Hot, clean and complex: Unlocking Indonesia’s geothermal power

Strategic Review, The Indonesian Journal of Leadership, Policy and World Affairs, January-March 2013, Vol. 3, No. 1, pp 72-85,

by Fitrian Ardiansyah and Adhityani Putri

Geothermal_Strategic Review_FA_2013The first parts of the article can be read below, the remaining section can be read if you are subscribed to Strategic Review http://www.sr-indonesia.com/index.php/subscribe

Indonesia has huge potential geothermal resources, but develop­ment has been slow and speeding it up is considered a herculean task. The high cost of investment and lack of government capac­ity are often cited as hindrances to development, along with familiar concerns from the era of decentralized government about unclear regulatory and institutional frameworks.

Finding solutions to these issues is critical to further unlocking this indigenous, clean and renewable source of power. Success could bring positive benefits to the country’s energy security and climate change mitigation efforts.

Indonesia can no longer depend on fossil fuels, particularly oil, to power its economy. Soaring global oil prices have placed consid­erable strain on the economy. According to the Finance Ministry, energy subsidies – from both fuel and electricity – in 2012 cost the government $18.55 billion (17 percent of government expenditures). This is a significant increase from $9.78 billion in 2010, as shown by several studies.The figure could even be higher since it reportedly underestimates the actual global oil price.

With Indonesia’s projected gross domes­tic product growth to remain steady at 4-6 percent and industrial production to slightly increase over the next couple of years, sev­eral studies, including from the National Council on Climate Change (NCCC) and the Energy and Mineral Resources Ministry (MEMR), have estimated that the power sector is projected to grow from 120 tWh (terawatt-hour) in 2005 to 970 tWh by 2030.

If Indonesia continues to depend on oil, rising electricity needs would lead to the depletion of Indonesia’s domestic oil reserves sooner than expected. A 2012 statement from the energy ministry estimated that the country’s remaining 10 billion barrels of oil reserves will be exhausted in the next 20 years should no new reserves be found. In fact, the country has been a net importer of both crude oil and refined products since 2004.

The formidable task of meeting rising electricity demand requires a funda­mental change in Indonesia’s energy policies, programs and actions. The country could opt for an easier solution, such as utilizing its abundant coal reserves. According to a 2009 World Bank report, the central government already has initiated a “crash program” to bring 10,000 MW (megawatt) of coal-fired power plants online as stipulated in Presi­dential Decree No 71.

Many critics, however, argue that while coal-fired power plants can alleviate short-term supply problems and reduce depen­dency on imported oil, the approach fails to address energy security goals and more im­portantly casts a shadow on the government’s pledge to tackle climate change and reduce emissions.

Key Indonesian stakeholders in­terviewed in 2011 believed that the new coal power plants – purchased at low cost from China – were mostly dirty and inefficient, according to the paper, “An Environmental Perspective on Energy Development in In­donesia” included in the 2012 book “Energy and Non-Traditional Security in Asia.” If the use of coal continues to dominate the power sector, many experts predict that increased CO2 emissions from electricity generation by 2030 could reach 810 million metric tons of CO2 equivalent (CO2e), an increase of nearly seven times the amount in 2005.

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Fitrian Ardiansyah is a doctoral candidate at the Australian National University.

Adhityani Putri is a postgraduate scholar at the Australian National University.

About Strategic Review:

The Strategic Review is the Indonesian Journal of Leadership, Policy and World Affairs with its editorial board led by Dr Hassan Wirajuda (Former Minister of Foreign Affairs) and its advisory board consists of Prof Juwono Sudarsono (Former Minister of Defense), Let Gen (Ret) Agus Widjojo (Executive Board in the Partnership for Governance Reform), Prof. John Thomas (Harvard Kennedy School of Government USA), Prof. Erhard Friedberg (Sciences Po France) and Prof Arne Westad (London School of Economics UK).

Balancing energy development and forest protection

Published in COAL ASIA MAGAZINE, VOL. 2, OPINION, AUGUST 17-SEPTEMBER 17, 2012, PAGE 94-95

by Fitrian Ardiansyah

To see the pdf version, please click COALASIA_OPINION_fitrian ardiansyah_energy&forest_Aug2012

As the largest energy producer and consumer in Southeast Asia, Indonesia is currently struggling to cope with the increase in energy demand each year, causing short-term energy shortage and likely leading to worse situation if no immediate actions taken.

