PRICING RENEWABLE ENERGY IN INDONESIA

Abstract

Indonesia is the largest economy in the ASEAN (Association of Southeast Asian Nations), the country's primary energy demand is projected to grow by 2.4% per year through 2030. Indonesia is endowed with rich fossil energy resources and is thus heavily dependent on fossil fuels. Previously an OPEC-exporter of oil, Indonesia became a net oil importer in 2004 and subsequently dropped out of OPEC (Organization of Petroleum Exporting Countries). Oil will be displaced by coal as the main fuel, but oil share will remain high at 24% in 2030. Its fast growing energy demand and heavy dependence on fossil fuels, among other factors, caused Indonesia to be today's world's eleventh largest emitter of greenhouse gases. Notwithstanding these future expectations, Indonesia aims to reduce its dependence on oil to 20%, by increasing the share of renewable energy sources to 17%, and cut emissions by 2025. Against this backdrop, government of Indonesia has been continuously making efforts to increase share of renewable energy. Therefore to increase use of renewable energy, several aspects have been taken into consideration, an influential factor being the price of the renewable energy vis-a-vis that from fossil energy source. The price of renewable energy has thus to be influenced by government policy and the price pricing mechanism adopted. In this thesis policies and practices in promoting renewable energy have been analyses and discussed critically as applied to the developed and developing countries. Feed in tariff, renewable energy portfolio, competitive bidding, tendering scheme, and subsidy etc. have been discussed with their consequence application and impacts. In this thesis pricing issued and application to geothermal and mini hydro have been critically analyzed and discussed, so that the target of 17% in the share of renewable energy by 2025 can be achieved.