indonesia becomes more substantial in relation with the rapid growth of technology, industry, and information. The national electricity company, P.T. PLN (Perusahaan Listrik Negara), was established in 1950 and it has been given a great role in the electricity development in Indonesia. The growth of electricity supplied by PLN is shown in Figure 2. However, it cannot provide sufficient supply of electricity to fulfil the demand due to (energi.lipi.go.id, 2005): geographical condition of Indonesia as it consists of 17,677 islands; imbalance of electricity load centres; high marginal cost of development of electricity energy system; and limited financial resources. Figure 2: Growth electricity supply by PLN

120,000

Selling Buying Own production Total Supply

100,000

GWh

80,000

60,000

40,000

20,000

0 1990

1992

1994

1996

1998

2000

Year

Source: COGEN 3 Final Report of Indonesia (2004)

Table 5: Energy consumption (2003) Net Domestic Consumption Per Energy (Mboe) Petroleum products Natural gas Coal & lignite Electricity Net Domestic Consumption Per Sector (Mboe) Industry Residential/commercial Transport Non-energy and others Energy Consumption Indicators (2003) Per capita final energy consumption (BOE) Per capita electricity consumption (kWh) Electrification of households (%) (1995)

329.52 75.27 40.96 51.76 186.48 324.56 155.12 74.47 2.35 420.00 53.00


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2002

The actual energy consumption, as of 2003, is given in Table 5. It is estimated that the actual energy consumption grows by an average of 7% annually. In 1970 the largest energy consumption was the residential sector; since 1990 the largest energy consumption is shared by the industrial sector and transportation sector due to the rapid industrialization, and thus the demand for transportation was also increased, and development in the transportation sector itself (Figure 3, Table 7). The distribution of final energy consumption by sector is shown in Figure 4. Figure 3: Growth of final energy consumption by sector (1970-2003) (Thousand BOE)

200,000

Thou sand BOE

150,000 100,000 50,000 0

1970

1980

1990

2000

2001

Yea r

Household

Industry

2003

Transport


Table 6: Final energy consumption by sector in 2002(ktoe) Final Energy Consumption Industrial Sector Residential and Commercial Sector Transportation Sector TOTAL FEC Coal & Coal Products Crude Oil & Petroleum Products Gas Electricity Others

1998

1999

2000

2001

2002

21,448 11,508 19,985 57,805 1,315 38,893 7,837 9,760 -

22,415 13,102 20,136 61,002 1,874 40,531 8,296 10,301 -

25,170 14,457 21,452 66,082 2,053 44,061 8,089 11,878 -

23,468 12,066 21,538 65,861 4,272 43,974 10,345 7,269 -

21,863 16,125 22,085 67,418 5,020 44,999 9,529 7,490 380

Source: Energy Data and Modelling Center, IEEJ (2005)

In 2002, the capacity of the national electricity system was 24,262 MW of which approximately 87.0% is coming from thermal (oil, gas, and coal) sources, 10.5% from hydropower and 2.5% from geothermal. PLN holds 21,112 MW of the total installed capacity and private sector holds 3,150 MW. In addition, there is captive power with the total generation capacity of 13,856 MW. In 2003, PLN generated 21,206.33 MW from the total generation capacity and the rest is contributed by the private sector (3,169.58 MW) (DJLPE, 2003). It is estimated that the Java-Bali power grid consumed 74% from the installed capacity in 2001. Shown in Figure 5 are the PLN’s existing supply facilities which cover both oil fired power plants and non-oil fired power plants.

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Figure 4: Distribution of final energy consumption (2003)

6.1%

0.9%

100%

0.1%

11.9%

80%

28.8%

16.3%

0.4% 0.7%

60%

33.5%

99.9%

40% 64.0% 20%

37.4%

0% Industry

OIL

GAS

Household & Commercial

COAL

Transport

ELECTRICITY


Figure 5: PLN’s electricity supply facilities

Note 1: Oil Fired Power Plant: PLTU - steam power plant; PLTD - diesel power plant; PLTG - gas turbine power plant; PLTGU - combined cycle power plant Note 2: Non-Oil Fired Power Plant: PLTA - hydropower power plant; PLTP - geothermal power plant; PLTU-B - steam and coal power plant; PLTU-G - steam and natural gas power plant; PLTG-G - gas turbine power plant; PLTGU-G - combined cycle power plant Source: Statistic of Electricity and Energy 2003.

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LPG

The electrification ratio in 2003 is around 53% (Figure 6). Energy consumption per capita is relatively low while energy intensity is high. In 1995, the recorded energy intensity of Indonesia in toe per million US$ is 470 as compared to Japan’s 92.3. The energy consumption per capita is 0.467 (Figure 7). Figure 6: Electrification ratio (1980 – 2003).

53

90,000 80,000

50

43

70,000 60,000

58,706 28 37,426

50,000 40,000 30,000

29,474

20,000 10,000

33,883

40 30

42,452 29,508

16

60

20

18,327

7

10,742

5,513

2,012

10 0

0 1980

1985

Number of Residential

1990

1995

Residential costumers

2003 Electrification Ratio


Figure 7: Energy intensity and energy per capita of various countries. 600 500 index (Japan = 100)

Electrification ratio (%)

Costumers (Thousand)

100,000

400 300 200 100 0 Japan

OECD Thailand Indonesia Malaysia North Am. Germany Energy Intensity Energy Per Capita


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2.

Renewable Energy

In general, there are plenty of renewable energy resources in Indonesia mainly in the forms of hydropower, geothermal, biomass, and solar energy. However, these sources have not been explored optimally because they are less competitive compared to the conventional fossil fuels which are still heavily subsidised by the government. The utilization of geothermal source is only 4% from its available potential and biomass is utilized for less than 1% (Armely, et.al., 2005). Indonesia’s fossil energy reserves are limited, while renewable energy potential is relatively abundant, although its share to the total energy mix is still low at 15%. The renewable energy potential is shown in Table 7. Table 7: Renewable energy potential (2003). Resources Hydropower Geothermal Small hydropower Biomass

Installed Capacity 4,200 MW 807 MW 84 MW 445 MW

Solar

Potential 75.67 GW 27 GW 500 MW 49.81 GW 4.8 kWh/m2/day

Wind

3-6 m/sec

0.6 MW

8 MW


In 2002, the generating capacity of PLTS (solar power plant) is 5 MW, PLTB (wind power plant) 0.5 MW, PLTMH (micro hydropower) 54 MW, and PLT Biomasa was 302.5 MW (DESDM, 2005). The National Energy Policy categorised the renewable energy into three groups according to the stage of technology development, i.e.: commercially developed technology (biomass, geothermal, and hydropower), technology with limited development (solar and wind energy) and technology, which is still in the research stage (ocean). As of the year 2000, the total national installed capacity is as shown in Table 8. By the year 2003, the total national installed capacity is approximately 35,000 MW (Table 9). The distribution chart according to the type of energy installed is depicted in Figure 8. Table 8: Potential and installed capacity of RE in Indonesia. Energy Resources Geothermal Micro hydropower Biomass 2 Solar (kWh/m /day) Wind

Potential (MW) 20,000 459 50,000 4.5 448

Installed Capacity (MW) 812 54 302 5 0.5

Source: Sumiarso, L. (August 2001)

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Share of Installed Capacity (%) 69.2 4.6 25.73 0.42 0.05

Share of RE being Utilized 4.06 11.76 0.6 N/A N/A

Table 9: Total power plant installed capacities by type of energy (2003). Energy Type Oil Gas Coal Hydropower Geo-thermal Biomass Other Renewables Total

MW 16,201 6,361 7,460 4,200 807 445 98 35,572


Figure 8: Total power plant installed capacities by type of energy (2003).