Albeit having enormous energy potential, developing energy sources in this country, while desirable, is fraught with hurdles, ranging from regulatory and pricing issues, lack of capacity and investment, to the problematic location of energy sources.

The heavy reliance on subsidized fossil fuels means it has brought about significant problems of energy security and economic issues, especially ever since Indonesia became a net importer of both crude oil and refined products in 2004.

The new extraction of oil, gas and coal as well as the development of new and renewable energy sources has been viewed as a priority by the government but this development faces a number of challenges, such as the fact that some locations of these energy sources overlap with Indonesia’s remaining important and fragile ecosystems, including its forests.

It has been reported by the Forestry Ministry in 2011 that the area of forests within mining concessions, which include for oil, gas and coal activities, covers approximately 2.03 million hectares – based on 842 licenses given for mining related exploration and exploitation between 2005 and 2011.

A number of environmental organizations, such as Mining Watch Canada and Walhi, even claimed a higher number stating that as of 2005, mining activities have encroached on or threatened 11.4 million hectares of forest in Indonesia, including 8.68 million hectares of protection forests and 2.8 million hectares of conservation areas.

A 2008 study conducted in South Kalimantan by M. Handry Imansyah and Luthfy Fatah of Lambung Mangkurat University, published in ASEAN Economic Bulletin, found that a massive coal exploitation without a proper technical handling for reclamation can cause serious water contamination and land degradation, because many mining areas are often left without rehabilitation.

A similar concern may also be said when it comes to the development of renewable energy, namely biofuels and geothermal.

In the case of biofuels development, mainly from palm oil, although considered as one of renewable sources of energy and therefore has the greenhouse gas (GHG) saving potentials, the development of these crops can further increase GHG emissions if the plantation replace forests and peat lands.

A 2011 article written by Gayathri Vaidyanathan in Nature shows that, for example, in North Sumatra and Bengkulu provinces, 38 and 35 percent, respectively, of peat-swamp forest were converted to oil palm plantations by the early 2000s – leading to the release of about 144.6 million tons of carbon from biomass above ground and peat oxidation below ground.

Another study conducted by Lian Pin Koh and David S. Wilcove in 2008, published in Conservation Letters,estimates that over 56 percent of oil palm expansion occurred at the expense of natural forest cover for the period between 1990 and 2005. In addition, according to the 2009 BAPPENAS (National Development Planning Agency) report, as of 2006, plantation licenses (i.e. predominantly for oil palm) on peatlands totalled 1.3 million ha.

With regard to geothermal energy, this type of renewables has a significant potential to contribute to the future electricity generating capability – with 10 gigawatts of total geothermal potential that is presently ready for commercial extraction as reported in 2009 by the World Bank.

If developed appropriately and immediately, geothermal energy can at least reduce the burden of approximately 35 percent of the current total generation capacity in 2035, as argued in a 2012 paper written by a research team from the Christian University of Indonesia, and eventually contribute to climate change mitigation.

Accelerating the development of geothermal energy is likely to be challenging since up to 60 percent of its potentials and reserves are located in the remaining important forest areas, according to a 2009 paper written by Montty Girianna, the Energy, Mineral and Mining Resources Director of Bappenas.

The exploration, extraction and overall activities of oil, gas, coal and geothermal have been previously subjected to the laws regulating the protection and management of pristine forests, including employing stricter conditions under which licenses are to be issued.

A 2011 report by PricewaterhouseCoopers explains that the Forestry Law No. 41 of 1999 (and its amendments No. 1 of 2004 and 19 of 2004) prohibit oil, gas and mining activities in protected forest areas except where a government permit is obtained.

This, however, was gradually altered, particulary since February 2010 when Government Regulation No. 10 of 2010 on Forest Areas Utilization was introduced. According to this regulation, development projects, including oil and gas activities, power plants, mining, transport and renewable energy projects, can take place in protected forests if they are deemed strategically important.

