Indonesia is planning to introduce incentives aimed at attracting investment in its renewable energy sector.
The country’s Minister of Energy and Mineral Resources recently announced that the government is mulling several incentives to bring large investments into its renewable energy sector, one of which could reduce the import duty on equipment used in the development of renewable energy projects. The planned incentives would play a critical role in Indonesia’s endeavour to boost the share of renewable energy sources in the total energy mix to 19% by 2019 and to 25% by 2025, up from its current share of renewable energy sources of between 5% and 6%.
Renewable energy potential (PDF) in Indonesia remains largely untapped, and investment from national and international companies is critical to turning this situation around. According to Perusahaan Listrik Negara (PLN), the government-owned electricity distribution company in Indonesia, the country has 75 GW of hydro power potential, 27.5 GW of geothermal energy potential, 50 GW of biomass energy potential, and 9 GW of wind energy potential.
However, over 90% of the potential in almost all renewable energy technologies remained untapped.
The government is nevertheless taking significant measures to make the renewable energy sector more attractive for investors, indicating that the budget for renewable energy development could be increased five-fold next year to around $800 million.
Policy guidance by the government is slowly reaping results. Construction of the country’s first large-scale wind energy project has already started, with the 50 MW project being constructed by a joint venture between an Indonesian and American company, and is expected to be commissioned in 2019. The government was also reported to be working to have 4 to 5 GW of geothermal capacity operational by the end of this year.