Natural Gas 17.9%

Oil 45.5%

Coal 21.0%

Other 0.3%

Biomass 1.3%

Geothermal 2.3%

Hydro 11.8%


2.1 Biomass Biomass is an important source of energy and its use is continuously increasing. The main applications are in the domestic sector and in small-scale industries, but also to a growing extent in large industrial and combined heat and power generating systems. Biomass is clean renewable source, carbon neutral and indigenous resource, which is not subject to world price fluctuations or the supply uncertainties of imported fuels. The use of biomass energy is probably the oldest source of energy, especially in rural areas. It is estimated that 35-40% of total national energy consumption originates from biomass. The traditional utilization of biomass usually is through direct burning and later on through modern conversion technology such as pyrolisis and gasification. The energy produced has been used for a variety of purposes, among others for household (cooking and home industry), prime mover for rice milling, for drying of agriculture produce and wood industry, power generation in wood and sugar industry. The utilization of biomass in certain industries is depicted in Table 10.

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Table 10: Indonesia’s biomass utilization in selected industries. Industry

Mill Size

Capacity

Biomass Potential for Power Generation

Saw mills Plywood mills Sugar mills Rice mills

1,000-3,000 m3/y 40,000-120,000 m3/y 1,000-4,000 TCD < 0.7 t/h >0.7 t/h 20- 60 t FFB/h

40-100 kWe 1.5-3 MWe 3-10 MWe 30-70 kWe 100-300 kWe N/A

0.6 m3 woodwaste/m3 Æ 130 kWh/m3 0.8 m3 wood waste/m3 Æ 200kWh/m3 0.3 t bagasse/t Æ 100 kWh/t sugarcane 280 kg husk/t paddy 120 kWh/t paddy 0.2 t EFB/t FFB 0.2 t fibre/t FFB 70 kg shells/t FFB Æ 160 kWh/t FFB

Palm oil mills

Note: TCD= tones of Cane per day; FFB= Full Fruit Bunches; EFB= Empty Fruit Bunches. Source: ZREU (2000)

Biomass cogeneration plants are mostly installed in biomass-based industries such as palm oil, wood and sugar industries. Small scale biomass gasification plants of 15-176 kW can be found as demonstration projects and usually are not commercially available. The availability of biomass energy sources differs by geographical location. In mountainous and island areas, fuel wood is predominant while in the lowlands, agricultural waste (crop residues) is the most available energy source. Municipal waste is mostly concentrated in the largest urban areas. Palm Oil Since the Indonesia Biodiesel Forum (Forum Biodiesel Indonesia) has been founded in 2002, there are many key players attracted to the biodiesel utilization. The main resource of the biodiesel is mainly extracted from palm oil as Indonesia has the second largest palm oil industries in the world. To make the price stable, it is proposed to utilize nonedible oil/fat such as: jarak kosta, physic nut, purging nut, jathropa curcas as main alternative sources. The plantation of these new sources covering an area of 5 hectares has been initiated in East Lombok by the Ministry of Agriculture Agency for Assessment and Application of Technology (Badan Pengkajian dan Penerapan Teknologi - BPPT). The first biodiesel demonstration plant is done in Serpong Laboratory -- a batch-type with a biodiesel capacity of 1,500 liter/day. A larger scale biodiesel plant was built in the Province of Riau in collaboration with the local government with a total capacity of 8 tons a day. It is expected that this biodiesel utilization can substitute petroleum diesel with ratio of 3:7. A number of research and development efforts have been conducted in many institutes and universities. Under New Energy and Technology Development (NEDO) sponsorship, Bandung Institute of Technology (Institut Teknologi Bandung - ITB), in collaboration with Mitsubishi Research Institute and Kyushu Electric Company from Japan, has launched the use of pure straight Jatropha oil BD 100 to substitute petroleum diesel for diesel engines. With lower maximum price production of Rp.1,000/kg compared to the petroleum diesel price production (Rp.1,600/kg), laboratory testing shows that this oil has an excellent performance which is similar to the conventional diesel fuel (www.itb.ac.id, February 2005). Rice Husk Recently, a commercial 100-kW diesel generator using rice husk was built at Haurgeulis, Indramayu, West Java. By using the gas coming from the fermentation process (1.5 kg/kWh), this plant is able to reduce the use of gasoline from 0.3 to 0.06 liter/kWh (Energi Terbarukan, 2005).

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Fuelwood Most of the sawmills and plymills are located in Sumatra, Kalimantan and Sulawesi -- the forest regions of the country. They generally use grid and/or diesel generator sets for their electricity requirements. Over 400 sawmills are estimated to have a milling capacity between 10,000 and 50,000 m3/year. An estimated 40 plymills have capacities of less than 50,000 m3/year and 70 plants produce between 50,000 and 200,000 m3/year. The future of co-generation in the wood-based industries will depend on the economic attractiveness. For instance, sawmills typically require 35 to 45 kWh to process 1 m3 of debarked wood, while the waste material (estimated at 50%) could generate up to 150 kWh of electric power. Feasibility studies and demonstration projects show favorable results with respect to the return on investment for auto generation (captive power). Pre-crisis assessments also showed that power sales to the grid could be feasible, based on the Small Power Purchase Tariffs set by the PLN utility. The regularity of the availability of fuelwood is often the most critical factor. Existing co-generation plants, initiated with limited technical and financial support of the ASEAN-EC COGEN program as ‘Full Scale Demonstration Projects’ are the: • 5.5 MW waste wood power plant at PT. Siak Raya Timber in Pekanbaru, Sumatra; • Steam boiler 35 t/h, 35 bar, 380oC installed at PT. Kurnia Musi Plywood Industry, Palembang, South Sumatra with a net output of 3,200 kW (Cogen, 2005). Crop Residues Most palm-oil mills generate combined heat and power from fibers and shells, making the operations energy self-efficient. However, the use of palm-oil residues can still be optimized in more energy efficient systems. Fibers and shells from one ton of Full Fruit Bunches (FFB) can produce approximately 45 kWh, and in addition, the Empty Fruit Bunches (EFB) could produce 35 kWh of power. Processing a ton of FFB requires 25 Wh and 0.73 tons of steam. A palm-oil mill could theoretically supply an excess amount of power that is twice as big as its own consumption. In addition, the effluent (POME) could be used for biogas production through anaerobic digestion. There are 56 sugar mills in operation in Indonesia. In sugar mills, a little less than one third of the initial sugar cane is turned into bagasse. One ton of sugar cane produces 290 kg of this residue, which can potentially be converted into around 100 kWh. It takes only 25 to 30 kWh and 0.4 ton of steam to process this one ton of sugar cane. The potential to produce excess electricity for supply to outside consumers exists in sufficient quantities for commercial projects. Municipal Waste Plans to install a municipal solid waste power generation project of 50 MW in Jakarta, are still at a preliminary stage. Biogas from conversion of animal and human wastes is mainly used in small-scale engines with an electric generator producing power for milling or water pumping. The main fuel for biogas generation in rural communities is presently animal dung. Hundreds of units have been installed. In some cases, human waste from hospitals and dormitories is used to produce biogas.

