Indonesia can't afford to stop paddling to new shores.

It's not all smooth going when it comes to the international renewable energy transition, but commitment is a must. Indonesia is one example of an important country in transition where we're looking at all the positive and negative signals to find investment angles.

Made up of over 17,000 islands in the Indian Ocean, this archipelago nation owes its modern existence to integration and access.

But local observers are worried that Indonesia's progress toward its own presidential renewable energy goals is moving too slow.

Only 64% of Indonesian households have access to electricity, and with Asia-Pacific nations all around it ramping up RE development, Indonesia's economy could end up between islands without an oar.

Indonesia has been Southeast Asia's leading oil producer, but like many of its petroleum peers, production is in steady decline.

The U.S. Department of Energy's international supply statistics show Indonesia with only 1 million barrels per day of output in 2008, compared to 1.6 million bpd in 1992.

Indonesia's oil consumption, though, rocketed from about 700,000 bpd to 1.16 million bpd over the same sixteen years!

That put it in the awkward position of being an OPEC member that actually dipped into net importer status in 2008. Indonesia withdrew its membership that same year, but it likely would have been forced out if it hadn't.

Indonesia has no time to lick its wounds after having to exit the world's most exclusive price club. Estimated average GDP growth of about 4.6% over the next five years means there's no rest for the weary when it comes to finding new energy resources.

35% of the Population Now "Excluded from Development"

President Susilo Bambang Yudhoyono must address the fact that 36% of Indonesians have no electricity, according to economist Terry Lacey in the August 24th edition of the online Asia Sentinel. 

Not only is it a question of access to electricity. . . On the heels of two July bombings in the capital city Jakarta, Lacey points out an uncomfortable energy link for this rapidly developing country with the world's largest Muslim population (over 237 million):

"Without electricity, a third of Indonesians are excluded from development, which is a precondition for defeating terrorism."

In the Jakarta Post on August 12, National Development and Planning Agency Director Monty Girianna proffered the government's latest plan while copping to an amazing fact:

Though 91% of Indonesia's 70,000 villages have access to either grid-connected or stand-alone electricity resources, only two-thirds of residences can tap local supplies.

That's a gaping hole in the country's end-user energy market — a gaping infrastructure hole at best, and a national security powder keg at worst.

Here are a few of the marks President Yudhoyono wants Indonesia to meet over the next few decades, according to Monty Girianna:

• 2.4 million kiloliters of biofuel from sources like jatropha and palm oil will be produced as soon as 2010, replacing 10% of diesel fuel consumption. That will grow to 20% by 2025.
• Bioethanol production should equal 15% of gasoline consumption by 2025. And perhaps above all. . .
• 95% of households will have electricity by 2025, requiring 1.3 million new connections per year.

Now, targets can be great press, but detailed initiatives do a lot more to draw investment and optimism.

That being said, stringing all those unserved or underserved island homes together is an infrastructure challenge that few other countries have faced.

But in Indonesia's environs, there are countries like Australia and China that are moving quickly to develop products and protocols that can help Indonesia achieve its goals.

Asia-Pacific Energy Forecast

Business Monitor International's Q3 2009 Indonesia Power Report says that thermal (coal) power accounted for 78.5% of the Asia-Pacific region's power supply as of year-end '08.

Yet, despite growth of 25.7% between 2008 and 2013, coal's share of the APAC energy market is actually projected to drop by that year.

Why is coal coming down even though millions more regional residences are coming online and promising to further drain total capacity?

The answer is that renewable energy initiatives across Asia are promoting energy-efficient appliances and promoting policies that make clean energy competitive with fossil fuels.

We've told you recently about India's 20 GW by 2020 solar capacity goal and the coming 2000% bump in the Japanese solar power market. Those require concerted nationwide efforts that involve cleantech industries and old-guard utilities that are adjusting to a renewable energy reality.

Indonesia's national utility, PLN, is drawing heat for its inability to incorporate generation projects, like rooftop solar, which will fall below 10 MW of production.

That could cripple the presidential decree to push clean energy to 30% of consumption by 2035 — up from only 5% today.

Instead of OPEC membership and innovation-driven energy abundance through cleantech, Indonesia could be facing energy poverty.

National Council on Climate Change Vice Chairman Armi Susandi says that far from erstwhile OPEC membership, the country's oil supplies will be close to gone in 17 years. Indonesia is the #3 liquified natural gas exporter in the world, and Susandi posits that natgas capacity could last up to 40 years, but when you factor in LNG export commitments, that's an increasingly lopsided generation scenario that no country should want to bet the house on.

Indonesia needs to bring into balance its vast renewable resources (including 33,000 MW of geothermal potential), with environmental protection laws, local preferences, and international norms.

None of that is easy, but right now Indonesia is falling behind Asian neighbors like Malaysia and Vietnam that have much smaller populations. Every second of waiting is another second slipping back from the Asian energy elite.

Regards,


Sam Hopkins

P.S.  If you haven't heard of "COP-15," you  soon will. On December 7th, world leaders will assemble behind closed doors in a secured Copenhagan location... in what could be the most high-powered, most secretive meeting of the century.

Members of the Saudi Royal Family, high-ranking Israeli officials with ties to the Mossad. . . even former members of the KGB's inner circle.

The purpose of this unprecedented summit? You might suspect it's over arms, oil reserves, or even precious metals. . .

But it's nothing like that at all. In fact, this meeting will determine how we go about our daily lives:

• Which cars we'll be able to drive. . .

• How many hours we can run hot water in our homes. . .

• How much we pay in electricity bills each month... and to whom we'll end up writing out the checks.

Now, to those vaguely familiar, this meeting carries the very non-threatening moniker, Conference of Parties.

But to insiders — and those who know what's really going on behind those closed doors — it's known as COP-15. . . read more