Thank you for making a robust analysis that is easy to digest!
I am curious, in your opinion, what do you think is the most urgent action/policy that the government of Indonesia needs to take to unlock the issue or provide a foothold for future development? I am not up to date on the energy sector, so it was surprising to me to know how small our share of the RE production is compared to Vietnam, although we already have Perpres 112/2022 that provides a competitive ceiling purchase price by PT PLN. In this case, I assume some constraints are in place that make the ceiling price less attractive, albeit a similar price to other countries.
Hi Donny, thanks for your kind words and thoughtful question!
I am going to give a bit of a reductive response to your question because otherwise it can get a bit nuanced and in-the-weeds... Taking solar policy as a clear contrast between Indonesia and Vietnam: Vietnam fundamentally gave a strong price signal to the developers that made it easier for them to crowd in investment for large solar projects. Indonesia did not have as much policy clarity here and the end results (<1GW vs 17GW of solar capacity installed) speak for themselves. Moreover—while we did not get into it in the article itself—energy transition is of course more than just solar as well as more than just incentives/demand signals, there's an important role for policies that disincentivize fossil fuels and deforestation as well. A sufficiently high-priced and well-enforced carbon (and other pollutant) tax is key here. Neither Vietnam nor Indonesia has this in place yet, which is part of the reason why coal still plays a large role in the energy production of each respective country.
In a nutshell:
1. Clearer demand-side policies that incentivize renewable energy (including solar) development
2. Strong enforcement of supply-side policies that disincentivize fossil fuels
Hi Max,
Thank you for making a robust analysis that is easy to digest!
I am curious, in your opinion, what do you think is the most urgent action/policy that the government of Indonesia needs to take to unlock the issue or provide a foothold for future development? I am not up to date on the energy sector, so it was surprising to me to know how small our share of the RE production is compared to Vietnam, although we already have Perpres 112/2022 that provides a competitive ceiling purchase price by PT PLN. In this case, I assume some constraints are in place that make the ceiling price less attractive, albeit a similar price to other countries.
Hi Donny, thanks for your kind words and thoughtful question!
I am going to give a bit of a reductive response to your question because otherwise it can get a bit nuanced and in-the-weeds... Taking solar policy as a clear contrast between Indonesia and Vietnam: Vietnam fundamentally gave a strong price signal to the developers that made it easier for them to crowd in investment for large solar projects. Indonesia did not have as much policy clarity here and the end results (<1GW vs 17GW of solar capacity installed) speak for themselves. Moreover—while we did not get into it in the article itself—energy transition is of course more than just solar as well as more than just incentives/demand signals, there's an important role for policies that disincentivize fossil fuels and deforestation as well. A sufficiently high-priced and well-enforced carbon (and other pollutant) tax is key here. Neither Vietnam nor Indonesia has this in place yet, which is part of the reason why coal still plays a large role in the energy production of each respective country.
In a nutshell:
1. Clearer demand-side policies that incentivize renewable energy (including solar) development
2. Strong enforcement of supply-side policies that disincentivize fossil fuels