SUSTAINABLE ENERGY Salient Items

Transcription

1 KOMITE NASIONAL INDONESIA SUSTAINABLE ENERGY Salient Items Internal Discussion on Sustainable Energy IESR, Jakarta, 21 January 2013 Hardiv H. Situmeang Indonesian National Committee World Energy Council (KNI-WEC)

2 ENERGY TRILEMMA To provide energy systems that are simultaneously affordable, stable and environmentally sensitive is the universal aspiration. If the enabling policies are to gain acceptance, promote investment and secure our energy future, they should be built on transparent dialogue that is explicit about the trade-offs between multiple goals, time periods and participants, necessary to overcome this energy trilemma.

3 THREE CORE DIMENSIONS OF ENERGY SUSTAINABILITY Energy Security Social Equity Environmental Impact Mitigation Energy sustainability *) is based on 3 (three) core dimensions: (1) Energy security, (2) Social equity, and (3) Environmental impact mitigation. The development of stable, affordable, and environmentally sensitive energy systems defies simple solutions. These three goals constitute a trilemma, entailing complex interwoven links between public and private actors, governments and regulators, economic factors, national resources, environmental concerns, and the behaviours of individuals. It needs firm action to steer the national energy system onto sustainable energy path in achieving stable, affordable, and environmentally sensitive energy systems. Energy Security: For both net energy importers and exporters this includes the effective management of primary energy supply from domestic and external sources; the reliability of energy infrastructure; and the ability of participating energy companies to meet current and future demand. For countries that are net energy exporters, this also relates to an ability to maintain revenues from external sales markets. Social Equity: This concerns the accessibility and affordability of energy supply across the population. Environmental Impact Mitigation: This encompasses the achievement of supply and demand-side of energy efficiencies and the development of energy supply from renewable and other low-carbon sources. *) WEC Definition. Policies for the future 2011 Assessment of country energy and climate policies, WEC 2011.

4 KEY CHALLENGES

5 ENERGY SECURITY 4 LEVELS

6 SOME ROUTES TO ENHANCE ENERGY SECURITY

7 SUSTAINABLE ENERGY FOR ALL THREE CLEAR OBJECTIVES TO BE ACHIEVED BY 2030 *) Ensuring universal access to modern energy services. Doubling the global rate of improvement in energy efficiency. Doubling the share of renewable energy in the global energy mix. * ) At the opening of the UN General Assembly in September 2011

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11 The 3 rd ASEAN Energy Outlook Some Salient Issues

12 The 3 rd ASEAN Energy Outlook

13 The 3 rd ASEAN Energy Outlook

14 The 3 rd ASEAN Energy Outlook

15 The 3 rd ASEAN Energy Outlook

16 Mitigation Potential for A Specific Period of Time

17 Mitigation Potential for A Specific Period of Time

18 BARRIERS AND CHALLENGES OF RENEWABLE ENERGY DEVELOPMENT ASEAN Best Practice Policy Guidelines on Renewable Energy Support Mechanisms for Bankable Projects ; Study Report, December 2012.

19 Market Deployment Stages of Renewable Energy Market Diffusion Theory could be adapted to characterize the market deployment stages of Renewable Energy (RE). This theory proposes that a market grows slowly initially, picks up speed with time and accelerates up to a certain point, after which it starts slowing down again. Finally growth becomes slower until the market eventually saturates. In Renewable Energy Market Deployment, there are three distinctive stages of market deployment Inception stage Take-off stage Consolidation stage

20 Market Deployment Stages of Renewable Energy Inception Stage Countries at the inception stage of RE Market Deployment are still dependent on fossil fuels to meet energy demand. Often, fossil fuels subsidy policies remain from the country s legacy to stimulate economic development. In this fossil-fuel dominated market environment, RE exists only as first examples and are deployed as demonstration or pilot projects. Initial formulation of regulations and policy on RE exists but is not yet effective to pave the way for RE growth. Moreover, the cost of RE technology is above the cost of competing alternatives. There is no timetested or proven business model in the RE electricity market that can be emulated. Take-off Stage At this stage, deployment of renewable energy grows. Awareness of the importance of RE as alternative sources to fossil fuel use is increasing, marked by enforcement of policies and regulations that promotes RE. The technology supply chain at the take-off stage in the country is also established and growing. The engineering, procurement and construction (EPC) contractors and skilled engineers can also be found locally and to some extent there is a preference for local contractors. This market environment progresses with establishment of business models for development of RE projects where developers are increasingly willing to take business risk, and financial institutions start to gain more knowledge on the risks and return of RE technologies, and are willing to provide financing.

