| Keywords |
Renewable Energy, Sustainable development, GHG, Climate Change, Private Sector participation, Innovative Financing Instruments, Market based tariff structure, and Measures to stimulate market mechanism |
| Abstract |
Inadequate power supply has emerged as one of the most serious infrastructure constraints on sustainable economic growth in the Asia and Pacific region in general, and more specifically in Indonesia. Additional investments in traditional commercial power supply sources alone will not be sufficient to bridge the demand-supply gap. The heavy reliance on fossil fuels in the energy mix also raises major environmental concerns at the national, regional, and global levels. The burning of fossil fuels emits greenhouse gases (GHG) that cause climate change and impose substantial environmental and economic costs. It is essential to reduce emissions of greenhouse gases, ease growth in fossil fuel energy demand, curb the upward pressure on energy prices, and improve energy security. Thus, power systems based on renewable energy sources (RES) such as geothermal, biomass, solar, wind, and mini-hydro, etc., and improvements in the energy efficiency and conservation programs in the existing facilities, are promising solutions for alleviating some of the power shortages in Indonesia. The priority for the development of renewable energy resources in Indonesia remains low at all levels, from end-users to Government officials. The Government of Indonesia should devise and enact, on an urgent basis, policies that are the pillars of renewable energy development, such as a market-based tariff structure; measures to stimulate market mechanisms; solid legislative and regulatory frameworks; strong institutional structures to ensure sustainability; and the promotion of behavioral changes that are not given much attention and priority at present in Indonesia. Power generated from RES is economically attractive when compared with power generated from commercial energy sources if the economic costs of inputs and the environmental costs of fossil-based generation they displace are considered. The competitiveness of RES vis-à-vis commercial energy sources rises further when the electricity tariffs are aligned with long-run marginal costs. RES technologies also offer investment opportunities to small entrepreneurs in power generation and provide alternative sources of energy, especially in rural areas that cannot be supplied by grid. The investment decisions that will be taken over the next two decades will be critical in determining the world’s climate and the security of energy supplies. There is, therefore, a challenge for the policy and decision makers of the governments, politicians, scholars, academia, civil society, media, and business leaders of the region and in Indonesia to create an enabling environment for the private sector to undertake development of geothermal energy and other RES. For their part, the multilateral development financial institutions like the Asian Development Bank, donor agencies, and the international financial institutions should extend not only the needed investment funds for the development of geothermal and other renewable energy resources but also provide new and bold innovative financing instruments, unlike the old traditional lending modalities of the past, that would enhance the provision of private capital, goods and services. |