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2.2 Solar energy Located on the equator, Indonesia has a good potential of yearly solar energy with high level of average daily radiation. Its western area has an average daily radiation of approximately 4.8kWh/m2 and 5.1kWh/m2 for the eastern area (Budiono, 2003). The annual average insolation level is about 4.5 kWh/m2/day in the Eastern part. To date a detailed solar irradiation map still has to be prepared, but generally it can be stated that PV is a feasible option for small-scale power generation everywhere in Indonesia, where some 60% of the population still dwells in rural and remote areas (www.aseanenergy.org, December 2005). Two kinds of technology have been applied so far: the photovoltaic solar energy and the thermal solar energy. Photovoltaic solar energy is used in rural areas to generate electricity for daily life. The total generated capacities of this technology is still limited (around 5 MW), due to lack of socialization, high operational (repair and maintenance) price, high investment cost, thus it cannot compete with the subsidised conventional fossil fuel energy. Solar thermal energy generally is used in the forms of solar stove, drying equipment for agricultural products and water heaters. The government considers PV technology as a complementary option in its rural electrification strategies. For areas that cannot feasibly be supplied with conventional electricity (either by grid extensions or by the operation of stand-alone diesel power plants), PV can be introduced as an alternative. The Agency for Application and Assessment of Technology (BPPT) recently completed a GIS database on solar PV applications, which was initiated in 1988. The success in developing the standard has propelled the World Bank and AusAid to them as references in developing and implementing PV in other developing countries. The list of national standard that has been formulated through the National Standard Committee is given in Attachment Table A1. For areas, which will remain to have a supply of electricity in the years to come, a small PV system may provide sufficient power to cover a rural household’s basic electricity requirements for lighting, radio and/or TV. PV-based power generation can also be utilized for telecommunication relay stations, navigational aids for sea and air traffic, and in future even power supplies for cottage industries, or larger grid-connected power supplies for urban applications. Solar Home Systems (SHS) are already reasonably well developed and have been introduced to the market. Most of the components are locally produced by a range of mostly smaller electronic manufacturing industries. In some cases, SHSs even provide the most cost-effective solution in villages with existing supply of electricity. Often, only the village center is electrified (20 % of total village population); and a large number of households exist that are situated in small clusters (kampungs) and scattered throughout the geographical area within the village but still some kilometers away from the grid. Over 6,000 villages basically outside Java-Bali are to be considered as the most important target for (decentralized) PV systems (as well as other NRES). Depending on the source, the overall market potential for solar home systems has been estimated as ranging from a minimum of 2 million units (EC study in 1994) to 6 or even 10 million units (WB 1996). Given new economic realities after the crisis of 98/99, including a substantial devaluation of the Rupiah, the actual purchasing power of many rural households has diminished, reducing previous market projections. At various stages of development there are a few projects for the installation of PV systems, namely: AusAid, the World Bank Program, the Bavarian BIG-SOL Program.

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They are all within the framework of the previously mentioned 50-MWp Program, which is coordinated by BPPT: • The 50 MWp Program, devised in 1992, had installed a total of 36,800 SHSs. This is materialized through the AusAid program in 191 villages and 28 districts in the provinces of Sulawesi Tenggara, Sulawesi Tengah, Sulawesi Utara, Nusa Tenggara Barat, Nusa Tenggara Timur, Timor Timur, Maluku, Kalimantan Tengah and Papua Barat (former Irian Jaya). • AusAid II: 15 units PV-Diesel Hybrid Systems in Central Sulawesi and 6 South East Sulawesi -- agreement has been signed on 30 June 1999. • The World Bank Program, which will also be part of the 50 MWp Program, will comprise the installation of 200,000 units of SHSs in south Sulawesi, Lampung and west Java, through a suppliers-based credit scheme with a GEF grant of approximately US$ 1 per Wp paid to each qualified supplier for each system installed in the area.

•

According to a cost comparison undertaken by the World Bank, population density (number of households per km2) is a critical factor as it represents the geographical load density. Generally speaking, if the load density is low, the costs of grid extension are higher than those of Solar Home Systems. Even if the load density in one area is considerable, but the number of customers is small, extension is often not economically viable. Solar Home Systems are less expensive than grid extension if the household density is less than 30 households/km2 (120-150 persons /km2). If the number of households in a particular cluster is less than 50, even a 3 km grid extension is more expensive than Solar Home Systems. These conditions apply for both inside and outside Java. To give an example: a cluster of 50 households with an average energy demand of 15 kWh per household per month outside Java is considered to have a density of 10 households per km2. The cluster is 3 km away from the grid. The costs of conventional electrification by grid extension are estimated at US$ 30 per month per household. If the cluster was serviced by an isolated diesel generator, the costs would be US$ 26 per month per household. The SHS costs are approx. US$ 11 per month per household. This analysis has been undertaken based on 1996 prices in Indonesia. The BIG-SOL project was aimed at installing of 35,000 SHSs and 300 centralized solar village centers. The total installed power would be about 2.65 MWp. Currently in East Java 33 units PV systems for chicken barns and 3 units for egg hatching have been erected both for AC and DC systems, as well as 50 units PV systems on fishing boats for lighting and radio. A PV system for an information center and 1 units for rural telephone has also been installed as well as three incubator systems. There will be several projects within the framework of the BIG-SOL Program: the hybrid systems in central Java (KALISDA project, five villages, 30kWp); Tamyamsang, East Java (large-scale continuation of the installations described above, 17,000 houses, 1.7 MWp, 1,700 fishing boats, 85 kWp); transmigration project central Kalimantan (30,000 houses, 1.5 MWp), rural electrification of Riau, eastern islands projects; rural pre-electrification of east Kalimantan (1,000 houses, 50 kWp), rural electrification of south Kalimantan (60 villages, 300 kWp).

Of all these projects only the multilaterally funded World Bank Program is by nature an “untied” aid program. Each supplier is free to develop its own market and offer its own conditions within the defined project area. Apart from these programs, the government has

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set goals for the installation of PV systems for the application of pumping systems, TV repeaters, public health centers, fishing boat lighting and grid-interconnected housing. About 16 PV pumping stations will be piloted in already existing wells. In the 6th Five Year Plan (up to '99), the required capacity of PV pumping power for rural clean water facilities is expected to be 600 kW. PV TV repeaters enable television reception in many areas where, due to the geographical and topographical conditions, this would not otherwise be possible. As diesel engines for these repeaters have very high maintenance costs, PV repeater stations with a broadcasting power of 5 MW are the better option to supply these areas. Until 1999, approx. 125 units of TV repeater stations will be installed which run on PV power amounting to 375 kWp. One station's capacity is 3 kWp. Basic medical care network for local populations in remote areas (Puskesmas) needs refrigeration facilities for vaccines and medicine which operate with cooling temperatures of 0°-8°C. Due to the low rural electrification rate, these refrigerators are kerosene-driven. However, they have not been proven reliable. On the other hand, PV has been proven highly reliable and maintenance free. By 1999, approx. 5,480 Puskesmas will have adopted PV technologies for lighting, vaccine storage and radio communication. With a capacity of 1.5 kWp per system, a total capacity of 1.75 MWp will by then have been installed in Indonesia. A solar boat system that has been developed comprises a PV power supply, three fluorescent lights and an underwater lamp to attract fish. The system's capacity is 100 Wp. As this system has proved to be very successful compared to kerosene lighting, by 1999 more than 20,000 fishing boats are expected to be supplied by PV so that approx. 20 MWp may be installed. An interconnection pilot project will be set up to examine the possibilities of using a solar home system connected to the grid as an electrical feeder for the grid at times when electricity is not needed in the house, and of using the grid as the back-up system when the solar home system cannot supply the household with electricity. Hybrid photovoltaic and wind technology have been implemented in Oeledo project, Oeledo Village, Rote Island, East Nusa Tenggara in 1997. This project is a result of the cooperation between E-7 Network of Expertise and the Indonesian government. This plant generates 22 MWh/year out of the total installed capacity of 44 MWh/year. This system supplied 120 houses, schools and public places within a radius of 3 km. It is expected that the village’s saving from the monthly electricity payment will cover the component replacement cost of which the life time is in the range of 10 to 20 years (CTRID, April 2003). Glass thermal drying house has been implemented by the cooperation among the Ministry of Energy and Mineral Resources, CREATA-IPB, and Barrak cooperation of small and medium home industries at Cipageran, West Java. The glass house is used for drying food (jerked banana flower) replacing the kerosene oven with a maximum temperature of 40oC. In addition to the solar energy implementation, the glass house is also equipped with a furnace which can be used for burning biomass waste. By using this equipment, the quality and quantity of the production can be increased from 6kg/day to 20 kg/day (www.energiterbarukan.net, 2005). Over the last decade, close to 100,000 systems have been installed in Indonesia through various Government programs as well as through active commercial marketing. The total installed capacity of PV systems is about 5 MW.

