Promotion of least cost renewables in Indonesia (LCORE-INDO)

Project description

Title: Promotion of least cost renewables in Indonesia (LCORE-INDO)
Commissioned by: German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB)
Country: Indonesia
Lead executing agency: Directorate General of New, Renewable Energy and Energy Conservation (NREEC)
Overall term: 2012 to 2016

GIZ advisors assess the potential for generating power from the waste product in a palm-oil mill. © GIZ

Context

Despite their huge potential, renewables have so far played only a small role in Indonesia’s energy supply. The absence of regulations designed to promote their use and the heavy subsidising of fossil fuels have combined to hold back their development. Steep rises in the cost of generating and distributing electricity, above all in the remoter parts of the country’s 5,000 or so inhabited islands, have resulted in a constantly growing need for subsidies on the part of the state energy supplier, Perusahaan Listrik Negara (PLN).

Indonesia has become a net importer of diesel, and energy subsidies are determined by fluctuating oil prices. In the long term, the country aims to guarantee supply and the complete electrification of off-grid villages, while also achieving its climate change objectives. This is where the LCORE-INDO project (Promotion of Least Cost Renewables in Indonesia) is working to close the gap between the growing demand for energy and dwindling fossil fuel resources by using renewables in an economically feasible manner.

Electricity generated from biomass waste and biogas from the agro-industry, for instance from palm oil and rice mills, are fed into the grid and lead to considerable savings of diesel fuel. Moreover, Indonesia has a large number of small diesel networks to supply rural villages and regions far away from the PLN grid. LCORE-INDO is working with the ministries and companies involved to develop business models for long-term, low-cost power supply in these areas using solar energy.

Objective

The Directorate General of New, Renewable Energy and Energy Conservation (NREEC) has established itself as an overarching authority for all matters related to renewable energy. It is developing guidelines and support programmes to accelerate the take-up of renewables. It is also contributing to the national climate strategy; this includes the design and implementation of structural measures to reduce greenhouse gases (nationally appropriate mitigation actions or NAMAs).

A delegation from the project partner NREEC visiting the municipal sewage works in Munich. © GIZ

Approach

Through joint activities the project is supporting the NREEC in analysing and further developing existing guidelines and support programmes on a step by step basis. The aim is to find ways of tapping into the potential of renewables more efficiently. One key to this is involving the private sector in investments in renewable energy facilities and their operation.

Activities with the partner NREEC focus on three areas:

  1. The use of waste biomass from agro-industries
  2. The replacement of diesel fuel by on-grid renewables, especially solar energy
  3. Innovative business models for off-grid electrification using renewables.

Results

The project team has made a precise calculation of the energy potential harnessable in agro-industries and of the potential for grid-connected use of solar energy. It has published this information in studies. The partner has been supported in formulating regulations. Key economic indicators for the bioenergy feed-in law have been jointly prepared, transparent permit procedures have been developed for renewables investors and technical guidelines have been drawn up for solar power plants.

Cooperation agreements have been signed with private project developers to serve as models. Pilot projects have been jointly developed for the use of biogas and biomass from waste generated by palm oil and tapioca starch mills, and for the use of solar power in the tourism sector and the fishing industry. These measures are being implemented with the help of private sector investors. The goal is for the power generated from renewable sources to be used internally or fed into the PLN grid to finance the commercial development and operation of the facilities.

Fishermen on Sumbawa load blocks of ice on to their boat. In future this ice is to be made using solar energy. © GIZ

A pilot project on solar energy in the tourism sector has been developed with German and Indonesian companies. The savings on diesel fuel will mean that an investment in a hybrid solar plant will pay off within about eight years for a diving club operator.