Indonesia’s Hydro Based Energy Plan aims to have 30% of the country’s energy derived from hydropower by 2035. Currently, Indonesia’s largest sources of energy are oil, coal, and natural gas & biofuel. Out of these three sources of energy, natural gas and biofuel stand to be the only relatively sustainable sources. Furthermore, these two sources—although cleaner than fossil fuels and coal—aren’t as clean as wind, solar, or hydropower. Natural gas contributes to methane production and biofuels are often a mix of fossil fuels and natural oils. Although it is environmentally progressive that Indonesia continues to invest in less harmful sources of energy, carbon-free energy sources will help their climate mitigation efforts more than natural gas and biofuel will.
The reduction in carbon emissions will be what determines the effectiveness of this policy in the coming years. Currently, about 40% of Indonesia’s energy sources are derived from oil. If this source were replaced by hydropower, Indonesia would see a stark decrease in its carbon emissions. The biggest obstacle in implementing this plan will be investments need to build infrastructure. Harvesting hydropower is capital intensive due to the massive infrastructure and networks needed to generate and store the energy. Historically, investors have preferred to put money into fossil fuels as this sector generates high returns. It is expected that after the COVID-19 pandemic oil prices will rise, which would mean increased investor interest in the fossil fuels sector. Although there are significant funding obstacles to overcome, many oil companies have projected that oil will reach peak demand this decade and has such boosted worldwide investment in renewable energy.
Therefore, to implement this policy, the Indonesian government needs to expand the market for investment in hydropower by facilitating and economy and a government that welcomes investors and makes it easier to obtain permission to build infrastructure and conduct business. Although non-governmental agencies can advocate for these changes, the government itself has to be willing to implement these policies.
Siti Nurbaya Bakar, Minister of Environment and Forestry
This Post was submitted by Climate Scorecard Indonesia Country Manager Ruby Orim