16

2.3 Wind energy Indonesia has a large potential of wind energy, but its utilization is still low. Research efforts are continuously conducted to increase wind energy utilization. US or Europe wind turbines available in the market are usually designed for high wind speed application which is not quite appropriate for wind condition in Indonesia. Therefore, development of wind energy technology in Indonesia is still wide open. Wind energy technologies developed in the country namely Wind Energy Conversion System (Sistem Konversi Energi Angin-SKEA) are prototypes for power plants with capacity ranges from 50 – 10,000 W, mechanical power pumping (45 – 250 liters/min), and power plants with capacity of 3.5 kW coupled with electrical pump for water pumping. The status of the national fabrication for wind energy conversion system is ready for small-scale utilization: the local industry is able to built wind energy conversion system components up to 5 kW of capacity and they are ready for mass production if the market is available. Medium- and large-scale utilization is still under development. An example of the implementation of this technology is the proposed program of 1,000 small wind water pump turbine Egra along the northern part of Java Island by the Heritage Bogor Foundation in 2004. New PLTB (wind power plant) is planned to be operated by PLN in Bawean Island in 2005 (PTPLN, 2005). The current limited utilization of wind energy concentrates on stand-alone electricity production in rural and remote areas as well as the utilization of wind turbines for pumping applications for agricultural purposes. Most of the projects have been carried out by LAPAN. Both vertical as well as horizontal generators have been used, both in semi-commercial and commercial projects. Most applications are situated in Eastern part of Indonesia (most promising wind conditions). Between 1983 and 1995 wind turbines were installed on 41 sites. In total 118 units with a capacity of approx. 230 kW were erected. The most important provinces for wind energy utilization were Central Java with 49 kW and Yogyakarta with 42 kW. The 41 installed applications comprise 11 pumping systems, 3 communication systems and the rest for rural electrification. The capacities of the wind generators vary from 0.1 kW to 15 kW. Two systems were developed as hybrid pilot projects. So far, no grid-connected medium or large-scale applications have been realized in Indonesia. 2.4 Small hydropower The utilization of the hydropower energy in the Indonesia is still limited compared to the huge potential as an archipelago country with many mountains and rivers which actually is a supporting factor to a decentralized energy system. No official record was found as regards when the hydropower was first utilized in Indonesia, but there is one operating hydropower power plant (Pelton type) that was built in 1892 with a generation capacity of 50 kW for processing tealeaves in Patuah Watee, West Java (Tantangan, 2005). Unfortunately, with a total potential of 7,500 MW throughout the country, only 200 MW has been utilized (Munpuni, 2001). It is predicted that 14% of the national energy demand can be satisfied by proper use of this source of energy (PLTMH, 2005). In many cases the development of hydropower power plant are not successful due to the limited lifetime of the system. Further tracked, the causes are lack of operator training and improper maintenance which resulted in damages and non functioning of the system (e.g. damage of turbine, low debit inflow, or the damage of the dam).

17

Hydropower resource for electric power generation are still under-utilized. Indonesia has abundant hydropower resources but its utilization is very low. In 2004, hydropower power can be generate 75.67 GW but still used approximately 4200 MW. Mini- and microhydropower systems, defined as systems of 500 kW up to 5 MW (usually run-of-river type) has potential of 712 MW but its installed capacity is just 80 MW as shown in Table 11 (DGEEU, 2004). Table 11: Installed hydropower capacity per province. Province NAD North Sumatera West Sumatera South Sumatera Riau Bengkulu Jambi Lampung South Kalimantan West Kalimantan Central Kalimantan East Kalimantan West Java

Installed Capacity (kW)

2,596 7,878 2,616 210 60 1,880 60 97 452 180 102 65 7,464

Province North Sulawesi South Sulawesi Central Sulawesi South East Sulawesi Gorontalo Bali NTB NTT Maluku Papua East Java Central Java

Installed Capacity (kW) 3,620 3,839 5,740 70 26 110 1,463 1,153 55 2,383 20,332 8,337


The Government of Indonesia has introduced some mini-hydropower and microhydropower capacities in its development plan for selected areas (especially remote area) as an alternative in providing access of people to modern energy. Usually microhydropower schemes are installed off-grid as they are used in rural and remote areas. The table below shows the already installed capacities of micro hydropower schemes in various locations. Under the Micro Hydropower project of the GOI and the Gesellschaft für Technische Zusammenarbeit (GTZ), 28 Micro-hydropower plants have been installed between 1992 and 1999. Standardized hydropower and electricity schemes were developed with nominal capacities of 10-100 kW. Up to 1995 more than 15 standardized SKAT T12 cross flow turbines were built. The first grid-connected scheme was built in Lombok in 1995 with a 40 kW turbine followed by a flow-controlled grid-connected plant with more than 100 kW, also in Lombok. The new standard T-14 with higher efficiency has been implemented recently in some sites. 2.5 Geothermal energy Indonesia is located between the eastern end of Mediterranean Volcanic Belt and western side of Circum Pacific Volcanic Belt, and is blessed with abundant geothermal resources, i.e. approximately 27 GWe or 40% of world’s geothermal resources. Half of these potential are found on Java and Bali, the most densely populated islands in Indonesia. However, the utilization of this geothermal energy is still very small compared to its high potential. At the present, only 807 MWe geothermal installed capacity have been developed. Geothermal development in Indonesia was started in 1974. The government has issued the President Decree No.16/1974, President Decree No.22/1981, President Decree No.23/1981, President Decree No. 45 in 1991 and President Decree No.49/1991. These decrees appointed the Pertamina, National Oil Company to conduct exploration, 18

exploitation and utilized the steam into energy. However, the development of geothermal in Indonesia is still facing some barriers. Monetary crisis since mid of 1997 have significant impact on Indonesia economic. It caused slow down geothermal business. To speed up geothermal development, recently, Government has issued the Geothermal Law No. 27/2003 to regulate the up-stream side and Government Regulations No. 3/2005 concerning Supply and Utilization of Electricity to regulate down-stream side. These Regulations also prioritizing the renewable energy especially in the local needs. In line with these regulations, Government and Parliament are still preparing the Energy Law following the 2003 National Energy Policy to support geothermal development in Indonesia. Indonesia utilizes 525 MW of geothermal energy from 787 MW of installed geothermal capacity (Table 12). This number accounts for 2.2% of 35,709 MW of total installed electric capacity (of which PLN generates 20,592 MW, private power developers 1,600 MW, and captive power 13,519 MW). PLN built 380 MW of total geothermal capacity and Pertamina and its contractors built the remaining 407 MW. As a result, Indonesia saves the equivalent of some 6,300 barrels/day of oil. According the Directorate General of Oil and Gas, Indonesia produced 37.6 million tons of geothermal steam in 2000, which translates into 4,696 GWh of electricity. Table 12: Installed capacity of commercial geothermal power plants (MW) Fields Kamojang, West Java Sibayak Darajat, West Java Gunung Salak, West Java Wayang Windhu, West Java Dieng, Central Java Lahendong TOTAL

PLN 140 (3 units) 55 (1 unit) 165 (3 units)

JOC 2 70 (1 unit) 165 (3 units) 110 (1 unit) 60 (1 unit)