21 Market Deployment Stages of Renewable Energy Consolidation Stage At this stage, the cost of RE technologies achieves a competitive playing field, and there is an important share of RE technologies among the electricity sources in the country. Deployment grows towards the maximum practicable level, which leads to the realizable potential for the country. RE projects operate widely with well-established business rules and at commercially viable terms. During the Consolidation Stage, RE projects are largely bankable, but issues like integration with the grid could take prominence.

22 Challenges and Barriers of Renewable Energy Inception Stage Key Item Technical/ Infrastructure Market Economics Financing Policy Institution Administration Challenges and Barriers Difficulty in accessing the grid either because of the distance from the grid or through enactment of technical grid standards Difficulty to access markets (e.g. lack of power purchase agreements, monopoly of electricity by utility company) Lack of supply chain of RE technologies which result in noncompetitive price Unviable tariff rate of renewable to compete with fossil fuel based cost Difficulty to secure debt financing as debt providers prefer not to take policy/regulatory risks or unfamiliar with technical risks Lack of capacity among policy implementers to provide suitable stimulus for renewable electricity market development Absence of effective institutional arrangements to enable renewable electricity projects Unclear/complexity of procedures in obtaining permits and project approvals

23 Challenges and Barriers of Renewable Energy Take off Stage Key Item Policy Market Financing Challenges and Barriers Establishment of long term policy commitment and regulatory certainty Balancing policy support so that the country gets neither a boom-bust cycle that hinders sustainable market growth nor a slow market development process that creates an expensive long term subsidy Robustness of policy to remove non economic barriers through establishment of transparent market and industry rules Effectiveness of policy to attract follow-on funds (leverage) from private investor

24 Challenges and Barriers of Renewable Energy Consolidation Stage Key Item Technology Market Policy Challenges and Barriers Maintaining the competitiveness of RE technologies Maintaining RE integration in the market Removal of the incentives/fiscal policy/subsidies to bring the RE into the market level playing field

25 Barriers and Challenges of Renewable Energy Developments (Highlights) Main Issues on RE Developments Fossil fuels subsidy policies remain the country s legacy to stimulate economic development Inadequate market push to RE High risk perception of RE Tendency that business models for RE projects must be proven beforehand Barriers Grid access limitation (i.e. grid standards, location) Difficulty to access market (i.e. monopoly of electricity market, lack of standardized PPA) Unviable tariffs of RE to compete with fossil fuel cost Unclear/complicated permits and project approvals Absence of renewable energy institution to enable RE projects Challenges - Difficulty to secure debt financing (due to policy, regulatory and technical risks) Lack of suitable stimulus for renewable electricity market development (e.g. FIT, incentives) Renewable energy is often seen as the second class technology option Lack of local supply chain (e.g. components, parts) Proposed Solution Formulate an integrated plan for RE (including provisions of tariffs and incentives) Provide priority grid access for RE Establish transparent grid and interconnection rules Establish policy certainty Develop soft loan assistance programs dedicated to RE projects Develop a standard PPA exclusively for RE Foster debt financing market for RE

26 BARRIERS AND CHALLENGES OF RURAL ELECTRIFICATION ASEAN Best Practice Guidelines on Innovative Off-grid Rural Electrification Approaches ; Final Draft, November 2012.

27 ASEAN Electricity Access Status ASEAN has a population of approximately 600 million people, of which around 55% live in rural areas. All ASEAN Member States give a high priority on providing their citizens access to electricity. Despite this policy, about 140 million people (23.5% of ASEAN population) remain without access to electricity today, and almost 80% of them live in rural and remote areas. No Country Electrification Ratio (%) 1. Myanmar Cambodia Indonesia Lao PDR Philippines Vietnam Thailand Malaysia Brunei Singapore ASEAN 77.5

28 Barriers and Challenges of Rural Electrification Demographics A large share of the remaining rural households without electricity in ASEAN countries is located in the poor, remote and isolated areas. Policy Framework ASEAN Countries with rural electrification needs have no specific policy framework for off-grid rural electrification. Provisions regarding off-grid rural electrification are usually included in the policies and plans for rural electrification in general, which generally focus on grid extension as this is a least-cost solution for many rural areas. Economics High levels of initial capital investments and lack of ability or willingness to pay by rural customers. Business Models There is no standard set of criteria, which could be used to define and classify the different business models of rural electrification.

