The final episode in Enlit Asia’s digital series Indonesia’s New Energy Paradigm did not disappoint, as the expert panel delved into how the country’s energy transition is opening up a variety of opportunities attracting investors from across the globe.
Indonesia has traditionally been a country with a challenging investment landscape. The panel acknowledged how constantly changing regulations, exchange rate fluctuations and licensing red tape have thwarted project development.
David Cao, managing director of Canadian Solmax Bioenergy added that the inability to purchase land was also a big hindrance to investment.
However, there are indeed exciting developments within Indonesia that are mitigating many of the challenges previously faced by investors.
According to Nadia Soraya, partner at HHP Law Firm (member firm of Baker Mckenzie), the centralising of licensing is an improvement, which has been coupled with a more stable regulatory landscape.
Says Soraya: “The Omnibus Law, passed two days ago has been well received by the stock market. It will reduce regulatory red tape, something investors were looking forward to.”
The Omnibus Law is a comprehensive law aimed at transforming the Indonesian economy by simplifying business licensing, easing foreign investment restrictions and labour laws, as well as streamlining corporate tax regulations. The bill was passed on Monday 5 October 2020.
The panel agreed that Indonesia is blessed with great renewables potential.
Daniel Mallo, head of Natural Resources & Infrastructure, Asia Pacific Societe Generale: “The country is experiencing high growth rates, demand outstrips GDP growth, and aside from COVID-19, it will be a purveyor of opportunities in the future.”
Mallo explained that the availlability of capital for renewable energy has remained available throughout the pandemic slump, which is good news for state utility Perusahaan Listrik Negara (PLN), and good news for investors on the equity and debt side.
Land acquisition challenges will open up the market for large scale floating solar, a great compliment to hydro plants. Furthermore, PLN simply can’t electrify all remote islands without support, presenting an opportunity for distributed energy at a community level. Mallo also highlighted that geothermal and hydro are big in the area and will provide a great source of investment opportunities.
The panel also heard from Darmawan Prasodjo, vice president and director of PT PLN (Persero). The utility has big plans to boost investment potential within Indonesia’s power sector, by:
Implementing utility 3.0 plans, including digitalisation and decentralisation;
Advancing clean energy in the next five years to 16.3 GW;
Boosting green energy investment into large scale hydro, geothermal and storage;
Developing the domestic market to minimise imports and reduce fossil fuels.
According to Prasodjo, the energy transition is a process and even though there is still a strong reliance on fossil fuels, “this is only the beginning, renewable is going to be the workhorse of the future, competing with fossil fuels, [this is] history in the making.”
The panel explored a number of interesting topics, including:
How PLN was impacted by COVID-19 and their recovery strategy;
Lessons learned from the pandemic and the unexpected up-side to the event;
How the movement away from coal and towards renewables will give rise to a number of new tenders.