World Renewable Energy Congress-Indonesia International Conference on Renewable Energy and Energy Efficiency, 16-20 October 2011, Bali,

Indonesia

Indonesia Renewable Energy Outlook: The Challenges Ahead

Adhi Dharma Permana*, M.A.M. Oktaufik, Yudiartono, Ira Fitriana Centre of Energy Resource Development Technology (PTPSE), Agency for Assessment and Application of Technology (BPPT), Jl.MH Thamrin No.8, Jakarta 10340, Indonesia * Corresponding author: adhidpermana@gmail.com, adhi.dharma@bppt.go.id

Abstract Indonesia new & renewable energy potential is quite large. However, the reality of new & renewable energy (NRE) application up to a significant share in the energy supply mix in Indonesia has not been a bright picture. The share of NRE in 2009 energy supply share was at the 4% level. On the one hand, the Government of Indonesia has set targets in the National Energy Policy of 2006 to increase the combined use of NRE of all types up to 17% in 2025. A new plan was also been proposed currently to achieved at least 25% of NRE utilization in 2025. This paper discusses the future prospects and challenges facing NRE application in Indonesia based on BPPTs Energy Model study of Indonesia Energy Outlook to 2030. The projection of future energy demand is obtained using the BPPT Model for Energy Demand of Indonesia (MEDI), an energy demand model based on activities and intensities of various subsectors of the Indonesia economy. On the supply side, the MARKAL model is employed to allocate energy resources and supply energy demand. MARKAL is an optimization model that employs linear programming to calculate decision variables based on total cost minimization. In addition, this paper addresses efforts to increase NRE application. Several key sectors for NRE applications are examined, i.e. the industry, transportation, and household sectors. Keyword: Markal Model, Energy Outlook, Renewable Energy, Energy Model 1. Introduction Over the past 20 years, Indonesia energy demand has risen steadily at an average growth rate of 6.08% pa. This trend is consistent with the countrys economic development. On the demand side, in 2009 the two leading end-use energy consuming sectors were the industry and transportation sectors, each of which had a share of 52% and 31%, respectfuly followed by household and commercial sectors. The industry sector is mostly dependant on gas and coal, whereas the transportation sector is mostly supplied by oil fuel (gasoline, diesel fuel). On the supply side, during the same period oil based energy has been the major energy supply contributing to 43% of total energy supply, followed by coal, natural gas and new and renewable energy (NRE) being 4%. Figure 1 shows historical energy demand vs supply during 1990 2009. Figure 1. Historical Energy Demand vs Supply (1990 2009)

Source: Ministry of Energy & Mineral Resources, 2010

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World Renewable Energy Congress-Indonesia International Conference on Renewable Energy and Energy Efficiency, 16-20 October 2011, Bali, Indonesia

The currently small contribution of NRE has the potential to be increased. the Government of Indonesia has set targets in the National Energy Policy of 2006 to increase the combined use of NRE of all types up to 17% in 2025. A new plan was also been proposed currently to achieved around 2526% of NRE utilization in 2025. Potential application of NRE are in alternative liquid fuels and electricity power generation. The current energy market is restricted by the presence of fuel subsidy for most consumers and the regulated electricity price for most consumers. However, there have actions to move towards the direction of employing subsidies for alternative liquid fuels, i.e. biofuels and to employ Feed In Tariffs (FIT) to power generation from certain NRE sources, e.g. geothermal, solar, and wind energy. This paper discusses future outlook for NRE in Indonesia, the challenges ahead, and efforts to overcome these barrier to promote NRE application. A future projection of Indonesia energy supply demand will be presented. 2. Methodology In this section, a brief discussion on the method to project future energy demand and supply and the underlying assumptions are presented. The projection of future energy demand is obtained using the BPPT,s Model for Energy Demand of Indonesia (MEDI), an energy demand model based on activities and intensities of various subsectors of the Indonesia economy. The sectors considered are industry, transportation, household, commercial and others. The main driver for activities are GDP, population growth, and other relevant parameters to the sectors of the economy. Table shows parameters considered for the various sectors in the economy. Table 1. Parameters considered for the sectors
No 1 2 3 4 Sectors Transportation Industry Household Others Parameter GDP growth, population growth, number of vehicles, vehicle energy intensity GDP growth, population growth, energy intensity, GDP growth, population growth, energy intensity, electrification ratio, government program on kerosene to LPG conversion GDP growth, population growth

On the supply side, the MARKAL model is employed to allocate energy resources and supply energy demand. MARKAL is an optimization model that employs linear programming to calculate decision variables based on total cost minimization. The energy system being considered encompasses the networks from resources, import, export, energy transformation to final (end-use) consumers is shown in Figure 2. Figure 1. Schematic Representation of Energy System

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World Renewable Energy Congress-Indonesia International Conference on Renewable Energy and Energy Efficiency, 16-20 October 2011, Bali, Indonesia