20 (1 unit) 380

407

Total 140 (3 units) 2 (see note) 125 (2 units) 330 (6 units) 110 (1 unit) 60 (1 unit) 20 (1 unit) 787

Note: Developed and operated by Pertamina Source: Renewable Energy in ASEAN website: www.aseanenergy.org (December 2005)

Indonesia began developing geothermal direct utilization (non-electricity) more than ten years ago. Geothermal energy most commonly and traditionally heats swimming pools and provides water for hot springs. The first exploration started in 1974 at Kamojang by Pertamina. A 250-kW non-condensing geothermal power turbine was built in 1978. PLN built on this initial success with the construction of Indonesia's first commercial 30 MW geothermal power plant in late 1982 which was followed with two units of 55 MW in 1987. There are many international and local firms involved in geothermal exploration currently, such as: Unocal (started in 1982), Amoseas (started in 1984), Bodas Company LLC, Himpurna California Energy Limited (HCE), Overseas Private Insurance Corporation (OPIC), Bali Energy (California Energy and PT Pandan Wangi Sekartaji), Mandala Magma Nusantara BV, Bumi Mandala Perkasa, and PT. Wahana Komunikatama. The total generation capacity from these firms can be seen in this Table 13. Table 13: Production and utilization geothermal steam. 1998 Field – Area Production (1000 MT) Kamojang, West Java 8,807.90 G. Salak, West Java 18,664.20 Darajat, West Java 2,663.50 Sibayak, N. Sumatra 51.6

19

1999

2000

8,377.50 19,517.90 3,754.70

7,976.30 20,359.50 5,474.10 72.6

1998 Wayang Windu TOTAL 30,187.10 Utilization (1000 MT) Kamojang, West Java 8,428.40 G. Salak, West Java 16,317.20 Darajat, West Java 2,277.00 Sibayak, N. Sumatra 27.6 Wayang Windu TOTAL 27,050.30 Electricity produced (MwH) Kamojang, West Java 1,094,434 G. Salak, West Java 2,264,304 Darajat, West Java 366,394 Sibayak, N. Sumatra 734 Wayang Windu TOTAL 3,725,867

1999 31,650.10 8,040.00 18,908.50 2,794.60 -

2000 3,750.70 37,633.20

29,743.10

7,685.00 19,884.30 4,891.30 66.3 36,244.30 32,526.90

1,045,889 2,346,896 398,957 3,791,742

1,000,023 2,441,086 744,897 2,829 506,840 4,695,675

Source: General Oil and Gas

In 1999, a group of researchers of Agency for Assessment and Application of Technology (BPPT) investigated methods to apply geothermal energy in the agricultural sector, particularly to sterilise the growing medium for mushroom cultivation which is still under research and development until today. The research is located at the Kamojang geothermal field.

3.

Energy Conservation Activities

3.1 Demand Side Management The government introduced Program Terang, Program Peduli, Program PJU and Program Kemitraan (literally: Light Program, Caring Program, Street Lighting Program and Partnership Program) as the main of DSM programs. Light and Caring Programs socialize the use of 8-W energy saving lamp instead of the 40-W conventional bulb lamp. PLN disseminates information on this program. Incentives were given, such as in Jakarta and Tangerang where households with the maximum power limit of 450 or 900 W were allowed to buy 3 units of lamp for only 14,500 IDR each (about US$ 1.6) in 2003. Table 14: Energy Saving Lamp of PLN Branch Jakarta DSM (2003). Technical Data Power Life time Lumen kWh/month

Energy Saving Lamp 10 W 6,000 hours 520 2,5 kWh

Bulb Lamp 50W 1,000 hours 500 12,5 kWh

Source: PT PLN (PERSERO), Jakarta Raya and Tangerang (2004)

The incentive of the Caring Program is given for the low-income customers only (with maximum power limit of 900 VA). An example of this program is the effort taken by the regional branch of PLN for Sumatera South, Jambi, and Bengkulu who sold 535,470 units CFL to their customers for only 12,000 IDR/unit (about 1.3 USD) in 2003, thus subsidising 3,000 IDR/unit (www.pln.co.id, 2005). The main objectives of the Street Lighting Program are to increase the efficiency of street lighting system, to reduce the expenses of the provincial government, to increase the quality and the quantity of lighting system, to fix and improve electrical street lighting

20

system and to reduce peak power occurrences. There are 10,000 lamps in Medan, 4,000 lamps in Semarang, 1,000 lamps in Jogjakarta being utilized so far. In Partnership Program, the government provides subsidies for energy auditing, workshop, training and technical assistance from other countries in energy efficiency measures. The participants of this program should agree to be audited, implement the proposed program and participate in energy efficiency socialisation. The objective of this program is to achieve an efficient solution of energy utilization through auditing, implementation, and evaluation. Since it was announced by the Directorate General of Electricity and Energy Utilization (DJLPE) in 2002, there has been an active participation of several companies in this program (www.djlpe.go.id, 2005). The participants of this program are shown in the Table 15. The outcome is given in Table 16. Table 15: Industries Participation in Partnership Program 2003 (in Java) 5 textile industries 1 steel industry 6 commercially buildings

2004 (out of Java) 2 steel industries 1 fluor mills 6 commercially buildings

Source: Energy Conservation, www.energiterbarukan.net (2005)

Table 16: Partnership Program - monitoring report (2003) No.

Name of Company

Total Recomm.

Applied Recomm.

Saving Energy

Saving Cost

1

PT. Ispatindo

8

3

21,999,000

2

PT. Roda Vivatex

5

3

4,290,000

PT. Bhineka Karya Manungga - l PT. Bhineka Karya Manunggal -2 PT. Vastex Prima PT. Indah Jaya Textile Industry

12

7

15,000,100

7

5

1,122,059

4

0

0

3,239,809,272 (16%) 637,006,951 (98%) 2,591,500,000 (51%) 448,823,652 (48%) 0

10

2

spinning

NA

3 4 5 6

Source: Energy Conservation, www.energiterbarukan.net (2005)

3.2 Labeling programs Labelling program for household electronic equipment is still at the promotional stage. The label has been finalized by the study of Testing and Implementation of Energy Efficiency Labelling for Electrical Household Appliances (Pengujian dan Penerapan Label Efisiensi Energi pada Peralatan Listrik Rumah Tangga) in 1998. The equipment which meets the highest energy efficiency standard gets a four-star label (www.clasponline.org, 2005). This labelling program is proposed to be done periodically by independent laboratories. However, up to now, the rules and regulation concerning the independent laboratories participating in this program are not finalised yet. 3.3 Award program There is no specific award program for energy conservation activities. However, the Indonesian government join the ASEAN Energy Efficiency and Conservation Awards scheme which is held annually. The objective of this program is to motivate designers to

21

create the most efficient building system. In 2002, one building in Indonesia received the award, the Graha Pangeran building in Surabaya, East Java, for its energy-efficient architectural design. In 2004, another two buildings received the awards: PT. Metropolitan Bayu Industri in Jakarta (Air Conditioning Unit Equipped with Heat Pipe) and PT. Nusa Dewa Natural in Bali (Tropical Building). 3.4 Standardization program Through this program, the government has set up guidelines for technical specification of energy equipment. It is expected that the manufacturers will improve the quality of their products in order to improve their competitiveness. Table 17 enumerates the energy conservation standards in Indonesia. Table 17: Standard of energy conservation Indonesia* No.