Specifically on geothermal, a presidential decree (No. 28 of 2011) released on 19 May 2011, allows conditional underground mining in protected forest areas, which includes geothermal energy. This decree was later strengthened with the release of the Memorandum of Understanding between the Energy and Mineral Resources Ministry and the Forestry Ministry (No. 7662 of 2011) aiming at accelerating the permit issuance of geothermal energy development in forest areas.

Critics, however, view that these regulations and policies which promote and accelerate energy development in forest areas will also encourage other destructive mining activities to take place since the use of the definition of ‘strategic’ or ‘vital’ development activities can have multiple interpretation.

Furthermore, these critics question the level of seriousness of the Indonesian president’s pledge to reduce Indonesia’s GHG, if many of his government’s policies still incorporate a large number of activities that will lead to deforestation in primary and secondary forests as well as peatlands.

It is, therefore, imperative for Indonesia to find practical and applied solutions to balance energy development and forest protection.

The balanced development of energy and forest protection is also crucial since the pledge made by Indonesia’s President particularly mentioning his commitment to changing the status of Indonesia’s forests from a net-emitter sector to a net-sink sector by 2030 and more specifically, emphasizing the preservation of areas under forest protection as one of key programs.

One immediate step to do this, for example, is by harmonizing and synergizing different regulations and policies that will result in a clearer guidance from the government. Vague words like ‘vital’ or ‘strategic’ development activities need to be clarified so that these will not be used as a loop hole.

Synergyzed policies will not be implementable if data regarding conventional energy sources, renewables and forest areas are not synergized as well. Recent actions taken by a number of government’s institutions to synchronize and agree on a map of forest and land use in Indonesia – adhered to across all sectors and levels of government – are therefore crucial to contribute to balancing energy development and forest protection.

Following these steps, a set of sustainability benchmarks is deemed urgent to be instituted to provide technical directions to mitigate the impacts and risks of energy development on forests.

The sustainability benchmarking – promoting principles of high conservation value forest, effective environmental assessment, management plans and monitoring, and multi-stakeholders participation – is required because not only the actual environmental impacts have to be mitigated but also the perceived risks coming from energy projects on these ecosystems need to be addressed, in which local communities and the public may have substantial interest.

The development and implementation of these benchmarks will also align with other laws regulating forest and biodiversity protection, namely the 2009 Forestry Law, the 1990 Biodiversity Conservation Law and the 2009 Environmental Protection and Management Law.

As an emerging economy with a significant increase in energy demand, supplying energy while reducing environmental impacts is definitely a balancing act.

Finding solutions, as elaborated above, is hence urgently required and if these solutions are applied appropriately, Indonesia is likely to secure its future energy in a sustainable way.

——

Fitrian Ardiansyah

The writer is climate and sustainability specialist, a doctoral candidate at the Australian National University, and the recipient of Australian Leadership Award and Allison Sudradjat Award. He can be reached at fitrian.ardiansyah@anu.edu.au

Igniting the Ring of Fire: a Vision for Developing Indonesia’s Geothermal Power

Early July 2012, Published by WWF-Indonesia, Author: Fitrian Ardiansyah and Ali Ahsat.

WWF-Indonesia released a report, co-authored by Fitrian Ardiansyah and Ali Ashat, entitled “Igniting the Ring of Fire: A Vision for Developing Indonesia’s Geothermal Potential” – an essay that elaborates the challenges and opportunities involved in the development of geothermal energy in Indonesia, as well as gives a picture on their possible workarounds.

For the pdf file of the complete report: please read geothermal_report or alternatively click http://awsassets.wwf.or.id/downloads/geothermal_report.pdf

This report discusses economic, social, policy, financial and environmental aspects of geothermal energy development in Indonesia, including balancing geothermal energy development and forest protection, and setting the price right for geothermal investment.

 

 

Renewing support for renewable energy

Fitrian Ardiansyah ,  The Jakarta Post, Climate Solutions Column, Contributor ,  Jakarta   |  Tue, 02/02/2010 12:40 PM  |  Features

Indonesia is at a crossroads. With the impressive rate of growth of its economy – leading to a dramatic increase in the level of energy consumption – and its ambition to reduce its greenhouse gas (GHG) emissions, it needs to come up with a way to reduce its reliance on carbon-fueled energy.