A set of major assumptions are employed in the projection of future energy supply demand. These major assumptions include: GDP growth rate, population growth rate, fossil energy prices as shown in Table 2. In addition to these assumptions, relevant programs/projects in the electricity, oil and gas areas are also considered as the energy supply infracture. Table 2. Key Assumptions for Future Projections
Population GDP Crude Oil Coal price (high calory) Million Billion USD USD/barrel USD/ton 2010 237 259 95 80 2015 251 363 120 90 2020 263 509 150 115 2025 274 714 175 135 2030 284 1002 200 150

3. Energy Outlook & NRE Projections Based on the above assumptions, future energy demand and supply are projected to increase more than 3 times compared to that in 2009. The largest end use consumer will be industry sector, followed by the transportation sector. Figure 2 Total Energy Consumption by Sector

Figure 3 Total Energy Consumption by Type

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World Renewable Energy Congress-Indonesia International Conference on Renewable Energy and Energy Efficiency, 16-20 October 2011, Bali, Indonesia

On the supply side, from a total of 1100 million BEO in 2009, energy supply will increase up to 3800 million BOE in which Fossil fuels (oil, gas, coal) will continue to dominate future energy mix (83% in 2030). The total energy supply based on type is shown in Figure 4. Figure 5 shows the projected energy mix for fossil energy and NRE. Figure 4 Projection of Total Energy Supply

Figure 5 Projection of Total Energy Supply

Energy mix (2009)

Energy mix (2030)

Although the share of NRE will decrease, NRE is projected to have a contribution that doubles its 2009 level or up to 16% 590 million BOE in 2030. The major NRE type that has the largest prospects are geothermal and biofuels, the two of which will reach 73% of NRE supply. Firewood will still be used mostly in rural households that do not have access to refined products and electricity. Nuclear energy for electricity generation will be an option for the energy mix as new generation of NPP equiped with more advanced safety features will be available in this decade. Solar power for rural

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World Renewable Energy Congress-Indonesia International Conference on Renewable Energy and Energy Efficiency, 16-20 October 2011, Bali, Indonesia

electrification will continue to increase its share as solar cell technology become more available and more affordable. Coal to Liquid (coal liquefaction or CTL) will be able to provide synthetic fuels from coal up to 5 million kl per year, based on the Governments energy policy. Figure 6 shows the share of NRE by type in more detail. Figure 6 Share of NRE by type

Electricity Power sector The demand for electricity in the future will increase significantly. It is projected that electricity consumption will reach up to 1.050 TWh in 2030 from 134 TWh (2009). To supply electricity demand, the total generating capacity will increase from 31 GW (2009) to 180 GW (2030). Most of the generating capacity will based on coal power plants followed by NRE, hydro, gas fired, and Diesel fuel. Figure 7. Total Capacity of Electricity Generation

NRE power generation capacity is projected increase from 1.2 GW to reach 12 GW by 2030 (or contribute to 7% of total share). By 2030, most of the power generation from NRE will be supplied by geothermal (79%), while mini/microhydro, solar, waste, and nuclear energy has the potential to contribute up to 20% of total capacity. Similary to the projected capacity of power generation, the total electricity generation based on fuel type follows the same trend as that of projected power generation capacity.

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World Renewable Energy Congress-Indonesia International Conference on Renewable Energy and Energy Efficiency, 16-20 October 2011, Bali, Indonesia

Figure 8 Total Capacity of Electricity Generation from NRE

Figure 9 Total Electricity Generation

4. Barriers and Challenges By 2030, the two largest end use energy consumers are the industry (42%) and transportation sector (32%), followed by household (14%), and the remaining being commercial and other sectors. The characteristis of the two major energy consumer will effect the overall pattern of energy consumption in the future. The industry sector is projected to have a diverse energy mix. Potential application of NRE in the industry sector will be biofuels, synthetic fuels and synthetic gas. In the transportation sector, biofuels and synthetic fuels are the most potential NRE to contribute in this sector. Meanwhile, in the household sector although electricity will be the predominant form of final energy, the large dependancy on LPG import will need attention to promote DME from renewable sources to increase energy security in this sector. It is projected that fossil fuels will still dominate future energy mix while NRE are able to fulfil some share up to 16% by 2030. When compared to latest National Energy Policy (based on Presidential Regulation no 5, 2006) NRE projection will not meet the target to reach 17% by 2025. To promote NRE application many barriers and challenges have to be overcome. Biofuels will be used mostly in
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World Renewable Energy Congress-Indonesia International Conference on Renewable Energy and Energy Efficiency, 16-20 October 2011, Bali, Indonesia