29 Barriers and Challenges of Rural Electrification Technology and Supply Chain Unreliable supply of spare parts for off-grid rural electrification projects often leads to the project failure. Intermittent characteristic and resource availability Rural electrification by renewable technology usually faces strict limitations imposed by site specificity and seasonality of resources. Social Acceptance The community can be very suspicious of a new technology and they need to see how rural electrification works in practice before accepting it. Capacity on Operation and Business Management Inadequacy of capacity on power plant O&M and business management often leads to the project failure.

30 Examples of Rural Electrification Policies and Programs in ASEAN Country Cambodia Indonesia Lao PDR Myanmar Rural Electrification Fund Program Micro Hydro Power Project (MHPP) Energy Self-Sufficiency Village 1000 islands program Rural Electrification Master Plan Shared Pico Hydro Power Angsana Village by LIRE Policy guidelines for Rural Development and Poverty Elimination Biogas electrification project Ka De Village Thu Nge Taw Village Rice husk gasification project Yong Daungt village Shwe Hlaing Chaung

31 DIRECTORATE GENERAL OF NEW, RENEWABLE ENERGY, AND ENERGY CONSERVATION MINISTRY OF ENERGY AND MINERAL RESOURCES OF THE REPUBLIC OF INDONESIA INDONESIA S CLEAN ENERGY POLICY & SALIENT ITEMS INDONESIA CLIMATE CHANGE DAY December 2012, LA CIGALE Hotel, DOHA Session : Sustainable Energy Maryam Ayuni Director for Energy Conservation - MEMR Hardiv H. Situmeang Chairman Indonesian National Committee-World Energy Council (KNI-WEC)

32 NATIONAL GHG EMISSION REDUCTION TARGET NATIONAL COMMITMENT TO REDUCE GHG EMISSION President of RI s commitment on G-20 Pittsburgh and COP15 Reducing GHG emission in 2020 FORESTRY AND PEAT LAND AGRICULTURE 26% 26+15=41% Domestic Effort Domestic effort and International support ENERGY AND TRANSPORT INDUSTRY Pres. Reg No. 61/2011 RAN-GRK Pres.Reg No. 71/2011 GHG Inventory dan MRV WASTE

33 CURRENT ENERGY CONDITION 2010 Total Energy Mix 1177 million BOE Gas 24% Hydro 4% Coal 24% Geothermal 1% Oil 47% Elasticity of Energy = 1,60 Share of Non Fossil Energy < 5% 1. Public access to energy (modern) is still limited: a. Electrification ratio is 72.95% (27.05% of households not yet electrified); b. Less of development of energy infrastructure particularly in rural / remote areas and outer islands. 2. The average of growth rate of energy consumption is 7% per year ; 3. High dependence on fossil energy while it reserves are more limited; 4. Utilization of renewable energy and implementation of Energy Conservation is not optimal; 5. Linkage to environmental issues: a. Mitigation of climate change; b. Carbon trading; c. National commitment to reducing emissions 26% by 2020;

34 ELECTRICITY PRODUCTION BY FUEL JAWA-BALI

35 ELECTRIFICATION RATIO 2011 NAD 87,72% Sumut 83,98% Sumbar 77,72% Jambi 76,54% Bengkulu 71,15% Lampung 70,40% Riau 78,17% Banten 68,17% Kepri 91,52% Sumsel 72,71% Jabar 70,72% Kalbar 65,37% Babel 82,26% Jakarta 100,00% Jateng 77,31% Kalteng 67,28% Kalsel 75,65% DIY 75,19% Sulbar 64,12% Jatim 72,05% Bali 69,77% Kaltim 63,44% NTB 52,88% Gorontalo 54,69% Sulsel 74,19% Sulteng 64,84% Sulut 73,21% Sultra 56,46% NTT 39,92% Malut 70,34% Maluku 70,80% Category : Papua 29,25% > 60 % % % Papua Barat 58,24% Electrification Ratio Year % 64,3% 65,1% 65,8% 67,2% 72,95%

36 GROWTH OF NATIONAL ENERGY SUPPLY NRE 4,46 % Gas 34,2 % Oil 56,6 % Coal 4,6 % (in Million BOE) Year NRE 5,03 % Gas 24,29 % Oil 46, 77 %` Coal 23,91%

37 GROWTH OF NATIONAL ENERGY DEMAND Household % Commercial 2.51 % Industry % Transportation % (in Million BOE) Year Household 9.8 % Commercial 3.7 % Industry 42.5 % Transportation 30.6% Non Energy Use 9.9% Others 3.4%

