The
oil prices have dropped to below $50 per barrel. Many people contend that this
could scare off investment in renewable energy as it needs huge budget to
deploy renewable energy project. With a very low oil prices, many people
believe that renewable energy projects will experience a delay thus it could
give a bad impact for renewables future. However, many experts argue that it is
unlikely to impact the future of renewable energy in Indonesia. There are
several reasons for it such as government support and the price of renewable
energy is falling too.
Firstly,
the renewable energy is fully supported by the government of Republic of
Indonesia through long-term PPA (Power-Purchase Agreement) contracts. Through
the PPA, government is committed to buy electricity generated from renewables
in certain fixed prices. The prices have already determined long before and
will be used for 20-30 years ahead. Thus any sudden hit like the plummet of oil
prices will not giving a significant impact to renewable energy investment in
the long run. In addition, the government of Indonesia has committed, by 2025, Indonesia aims to install 6.7
gigawatts (GW) of new renewable energy capacity by increasing the proportion of
renewables from 7 percent to 15 percent of total energy production.[1]
Secondly,
many prices of renewable energy projects have already been competitive. Solar
and wind power are one of those examples. According to Pavel Molchanov, a
senior research analyst at Raymond James Financial, solar can compete
effectively with diesel-fired generation.[2] In
addition, the total LCOE (Levelized Cost of Energy) for onshore wind is cheaper
than that of conventional coal as well as natural gas-fired plants with carbon
capture and storage.[3] In
Indonesia itself, some renewable sources have abundant resource potential such
as hydropower, geothermal, and biomass.
The
only problem for renewable energy in Indonesia is not the price of oil or gas
or coal, but government will and regulatory measures. It often struggles to
implement policy initiatives, which causes bottle-necks for innovative
technologies like renewable energy. If government sticks with their commitment
to increase the proportion of renewable energy, the plunge of oil prices will
not hurt the future of renewable energy.
[1]
US. Department of Commerce, “Renewable Energy Market Assessment Report:
Indonesia” Manufacturing and Service
Competitiveness Report, May 2010.
[2]
Kevin Smead, “How Could Falling Oil Prices Affect Renewable Energy Growth?”
accessed from http://www.energydigital.com/renewables/3722/How-Could-Falling-Oil-Prices-Affect-Renewable-Energy-Growth
[3]
Ibid.
