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A potential path of growth with low carbon emissions

Jakarta Post

Our economy drives our energy consumption up. Its structure, for example, the relative share and contribution from different sectors, is constantly changing. When the growth of service sectors becomes an important part of the economy and as sunset industries close, the energy intensity of the sector and the national aggregate change. This trend is important for us to identify the best energy mix — an efficient portfolio with more renewables. Today, the abundance of oil that has been a fundamental source for our energy is depleting. Coal is still plentiful, but is a major contributor to green house gas emissions. Our endowment in renewable resources — hydro and geothermal — are abundant, and in light of the volatility of fossil fuel prices they are becoming the least cost generation options.

Hydro-based energy is currently limited, but the source has a large potential. What is lacking is a mechanism to identify potentially efficient sources for hydro energy. We have abundant rivers, but not an abundance of locations identified, where there is optimal use for irrigation as well as power generation.  We can combine the use of water resources required for drinking water and reservoirs for small hydro units might be possible.  However so far we have not made a systematic inventory of these options and as a result, our current electricity development seems to be ignoring hydro potential.Geothermal resources are rich but largely unexploited.  What is lacking is sufficient instruments that can attract private sectors entering into independent power produces’ contracts (IPP) with a regulated state-owned electricity buyer.

By law, local government is responsible for geothermal “greenfields” development. The construction of IPP with this decentralized structure is relatively new. We have not had a success story with this construct. For a number of decades, we are not using energy wisely. Efficiency is lacking far behind our neighbor countries. Our electricity generations use old plants and are lagging best practice efficiency. Operators seem as if they are not facing strong commercial incentives to optimize their plants. With a majority of our electricity generated from oil, gas, and coal, we have not focused on the efficiency in improved operation, retrofitting of advanced control systems and component upgrades.

Our fuel refineries are currently operating at far less than their full capacity, fulfilling only two-thirds of our domestic demand. We have not seen that bringing the prevailing refineries up to their optimal output is a key to energy efficiency priority and, most importantly, is the least cost approach to increasing fuel supply. The transportation sector accounts for more than half of national fuel demand. Today, its growth reaches at a rate of roughly 10 percent or even double digits in urban areas per year. With the current subsidized prices, fuel demand is rapidly exceeding supply.

Carrying capacity of transport infrastructure, particularly roads, stall. Worst, we currently do not yet have a comprehensive regulatory program to undertake test standards and related efficiency performance standards, for vehicles and fuel.Our aim is to have an efficient energy portfolio with a significant share of renewable in the national energy mix. Not only that, we are aiming at an efficient supply of energy and its use. To move toward a lower carbon economy, we need to encourage scaling up the supply chain and infrastructure for the production, distribution and use of non-fossil fuels — renewable. 

We need to establish energy efficiency benchmarks in line with the international mandate on clean and renewable energy. “What is lacking is a mechanism to identify potentially efficient sources for the energy.” With all these, we will be more secure against the volatility of the market price for fossil fuels. Our energy cost will significantly be cheaper than the cost of energy in neighboring countries.

Soon, this would place our country in a position to attract energy intensive industries, such as metal melting, steel factories, while processing this with very low carbon emissions. We eventually can offer our own and foreign industries low-cost and low-carbon energy prices.

Access to relatively cheap unsubsidized energy will also facilitate the development of new industries — coal processing and downstream oil and gas industry. We can make our abundant coal reserves more profitable by processing coal into liquid or gas and have its CO2 extracted. We can shift the use of oil into the production of chemicals, fertilizer, rubber and other products domestically. In turn, it would allow us to attract the additional resources required to enhance our oil and gas field exploitation, to use oil and gas reserves which would be too costly now to exploit. In the long run, this scenario would increase the attractiveness of oil and gas fields for exploration and development.

This long-term vision cannot be reached unless we are shifting our paradigm in the thinking, in the knowledge and in the actions. A shift in the energy mix from fossil fuel to renewables would not have been possible in a market driven environment. Smart intervention is needed.  A potential of comparative advantage as a low cost and low carbon energy economy provides a strong justification for the intervention. Of course the fundamental challenge is purely human — the optimism to dramatically reduce the role of the traditional, fossil-based energy, to make a quantum leap and make the energy sector the engine of growth for our economy – our green economy.

The writer is director for energy, mineral resources and mining at BAPPENAS. This is a personal opinion.

El contenido de las noticias que se presentan en esta sección es responsabilidad directa de las agencias emisoras de noticias y no necesariamente reflejan la posición del Gobierno de México en este u otros temas relacionados.


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