According to the World Energy Outlook 2009 published by the International Energy Agency (IEA), Indonesia is the largest energy producer and consumer in the region, the world’s leading thermal coal exporter, a substantial liquefied natural gas (LNG) exporter, and until 2004 was a net oil exporter.

If no new oil reserves are found, and with the increasing demand for energy, scientists expect Indonesia will be a significant oil importing country within less than two decades.

By 2030, Indonesia will remain an exporter of natural gas and coal, but will import 1.3 million barrels of oil per day.

Energy demand will increase in line with regional economic development and population growth.

At present, around 65 percent of the population have access to electricity. But in rural areas, 74 million people remain unconnected to the network.

As a result, Indonesia is expected to provide its own supply of energy to avoid energy security issues.

According to the IEA Reference Scenario, Indonesia accounts for 36 percent of the incremental energy demand in ASEAN to 2030.

With the high price of oil and the target to reduce emissions, Indonesia needs to provide an alternative source of energy to meet this demand.

Coal has been seen as one of the significant sources to substitute for oil to satisfy Indonesia’s primary energy development, especially under the first phase of the 10,000 MW of capacity added by 2013 – mostly through coal-fired plants.

However, the use of coal for power plants has major environmental impacts, namely smog, acid rain, significant GHG emissions that cause global warming, and air pollution.

On the other hand, Indonesia possesses a variety of other energy resources. These include natural gas and renewable energy sources such as geothermal, solar, micro-hydro, wind and bio-energy.

It will be impossible to diversify energy sources, address the escalating concern over environmental issues, and reduce dependency on conventional energy resources if there is no serious support for or investment in renewable energy.

The National Council on Climate Change recommends the conversion from coal and petroleum-based fuels to renewable energy sources to reduce emissions. The government’s general energy policy also advocates the diversification of energy sources.

Nonetheless, promoting the development of renewable resources over the past several years has progressed very slowly.

Energy and Mineral Resources Ministry statistics show that at present renewable energy (hydropower, geothermal and biomass) accounts for only 3.4 percent of total potential reserves.

This is perhaps because there are no clear policies, incentives or pricing plans to encourage investment in renewable energy, or promotion of schemes to develop renewable energy concurrently to displace high-carbon coal with low-carbon gas as a “bridging fuel”.

Lets take a look at geothermal energy.

Despite Indonesia possessing the world’s largest reserves of geothermal energy, it hasn’t made much progress using them. Over the last two decades, less than 4 percent of Indonesia’s geothermal potential has been developed.

Pricing of those energy sources is one of the main obstacles in the development of geothermal energy in Indonesia. Geothermal energy needs to be competitive with other energy sources, and at the same time offer developers an attractive rate of return.

The geothermal industry argues that prices could be more competitive if upstream and downstream activities could be integrated, with value added tax (VAT) applied only to sales of electricity. A significant factor affecting the price of geothermal energy is the 34-percent tax rate applied to electricity rates.

The government’s recent introduction of a ministerial decree on the benchmarking of prices of geothermal electricity sold to PLN (the state-owned electricity company) may provide a breath of fresh air.

Other obstacles that need to be addressed include high fossil fuel subsidies, inadequate legal and institutional frameworks to promote the development and utilization of renewable energy that result in the unpredictability of the industry and bias for fossil fuels, and higher upfront costs compared to conventional energy.

This is why the reduction of subsidies allocated for fossil fuels is still necessary to stimulate further use of alternative renewable energy resources.

The development of renewable energy has also been generally smaller in scale compared to fossil-fuel based projects. Hence, the relative transaction costs are higher, which impedes small investors from opting for renewable energy and discourages government officials from supporting such projects.

It is clear that for Indonesia to achieve its aspiration to reduce greenhouse emissions while ensuring energy supplies for future generations, the barriers mentioned above will have to be addressed seriously.

A comprehensive mechanism framed by relevant government regulatory agencies is required to ensure necessary support for the development of renewable energy.

It is time to for this country get going, not just with small test pro-jects of renewable energy but with full-scale support and programs.

The writer is the program director of climate & energy at WWF-Indonesia, and adjunct lecturer at Paramadina Graduate School of Diplomacy. He can be reached at fardiansyah@wwf.or.id

The original link:

http://www.thejakartapost.com/news/2010/02/02/renewing-support-renewable-energy.html