38 TRANSFORMATION PARADIGM OF NATIONAL ENERGY MANAGEMENT ENERGY SUPPLY SIDE MANAGEMENT ENERGY DEMAND SIDE MANAGEMENT SUPPLY DEMAND DEMAND SUPPLY Supplied by Fossil Energy, at any cost (Subsidize) Renewable Energy as an alternative Inefficient Sectoral Energy Demand: Household Transport Industry Commercial Efficient Sectoral Energy Demand: Household Transport Industry Commercial (CONSERVATION) Maximize the supply and utilization of New Renewable Energy, with Avoided Fossil Energy Costs (DIVERSIFICATION Fossil Energy as balancing factor Current condition: 1. Energy needs has not been efficient 2. Energy needs are met with fossil energy at a cost of whatever and even subsidized 3. Renewable energy as an alternative only 4. Renewable energy sources that are not utilized is wasted God's gift Future Condition: 1. Minimize the energy requirements 2. Maximize the provision and utilization of renewable energy, at least with the price of fossil energy avoided cost, if necessary, subsidized 3. Fossil energy is used as a counterweight 4. Fossil energy sources are not utilized as a legacy for their children and grandchildren / exported

39 BARRIERS TO CLEAN ENERGY DEVELOPMENT 1. Clean energy projects, such as new renewable energy and energy conservation, are difficult to develop with subsidized-fossil energy condition 2. Lack of knowledge and awareness of the stakeholders, particularly consumers and banking institutions, on clean energy projects 3. Currently, there are little facilities/incentives for producers and consumers of clean energy projects 4. Lack of institutional and legal framework on new energy, causing uncertainties on its development 5. Lack of pilot projects and/or best practices of clean energy projects for developers to develop their own projects.

40 POLICY DIRECTION Hydro 4% Gas 22% Coal 26% Oil 47% Geother mal 1% Gas 21% Coal 35% BAU NRE 3% Oil 42% Presidential Regulation No. 5/2006 NRE 17% Gas 30% Oil 20% Coal 33% VISION 25/25 25% NRE 20% Gas 23% Oil 32% Coal 3298 Million BOE 3,1% 3200 Million BOE 2785 Million BOE PRIMARY ENERGY CONSERVATION (15.6%) NRE Coal Gas Oil 1177 MillionBOE 5 % 26,4 % 21,9% 46,9% 1649 MBOE 2419 MBOE 34.6% 20,6% 41.7% 17% 33% 30% 20% 25 % NRE 32% Coal 20% Gas 23% Oil ENERGY DIVERSIFICATION Source: DGNREEC Note: 1 TOE = 7,33 BOE 2025

41 TWO MAIN POLICIES 1. Energy Conservation to improve efficiency in energy utilization from upstream up to down-stream (Demand Side) i.e. industrial, transportation, household and commercial sector 2. Energy Diversification to increase new renewable energy share in national energy mix (Supply Side) as below New Energy Renewable Energy a. Liquefied Coal, a. Geothermal, b. Coal Bed Methane, b. Bioenergy, c. Gasified Coal, c. Hydro, d. Nuclear, d. Solar, e. Hydrogen, e. Wind, f. Other Methanes. f. Ocean.

42 GOV T SUPPORTS ON CLEAN ENERGY DEVELOPMENT 1. Pricing Framework Provide subsidy for clean energy development Issues Feed-in-Tariff for renewable-energy based electricity 2. Funding Mechanism Develop green banking to support new renewable energy and energy conservation projects Provide government assurances for large-scale renewable energy projects (i.e. Geothermal) 3. Facilities and Incentives Provide fiscal incentives for new renewable energy producers and energy efficiency tecnology providers Prepare incentives for consumer favouring clean energy sources Support the clean energy manufacturing industries Create special unit/state-owned-company to develop new renewable energy potentials

43 THANK YOU Go Green Indonesia! green energy, future energy MINISTRY OF ENERGY AND MINERAL RESOURCES REPUBLIC OF INDONESIA DIRECTORATE GENERAL OF NEW, RENEWABLE ENERGY, AND ENERGY CONSERVATION Jalan Jenderal Gatot Subroto, Kav. 49 Jakarta 12950; Telp: ; ; Faks: ; ;

