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20 April 2010

Indonesia urged to reduce dependency on coal

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World Bank’s senior energy specialist Dr. Xiaodong Wang has suggested that Indonesia switch to natural gas, geothermal, hydro, and biomass resources to reduce its prevailing dependency on coal, reported the Jakarta Post.

“Indonesian geothermal plants now have an output capacity of around 1,000 megawatt (MW), mostly from government plants. Indonesia technically has a potential of 27 gigawatt (GW) of geothermal output, so we think that the market is feasible and large,” Wang told a teleconference from Singapore on Monday to explain the bank’s latest energy report.

“The key question is to put the right policy framework into place and for the government to seriously try to improve the existing regulations,” she added.

Indonesia has the world’s largest geothermal resources and the government has a blueprint to develop at least 6,000 MW of geothermal power capacity by 2020.

However, Indonesia plans to expand the role of coal, as coal is abundant in the country and provides low-cost and secure energy supplies although coal is a high-carbon energy source.

The Trust Fund Committee of the World Bank’s Clean Technology Fund (CTF) endorsed $400 million in funding for Indonesia’s geothermal power sector to meet the government’s goal of reducing greenhouse gas emissions by 26 percent by 2020 starting this year.

World Bank energy specialist Elvi Nasution-Schaefer said that Indonesia would use co-financing from the multilateral CTF to expand large-scale geothermal power plants and to accelerate initiatives to promote energy efficiency and renewable energy by creating risk-sharing facilities and addressing financing barriers to small- and medium-scale investments.

The plan aimed to mobilise an additional $2.7 billion from a range of other sources.

Wang said the World Bank’s key concern in Indonesia was that market distortion discouraged energy conservation and clean energy technologies while energy subsidies increased the burden on the budget.

Fuel subsidies, which were intended to benefit the poor, were actually benefiting the rich. The government had estimated that the top 40 percent of high-income families benefited from 70 percent of the subsidies while the bottom 40 percent of low-income families benefited from only 15 percent of the subsidies, she said.

“The fuel subsidies should be removed to realize energy efficiency,” Wang said.

In the report, “Winds of Change: East Asia’s Sustainable Energy Growth”, the World Bank said that China and Southeast Asia need to boost investment in renewable energy by $1.6 trillion to slow growth in greenhouse gas emissions over the next 20 years.

The region already plans to invest $100 billion a year to boost energy efficiency and develop renewable energies and technologies. But that won’t be enough to keep carbon emissions — which many scientists say cause global warming — from doubling over the next 20 years.


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