Standard

1

SNI 03-6389-2000

2

SNI 03-6390-2000

3

SNI 03-6196-2000

4

SNI 03-6197-2000

5

SNI 04-6958-2003

Remarks Konservasi Energi Selubung Bangunan pada Bangunan Gedung (Energy Conservation for Glass Cladding in Building Structure) Konservasi Energi Sistem Tata Udara pada Bangunan Gedung (Energy Conservation for Ventilating System in Building Structure) Prosedur Audit Energi pada Bangunan Gedung (Procedure for Energy Audit for Building Structure) Konservasi Energi Sistem Pencahayaan pada Bangunan Gedung (Energy Conservation for Lighting in Building Structure) Label Tingkat Hemat Energi Pemanfaat Tenaga Listrik untuk Keperluan Rumah Tangga dan Sejenisnya (Energy Conservation Labelling for Household Equipments and the Likes)

Note: * unofficial translation Source: Energy Conservation, www.energiterbarukan.net (2005)

3.5 Information dissemination The information dissemination activities for energy conservation include holding of seminars and workshops, distribution of brochures and stickers for the industrial and commercial buildings and mining associations in remote areas. Some examples of the recent dissemination activities are: • “Implementation of the Program Kemitraan” Seminar on 22 July 2004 in Jakarta • “Policy Measures for the Promotion of Renewable Energy” Workshop on 26 August 2004 in Bandung • “Energy Conservation Measures in the Steel Industries” Workshop on 14 October 2004 in Jakarta • ”Socialising Energy Conservation” Seminar on 7 December 2004 in Makassar Table 18: Energy conservation potential by sector (2003). Sector Industry Transportation Household & Commercial

Total Consumption (MBOE) 188 186 115

Source: RE in ASEAN website: www.aseanenergy.org (December 2005)

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Potential (MBOE) (%) 28 – 56 15 – 30 46 25 11 – 34 10 – 30

4.

Existing Renewable Energy and Energy Conservation Policies

4.1 Main national policies on RE & EC There are several regulations concerning cogeneration, a generation system which is compatible with renewable energy sources and utilize fuel with high efficiency. No clear policies are defined to promote cogeneration. The support has always been indirect through energy efficiency and biomass utilization measures. Main national policies related to Renewable

Energy and Energy Conservation is listed in Table 19: Table 19: Main national policies to renewable energy and energy conservation. Regulation Presidential Instruction No. 9/1982 No. 15/1985 No. 10/1989

No. 43/1991

Remarks Energy Conservation Electricity Act Supply and Utilization of Electricity Power (Penyediaan dan Pemanfaatan Tenaga Listrik) which gives a description of types, procedures, obligations, and responsibility of electricity business permit holders (Izin Usaha Penyediaan Tenaga Listrik-IUPL). Energy Conservation

No. 20/1994

Has direct impact on financing of energy projects that concerns ownership of shares of companies established in the framework of foreign investment. Under this regulation, the foreigner companies are allowed to be full owner, (100% foreign investment).

Ministerial Decree No. 1895.K/437/M.PE/1995

The Decree of the Minister of Energy and Mineral Resources on Small Power Generating Plant Owned by Private Enterprises and Cooperatives scheme (Pembangkit Listrik Skala Kecil untuk Swasta dan Koperasi – PSKSK). The decree sets a pricing scheme for the electricity sale from PSKSK to PLN. According to this decree, there are two contracts, namely: non-firm capacity contract and firm capacity contract. The prioritization of energy sources is given as follow: 1. generating plant using wind, solar and mini-hydropower energy; 2. generating plant using agricultural waste, industrial waste, municipal waste, dendrothermal and geothermal sources; 3. generating plants using co-generation system using natural gas, coal or natural oil; 4. generating plants using natural gas, coal or natural oil.

Ministerial Decree No. 100.K/148/M.PE/1995 Ministry Decree No. 90/KMK.04/1998

Master Plan of National Energy Conservation (RIKEN)

No. 22/1999

Regional Government which stated that each regional has an authority to govern, set, and establishes guidelines, including in energy sector. The central government should share the revenue from the energy sector with the provincial government as much as 15% for oil and 30% for geothermal. Electricity Supporting Venture (Usaha Penunjang Tenaga ListrikUPTL). Electricity Selling Price by the Small-Scale, Private, Cooperatives and Community Self-Supported Electricity Generation (PSKSKSM). Government Authority and Provincial Authority as an Authonomous Region (Kewenangan Pemerintah dan Kewenangan Propinsi sebagai Daerah Otonom).

No. 25/1999 No.996K/43/ MPE/1999 No.25/2000

Has direct impact on financing of energy projects that concerns import duty on Investment Materials for Power Generation.

23

Regulation Ministerial Decree: No. 1122 K/30/MEM/2002

No.20/2002

No.89/2002 No.27/2003

No.53/2003

Ministerial Decree: No. 0002/2004 No.17/2004 Ministerial Decree: No.0983 K/16/MEM/2004

No.3/2005 Ministerial Decree No. 1109 K/30/MEM/2005

Presidential Instruction No 10 Year 2005

Remarks Small power generation using renewable energy (distributed renewable energy small scale power plant): • Developer: Small Enterprises • Capacity: < 1 MW • Electricity Price by Utility: - 60% x Utility’s Production Cost, if connected to the low voltage grid - 80% x Utility’s Production Cost, if connected to the medium voltage grid In Article 4, Clause 3, it stated that in order to satisfy the primary energy demand, power generation should utilize fuel resources which are available locally with renewable resources as the main priorities PLN Selling Price of Electricity in 2003. Geothermal Law which regulate the management and development of geothermal sector as a mining source as well as direct and indirect electricity utilization. The non-exportable energy especially from geothermal resource should be utilized to the successful development of the country. For restructuring the electricity sector which was followed by the launching of the Electricity Supervisory Agency (Badan Pengawas Pasar Tenaga Listrik): Regulate the supply and utilization of electricity & Prioritizing the utilization of renewable energy for power generation Green Energy Policy Ratification of the Kyoto Protocol which was signed on 19 October 2004, thus, Indonesia can benefit from the Clean Development Mechanism National Energy Policy: Guarantee a domestic energy supply; Increase the added values of energy sources; Manage energy sources in an ethical and sustainable manner; Provide an affordable energy for low income people and develop domestic capacities in the field of energy management Regulation on Electricity Supply and Utilization stated that the Law No.20/2002 is cancelled and being temporarily replaced with the previous law (Law No.15/1985). National Committee on Safety of Electrical Installation as Supervisory Agency for Low Voltage Consumer Installation (Penetapan Komite Nasional Keselamatan Untuk Instalasi Listrik (KONSUIL) Sebagai Lembaga Pemeriksa Instalasi Pemanfaatan Tenaga Listrik Konsumen Tegangan Rendah). Concerns Energy Efficiency, issued on 10 July 2005

Sources: www.mki-online.com (2005); Cogen 3 (March 2004); www.energi.lipi.go.id (2005); IIEC (December 1997) www.djlpe.go.id (April 2005)

The main objective of the National Energy Policy 2003-2020 published in February 2004 by the Ministry of Energy and Mineral Resources is to ensure the national energy supply and the efficiency of energy consumption until 2020 (DESDM, 2005). The utilization of various energy resources is expected to reduce the dependence on conventional energy resources. The government aims to increase the use of renewable energy such as: geothermal, biomass, and micro-mini hydropower, especially in the form of small-scale hydropower, to at least 5% in 2020. It is targeted that 90% electrification ratio will be achieved in 2020. The decrease of energy consumption intensity is expected as much as 1% per year. There are three main policies to achieve the objective:

24

• • •

Intensification: To increase the national energy supply in line with the increasing population and country development. Diversification: To utilize various energy resources such as: coal and natural gas and renewable energy sources (highly potential). Conservation: To increase efficiency in energy utilization by developing and utilising energy efficient technology.