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45 The Key Messages for Policymakers from the 2011 Assessment of Country Energy and Climate Policies, which cut across all policy areas Assess, communicate and manage policy trade-offs Energy policymaking is complex, with multiple objectives that cannot always be pursued simultaneously. Policymakers must be transparent and explicit about the trade-offs involved in a policy and about the rationales for the choices they make. The introduction of new policy instruments on top of existing policy instruments must be analyzed in advance to avoid potential conflicts, redundancies, and policy failures. Policies must be continuously monitored to identify and address unintended consequences. Policies for the future: 2011 Assessment of Country Energy and Climate Policies; WEC Address complexity and co-ordination across multiple jurisdictions and energypolicy domains Multiple levels of government are involved in aspects of energy policy, each with its own responsibilities, competences, and opportunities to contribute to sustainable energy policy. To achieve policy objectives co-ordination is needed across at least three dimensions: policy instruments, jurisdictions, and local, regional and national government levels. Adapt best practice policy instruments Dialogue with international energy-policy experts, policymakers, industry, and stakeholders can provide reliable evidence on what works and possible pitfalls. Countries must translate global findings about successful policy instruments into local arrangements and settings.

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47 Energy Industry Recommendations CEOs and senior executives from leading energy companies have three main recommendations for how policymakers must expedite the development of sustainable energy systems: 1) Design coherent and predictable energy policies, 2) Support market conditions that attract long-term investments, and 3) Encourage initiatives that foster research and development in all areas of energy technology.

48 Recommendation 1 Design coherent and predictable energy policies Policymakers must establish coherent, long-term, accessible, predictable, and transparent policies that rise above narrow interests to respond to energy needs holistically. Contradictory and ad hoc policies developed in isolated silos hinder energy investments. Sound and coherent policies that are oriented toward results rather than around the types of energy or technology used to achieve them can - and should - enable the world to achieve energy sustainability. A master plan must be developed that connects energy policies on two fronts. First, national energy policies must complement and link together national industrial, financial, environmental, transportation, and agricultural goals and policies. Second, policies concerning energy resources, infrastructure, environmental issues, and regulations must be regionally coordinated. Sharing resources across borders enables countries to increase regional energy security, reduce power costs, and attract investments by creating greater market scale to interest investors, optimize natural resources, and develop common infrastructure. To make sure that these policies are predictable for industry, governments must develop regulations that are consistent, clear, and simple, in spite of the complexities that they address. Equally important, policymakers should separate energy policies from short-term politics to guarantee that they reflect a well-defined, long-term view. A significant hurdle to policy longevity, as perceived by industry, is the conflict between the long-term nature of energy investments and the comparatively short-term nature of politics. Consumer education and awareness is also crucial. To encourage energy efficiency, for example, governments must not only establish environmentally responsible construction and manufacturing standards, but can also set a regulatory framework for progressive energy tariffs to make consumers more aware of energy efficiency as a means to reduce overall national energy costs, introduce tax reductions on energy-efficient equipment (on VAT or on import duties), or on energy-efficiency investments (reduction in VAT rate).

49 Recommendation 2 Support market conditions that attract long-term investments With consistent and committed regulatory approaches, policymakers must encourage the development of attractive markets to stimulate long-term private investments in energy infrastructure and technologies. Simultaneously, they must support the development of new investment mechanisms that can reduce risks and stimulate greater private sector investment in the energy sectors. Such mechanisms can include green banks, a green bond market, and public-private partnerships. These efforts must be underpinned by a stable and predictable carbon price necessary to drive the transition to a low-carbon energy system. Huge investments are required to improve access to energy worldwide, develop new energy technologies, and to build new and replace ageing infrastructure. Cash-strapped governments have limited funds to support a shift to a low-carbon future. Unfortunately, capital from the private sector and from investment funds remains largely on the side lines. Less than 1% of pension investment funds worldwide, for example, are invested in infrastructure projects designed to improve the supply of electricity. The use of subsidies should be minimized, since they increase political and regulatory uncertainty. This distorts competition and erodes investor confidence. If used, subsidies must be focused on achieving a specific outcome, and have a clear sunset built-in from the start.

50 Recommendation 3 Encourage initiatives to foster research and development in all areas of energy technology To drive innovation further in all areas of energy technology, policymakers should implement goal-driven policies rather than prescriptive policies. New renewable energy and fossil fuel technologies can bring the world much closer to attaining sustainable energy systems and potentially spur economic growth. For this to happen, however, policymakers need to leave it to the market to decide which types of technology should survive so that they can remain competitive in the long term.

51 KOMITE NASIONAL INDONESIA Terima Kasih