the transportation sector where currently up to 99% of the supply in this sector are met by fossil fuel (gasoline, Diesel fuel). Currently, a quota of oil fuels up to almost 60% has been receiving fuel subsidy to help the unfortunates of the society have access to oil fuels. This condition pose a challenge of the competitiveness of biofuels. The application of biofuels will require mandatory policy to be implemented rigorously when crude oil price are unfavorable towards biofuels. Given the above assumptions on crude oil price, it estimated that by 2020 mandatory policy will no longer be required. However, another challenge in promoting biofuels is securing feedstock and product sales under a dynamic competition with respect to fossil based oil fuels. On an economic competitive basis, there exists the potential to develop synthetic fuels from coal (CTL). The development of CTL will require guaranteed coal feed at a guaranteed price to ensure the continuity of CTL plants in operation during its entire economic life time. Therefore the commercial operation of CTL plant will require securing a large source of coal feed. In addition, there must be a guaranteed purchase of synthetic fuels at a guaranteed price when in competition against refined products. With a large investment (in the order of 5 6 billion USD for a plant with a capacity of 50.000 barrel per day) at stake the challenge to develop synthetic fuels from coal will be significant. In the electricity power generation sector, geothermal energy has the largest potential to be develop to its fullest. However, it is projected that it will not reach the 5% target as set by the National Energy Policy of 2006. The Government setting of feed-in tariff when purchasing electricity from geothermal energy can be expected to increase its penetration. However, more efforts are required to make geothermal energy more attractive for investments. The challenges in increasing geothermal energy include regulation overlaps when plant site location is in a protected forest, reducing the cost and risks in resource development, reducing total investment cost through increasing local content, and employing other financing mechanisms such as CDM to increase investment in geothermal power plant. Other forms of NRE such as solar (PV) wind, and nuclear powered electric power require careful planning, calculation and application. According to the future projection results, its application will not reach the 5% target as set by the National Energy Policy of 2006. Moreover, solar and wind power will not be competitive when connected to major grids. They are more suitable for remote areas where there are no other options. The investment cost of solar powered electricity (photovoltaics) will be the major challenge, therefore a form of incentive will be needed to promote PV application. Wind energy application in Indonesia will require locations with adequate wind speed. As the theoretically maximum of wind energy extracted is the Betz coefficient (0.59) then the available wind energy will be limited as constrained by the available wind speed. Nuclear power generation will need to be determined by the Government decisively since the lack of public acceptance will pose challenge to the success of building nuclear power plant on a particular site. 5. Efforts required to promote NRE application Barriers in promoting NRE can be categorized into: pricing, guaranteed feed stock and product purchase, technology development and industry support base to increase competitiveness. Various policy instruments exist and has been adopted in many countries to promote NRE application, e.g. Feed-in tariff, Renewable portfolio standard (RPS), tax incentives. Biofuels Biofuels will require securing feedstock supply and product sales under fluctuating crude oil price and its effect towards feedstock price thereby posing a constraint to biofuels competitiveness. Mandatory and RPS policy instruments when opted need to be implemented consistently with adequate enforcing resources. Geothermal energy Feed in Tariffs will guarantee developers the payback of their investment which is site specific thereby resulting in different FIT for diferent geothermal projects. In addition, an effort to make

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World Renewable Energy Congress-Indonesia International Conference on Renewable Energy and Energy Efficiency, 16-20 October 2011, Bali, Indonesia

regulations in different sectors (forestry, mining, industry, etc) coherent and consistent will support geothermal energy development. Solar, Wind, Nuclear energy Solar and wind power applciation require careful planning and calculation to ensure their feasibility. As they are not competitive when connected to major grids, they are constructed on a closed system supplying electricity at remote areas where electricity generation using oil fuels are more expensive. In addition to technical and economical aspects, the application of nuclear energy require more intensive efforts to educate public acceptance based on credible and fair information. 6. Conclusion This paper has discussed future projections of NRE application in various sectors of the Indonesia economy based on BPPT energy model. Biofuels and geothermal are the two major NRE that deserve support for their promotion. Major challenge in promoting biofuels include securing feed and product sales, competitiveness against fossil based oil fuels. Policy instruments such as feed-in price, biofuel subsidy may be employed as a temporary approah to develop biofuels market. Geothermal energy has a large potential to be fully developed as source of electric power generation. Feed-in Tariff based on a specific site need to be examined carefuly. In addition the coherency of regulations accross different sectors (forestry, mining, industry, etc) need to be developed to support geothermal energy. Other types of NRE such as solar and wind power require careful planning and calculation to ensure its feasibility.

7. Reference 1) 2) 3) 4) 5) Anon.,Renewables 2010 Global Status Report, REN21, 2010. Adhi D. Permana, et.al., BPPT Indonesia Energy Outlook, 2011 Anon., Handbook of Energy & Economic Statistics of Indonesia,MEMR, 2010 Jane Early, US Trade Policies on Biofuels and Sustainable Development, 2009 Wallace E. Tyner and Farzad Thaeripou, Future Biofuels Policy Alternatives, 2007

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