The National Committee on Safety of Electrical Installation (KONSUIL) was established on 25 March 2003. This committee conducts inspection on electricity supply and utilization installation in the form of new, modification and periodic inspections on installation standards stipulated. The objective is for safety and security assurance for both electricity users and installations. In addition, KONSUIL shall issue operational feasibility certification for electrical installations in accordance with the standards and laws and other prevailing regulations (BAI, April 2004). In August 1998, the Indonesian government launched the Power Sector Restructuring Policy to overcome the impact of financial crisis in 1997. The objectives of this restructuring plan are to develop the power sector, providing high quality and efficient electricity supply for the benefit of the consumers and to change the status of the state utility to be financially independent (Cogen 3, March 2004). The current obligation of PLN to IPPs was beyond its economic capacity thus needs rationalization. The existing electricity tariff needs to be revised but it should still consider customer’s rights who have been directly affected by the crisis. PLN as the state-owned electricity company should be privatized as well (Motoyama, et.al., 1999). The Indonesian government has also been active in promoting energy conservation programs. The Renewable Energy and Energy Conservation (Green Energy) Policy has been introduced in 22 December 2003 by the Minister of Energy and Mineral Resources, Dr. Ir. Purnomo Yusgiantoro M.A. M.Sc. (DEMR, December 2005). There are some policies to increase the use of renewable energy and energy conservation measures, i.e.: • Investment and Financing Policy (Kebijakan Investasi dan Pendanaan) provides good investment atmosphere by giving exclusive financial, monetary, and fiscal, giving incentive for investments through a good investment system and low interest loan, increasing the system and the mechanical of the cooperation system among the key players, and utilising the supply and the using of renewable energy and energy conservation. • Incentive Policy (Kebijakan Insentif) through exclusion from the general tax and fiscal for companies in renewable energy and energy conservation activities, award for people who have successfully applied the energy conservation technology and utilising the renewable energy, exclusion from valuables tax for renewable energy and energy conservation applications, and loan for investments in the engineering sector of the development of renewable energy and energy conservation. • Energy Pricing Policy (Kebijakan Harga Energi) by step-by step reduction of the subsidies for the conventional fossil fuels. • Standardisation and Certification Policy (Kebijakan Standarisasi dan Sertidikasi) through the introduction of national standard for energy activities. • Policy on Capacity Building of the Human Resources (Kebijakan Peningkatan Kualitas Sumber Daya Manusia) through training and workshop. • Policy on Information System (Kebijakan Sistem Informasi) through a good database system.

25

•

Research and Development Policy (Kebijakan Penelitian dan Pengembangan). Prioritize research and development in the area of renewable energy and energy efficiency technology and local commodities and services through a partnership with institutional or research industry. • Institutional Policy (Kebijakan Kelembagaan) through building a strong network of the key players, giving a recent information to the public and increasing an awareness of government agency to apply the RE and EE policy. The framework of energy conservation policy and measures is illustrated in Figure 9. Figure 9: Framework of energy conservation policy and measures in Indonesia.


26

4.2 Objectives of policies on RE & EC In general, the objectives of the policies regarding renewable energies and energy conservation are stated as follows: • Realizing sustainable energy supply and utilization to support the achievement of sustainable development • Improving national resilience in the management of energy system, especially to fulfill the need for energy at the present and in the future (security of supply) • Ensuring sustainable energy resources supply, in other to ensure sustainable pattern of supply to support the implementation of sustainable development, whereas the role of renewable energy is increasing • Achieving more efficient, varied, safe, reliable and environmentally friendly energy utilization pattern. These general objectives are further broken into short-term and long-term policy measures which the government considered as necessary. The short-term goal constitutes smaller scale in fulfilling rural basic energy needs like lighting, refrigerator for rural health center, communication, battery charging, water pumping, agriculture/fisheries products dryer. On the other hand, the long-term goal requires (1) aapplication of the energy players mandated to utilize RE (NFFO-Non Fossil Fuel Obligation); (2) application of mandatory energy-saving technique; (3) application of technologies that promote efficient energy utilization and at the same time environmentally friendly; and (4) establishment of funding institution in order to finance RE and Energy Conservation programs. Ultimately, this longterm goal projects to substitute fossil energy which is essential in achieving energy sustainable development. By 2025, specific conditions that indicate full realization of the goals are: at least 3.8% of the total power capacity from geothermal energy, 4.4% from other renewable energy and 1% a year reduction in energy consumption intensity. The government of Indonesia has completely formulated the Blue Print on National Energy Management for 2005-2025 that emphasizes on the utilization of energy in efficient, equitable and sustainable way and widening public accessibility for energy sufficiency with reasonable price. On the other hand, energy diversification is pursued by exploring new renewable energy sources and alternative energy to reduce dependency on fossil fuel. The Blue Print constitutes the main guidelines for managing energy in national level. In line to both the long-term and short term goals, recent developments include the generation of the three main ouputs: 1. Programs related to RE and EE development: • Rationalization of petroleum product price • Tax allowance • Gradually Implementing carbon tax to develop clean energy • Implementing Demand Side Management • Improving exploration activities, including RE • Socialization • Local manufacturing and energy services development • Energy alternative development 2. Target of National Energy Mix 2025 (Table 20) 3. Road Map of Energy Development

27

Table 20: Target of national energy mix 2025. Renewable Energy Geothermal Micro hydropower

2004 807 MW 84 MW

Solar Energy Biomass (Electricity) Wind Energy

8 MW 445 MW 0.6 MW

Bio-diesel Gasohol Bio Oil

2025 9,500 MW 500 MW (On Grid) 330 MW (Off Grid) 80 MW 810 MW 250 MW (On Grid) 5 MW (Off Grid) 5% of total ADO (4.7 Million KL) 5% of total Gasoline 2.5% of total FO and IDO

Source: Blue Print National Energy Implementation Program 2004-2025 (2005)

In order to quantify the successes and failures in the process of implanting the existing policies, the government came up with the following items that compose the criteria: • Share of RE in Energy Mix • Investment • Incentive • Supporting policy • Knowledge, awareness • Domestic industry’s capability • Oil subsidy A concrete example on the success of the implementation with regards to Ministerial Decree No. 1122 K/30/MEM/2002 which concerns the small distributed power generation using RE are as follows: 1. 4 Micro Hydropower Power Plant (MHPP) has been interconnected • MHPP Kalimaron East Java (30 kW) • MHPP Curug Agung, West Java (11 kW) • MHPP Waikelosawah, Sumba Timur, (14 kW) • MHPP Cinta Mekar, West Java (100 kW) 2. 6 MHPP under processing to be interconnected to the grid • MHPP Dompyong Jatim (20 kW) • MHPP Santong Lombok Barat (15 kW) • MHPP Kalumpang (700 kW) • MHPP Hanga-Hanga Sulteng (2 x 1000 kW) • MHPP Lab. PLN JTK Cipayung (250 kW) • MHPP Anggrek Mekarsari Sumbar (1000 kW) 4.3 Institutional Structure and Financing Financing of energy project development is split among several players: 1. PLN remains a key player either as the developer of its own power projects or as the bulk purchaser of electricity from Independent Power Producers. The government and PLN have financed many of their power generation and distribution projects from multilateral sources (Asian Development Bank, World Bank). 2. For projects with a more (rural or technological) developmental character, the MEMRDGEED or BPPT (for primarily technological development projects) can play a role. 3. The REP (Rural Electrification Program) aims at the widespread generation of electricity in all parts of Indonesia. Prospective customers in villages who are not capable of paying electricity connection and installation costs may obtain low-interest

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4.

loans and credits from PLN. These credits are called rural electrification credit (KLP). In 1995, more than 84,500 customers obtained these credits. The Global Environment Facility (GEF), which consists of members of the World Bank-appointed United Nations Development Program (UNDP), the United Nations Environmental Program (UNEP) and the World Bank itself manage, develop and implement grant programs in developing countries. One of these programs which can be applied in Indonesia is the Small Grants Program (GEF SGP). The appointed host organization in Indonesia is Yayasan Bina Usaha Lingkungan (YBUL), a non-profit NGO. The program supports and empowers local communities and other organisations (NGOs) in measures to improve the environment. These organisations can submit project proposals and receive grants from the program which is managed by YBUL. In 1996 and 1997, US$ 600,000 were made available for the fund.

