Indonesia must move to meet demand growth and ensure the environmental sustainability of its energy supplies, the International Energy Agency, IEA, said on Tuesday.
The agency said that the country is improving the control and transparency of its energy institutions and state-owned companies, reducing fuel subsidies and facilitating much-needed infrastructure investments. However the new IEA review underlined that even though Indonesia remains a net energy exporter due to the expansion of its coal and liquid biofuel production, the country is consuming more energy as a result of rising living standards, population growth and rapid urbanization.
Energy subsidies are a challenge to developing the country’s energy sector, the EIA said in the 'Energy Policies beyond IEA Countries: Indonesia 2015.'
The agency said the decreasing fossil fuel subsidies and the government’s recent move to phase out gasoline subsidies is a powerful sign for change but added that it needs to be sustained and extended to other fuels.
'Unrealistic targets and unclear regulations, difficult land and licensing acquisition, and limited options in private financing for small and medium-sized project developers are all major barriers to investment in Indonesia’s energy sector development,' IEA Executive Director Maria van der Hoeven said.
'In the power sector, Indonesia’s achievements are notable,' said the IEA, underlining a steady increase of installed capacity, the partial opening of the electricity sector and a substantial increase in the electrification rate. However, EIA suggested that to avoid electricity shortages and large-scale brown-outs, the country must take action to increase investment immediately in generation transmission and distribution infrastructure.
Indonesia needs to reform its wholesale pricing to bring it closer to reflecting global market pricing as well as implementing an integrated long-term development plan for natural gas infrastructure, and establish an independent regulator to monitor and co-ordinate the downstream sector.
The recommendation for Indonesia’s economy is that its national energy plans and policies should be updated based on reliable data and on realistic implementation aims.
By Huseyin Erdogan