The 50 MWp PV Rural Electrification Program was launched in 1992 by the government. The program is based on two repayment schemes, both founded on lease-purchase concepts. One scheme, with reduced monthly installments, is applicable in regions with less developed villages, the other, with higher installments, in areas undertaken by people with higher income. Several energy projects are under implementation or in preparation. The World Bank project aims to realise up to 200,000 solar home systems in South Sumatra, west Java and south Sulawesi. The AusAid (Australia) project for around 36,400 SHSs focuses on the eastern islands, completed in 1999. The Federal State of Bavaria aims to develop a project for some 35,000 solar home systems and PV power supplies for some 300 villages under the BIG-SOL program. The key players from the government in implementing these policies are: 1. BAPPENAS (National Economic Development Agency - Bureau for Electricity, Energy Development and Mining): it prioritizes renewable energy projects, special rural electrification projects, determines (level of) government support, and appoints government project partners. 2. BAKOREN (Badan Koordinasi Energi Nasional): an inter-ministerial national energy co-ordination board, this is the energy policy and decision making agency in Indonesia; it co-ordinates the national energy program. 3. MEMR (Ministry of Energy and Mineral Resources, formerly MME): the main actor of the ministries in BAKOREN, this is the supervisor of the state-owned utilities and energy service companies. 4. DGEED (Directorate General for Electricity and Energy Development of the MEMR): the main actor in the field of fossil and renewable energies, DGEED also chairs the Rural Electrification Steering Committee which is responsible for the insurance of inter-agency co-ordination and co-operation in matters related to the government's rural electrification program; in addition, DGEED co-ordinates and supports SPPA (Shall Power Purchase Agreement) project developments. 5. MPW (Ministry of Public Works): responsible for hydropower power resource surveys and, in a few cases, the operation of hydropower plants. 6. MOC (Ministry of Cooperatives and Small Enterprises Development): responsible for enhancing the role of co-operatives in rural electrification, and in some cases initiator of electrification projects. 7. BPPT (BPP Teknologi): this non-departmental government Agency for the Assessment and Application of Technology, established in 1978 works in the energy field, directly reporting to the Indonesian President; BPPT is responsible for technology research and development, demonstration, testing etc, and is involved in project development in the pilot and pre-commercial phase.

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8.

AFRD (Indonesian Agency for Forestry Research and Development): this is linked with the Ministry of Forestry (MFO) and undertakes research and studies in the field of utilization of wood and biomass.

The MOC initiates village-based cooperatives (Koperasi Unit Desa: KUDs) as multipurpose community-based cooperatives. As of December 1999, there are more than 4,503 such cooperatives all over Indonesia. The business activities of these cooperatives in the field of electricity have been conducted under four specific schemes (POLA) and two Management Service Arrangements (MSAs): • Mechanism I: cooperatives handle meter reading, electricity bill collection and light maintenance as contractors of PLN on a fee-for-service basis. Number of cooperatives involved: 3,586. • Mechanism II: cooperatives install house wiring and undertake small electric repairs as a contractor of the customer, with licenses and price schedules approved by PLN. Number of co-operatives involved: 56. • Mechanism III: cooperatives purchase electricity in bulk from PLN or any other private electricity generating company and assume responsibility for local electricity distribution. Number of co-operatives involved: 147. • Mechanism IV: cooperatives generate and distribute electricity independently of PLN and other generating companies. They are subject to government regulation. Number of co-operatives involved: 7. • MSA-Grid: cooperatives handle a wider range of customers and technical functions such as line maintenance, simple fault clearing, trimming and street light maintenance based on an MSA that identifies the geographical service area of responsibility, performance indicators and fee structure. Number of co-operatives involved: 508. • MSA-(Isolated) Diesel : co-operatives handle the daily operation and management of an electricity generation and distribution system based on remote (isolated) diesel power plants including all customer administration functions. Asset ownership is still with PLN. Number of co-operatives involved: 180. The electricity supply system for the entire nation is operated by the State Electricity Corporation of Indonesia (Perusahaan Umum Listrik Negara, PLN). Since 1994 the company runs as an incorporated company to have more freedom of action. Its name is now PT. PLN (Persero) or National Electric Power Limited. PLN has the obligation and the right to supply power in Indonesia according to the Electricity Act of 1985, PLN is currently is the process of restructuring geared towards a multi-user / multi-seller market with PLN retaining the task of transmission. PERTAMINA is the national company responsible for exploiting oil, gas and geothermal energy. The national company PT. Bukit Asam is responsible for exploiting coal resources and the company PGN is responsible for the gas distribution network and gas supply. Non-governmental Organizations play an important role in Indonesia's energy sector, mainly as advisers, project developers and managers, in executing some energy programs in Indonesia. NGOs are also active in the different NRES fields. The Renewable Energy Network Indonesia (RENI) was established as a program of the NGO Yayasan Bina Usaha Lingkungan (YBUL), with the support of USAID and Winrock International in 1996. It aims to stimulate the development and implementation of renewable energy in Indonesia. RENI identifies possible projects, is active in cost-sharing of pre-investment studies and transfers technologies for renewable energy.

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IBEKA is an NGO specifically focused on the development of Micro-hydropower projects; PELANGI is an NGO offering general consulting services for Renewable Energy project development; Yayasan Dian Desa is involved in a program for improved cook-stove. Yayasan Gemi Nastiti (GENI) The private sector operates increasingly significant amounts of captive power capacity. It is expected to play an increasingly important role in the supply of oil, gas and electricity. In the electricity sector, more than 50% of the additional grid capacity (around 11,600 MW) is expected to come from independent power producers (IPPs) until 2004. To date, power purchase agreements have been signed with IPPs for over 3,700 MW; negotiations have been completed for projects with a total capacity of over 1,000 MW. In terms of rural electrification and renewable energy utilization, the (future) role of the private sector will basically concentrate on the SPPA concept. There are some trade associations for specific technology sectors in Indonesia. The renewable energy sector is, for example, represented by Association of Indonesian Renewable Energy Companies (APETINDO), established in 1996. The PV association is APSURYA; for biomass, there is the Biomass Association and for geothermal projects, there is the Indonesian Geothermal Association (INAGA). In 1999 the IRES (Indonesia Renewable Energy Society) was formed.

5.

Potential of Renewable Energy and Energy Efficiency

5.1 Biomass potential Indonesia has abundant biomass resources. It is estimated that the biomass production is 146.7 million tons per year (equivalent to 470 GJ/y). Rice residues give the largest energy potential of 150 GJ/year and followed by rubber wood of 120 GJ/year (Table 21). The potential market is indicated in Figure 10. Table 21: Major potential biomass residue Residue

Main region

Production [M t/year] 41 (replanting)

Energy Potential [MGJ/year] 120

Rubber Wood

Sumatera, Kalimantan, Java

Logging Residues Sawn Timber Residues

Sumatera, Kalimantan Sumatera, Kalimantan

4.5

19

1.3

13

Plywood and Veneer Production Residues Sugar Residues

Kalimantan, Sumatera, Java, Irian Jaya, Maluku Java, Sumatera, South Kalimantan

1.5

16

Bagasse: 10 cane tops: 4 cane leaves: 9.6

78

Rice Residues

Java, Sumatera, Sulawesi, Kalimantan, Bali/Nusa Tenggara

Husk: 12 Bran: 2.5 Stalk: 2 Straw: 49

150

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Remarks Small logs ∅