The Potential of CleanTech in Indonesia

Image Credit: The Lonely Planet

With its projected population of over 272 million by 2020 and its economy ripe for becoming Southeast Asia’s next big technology hub, Indonesia presents itself as a nation ready for growth in cleantech innovation. If capitalized correctly, Indonesia has the potential to harness renewable energy into a vehicle for prosperity. The Indonesian government is just beginning to make changes to focus on resource efficiency and management, with both established companies and startups working together with Indonesia’s utilities to provide innovative solutions to this problem.

Investment in Indonesia’s Renewable Energies Sector

Indonesia has attracted record amounts of renewable energy investment within the last several years, announcing certain deregulation to help encourage FDI. Early 2015 saw Indonesia cutting its consumers’ fuel subsidies, with the intent being to manage oil/gas resources more efficiently. This in turn attracted attention from the Asian Development Bank in late 2015, who approved $500 million in loans for Indonesia to help stimulate investment in the country’s emerging clean technology sector. Indonesia’s Energy and Mineral Resources Ministry also announced in early 2016 that it had attracted over $325 million in renewable energy investment. Additionally, Indonesia has also recently been approved for over $55 million in grants to support geothermal energy investment from the World Bank, further driving the cause of clean tech in Indonesia.

Indonesian-Focused Clean Tech Startups

Kopernik, a former startup seeing unprecedented growth since its inception in 2010, established its headquarters in Ubud, with the goal of bringing clean tech to Indonesia. With funding partners including tech incubator Inotek and asset management firm Russell Investments, Kopernik has developed multiple internal projects to accomplish this goal. One of its best-known initiatives includes the “Wonder Women” program, where women from rural villages are empowered and trained to become Tech Agents, establishing Tech Kiosk micro-stores to sell clean-tech appliances on commission. With exclusively-designed products including the micro-solar BrightBox energy system and the CO2-reducing CH-2300 Cookstove, Kopernik is bringing affordable clean technology to rural areas, encompassing all sorts of renewable energies in Indonesia.

Another company emerging from its startup roots and becoming a true industry power in Indonesian clean tech is Fluidic Energy. With over $150 million invested, including an undisclosed Series D round with Caterpillar as the majority investor in 2015 and Series C funding of over $20 million from Chevron Energy Solutions and Madrone Capital Partners in 2011, Fluidic Energy’s rechargeable zinc-air battery technology has drawn intense interest from the energy investment community. The 2015 announcement of the “500 Islands” project has Fluidic promoting both rural development and increasing renewable energy usage to Indonesia’s weak power grid environment. Fluidic has so far delivered energy to over 90 villages in the archipelago nation, making its efforts one of the region’s largest rural electrification projects. With over 40MWh of energy storage worldwide, Fluidic Energy leverages its zinc-air energy storage technology to bring sustainable energy to developing regions such as Indonesia, bolstering the growing clean tech market in this nation.

Renewable Energy in Indonesia

The geothermal industry has huge potential in Indonesia, with Indonesia ranking as one of the world’s largest potential geothermal resources. The World Bank has recently approved over $55 million in grants to support Indonesian geothermal energy projects, split between infrastructure development and actual technical assistance, both of which are currently lacking in Indonesia. One huge milestone for Indonesian geothermal energy was the financial closing for a large geothermal plant by Engie, one of the world’s largest energy utility companies in the Solok Selatan region in West Sumatra province. Historically challenged by lack of funding in renewable energy sectors, the Engie plant is an excellent example of Indonesians seeing the increasing importance of renewable energy as a resource. Combined with the approved investment funds via the World Bank, the Indonesian geothermal industry has great potential to utilize its currently untapped power.

The solar industry in Indonesia currently faces certain framework and developmental challenges. However, with government involvement in clean technology growing alongside privately funded projects, the solar realm seems to be gaining ground on the road to industry maturity. The government has taken huge strides in addressing concerns with the Indonesian solar market, with the Ministry of Energy and Mineral Resources (EMR) taking on both large and small projects, providing funding for rooftop solar systems at airports and government buildings, as well as funding over 500 solar PV mini/microgrid projects. Additionally, the Indonesian government has created new regulations to support solar systems for utilities, furthering the future of Indonesian clean tech.

Indonesia is among the top ten countries with the biggest hydropower potential in the world. As Indonesia’s dependency on fossil fuels rises, clean technology is becoming increasingly focused on by consumers, the government, and private sector alike. Micro-hydro power, producing about 5KW to 100KW of electricity, has seen a growth rate of over 700% since 2000, with over 450 MW of electricity currently coming from micro-hydro power in Indonesia. The government has set goals to quintuple this number by 2025, developing partnerships and funding through the domestic economy utilizing feed-in tariffs. These are payments to ordinary energy users for the renewable electricity they generate, which incentivize Indonesians to pursue hydroelectric power, among other clean tech initiatives.

Wind power in Indonesia is another form of renewable energy that Indonesians must capitalize on. With help from the US-based Overseas Private Investment Corporation (OPIC), UPC Sidrap Bayu Energi has secured funding to build a $120 million wind farm,providing 70 MW of wind-generated electricity to Indonesians in South Sulawesi. UPC Sidrap Bayu Energi, a joint venture between UPC Renewables and Binatek Energi Terbarukan, is further looking at adding over 1,000 MW of wind energy to Indonesia in the next 5 years. With this project being the first utility-scale windpower, Indonesia’s goal of increasing its amount of renewable energy from 6% in2016 to 23% by 2025 is becoming increasingly more realistic.

Conclusion

Given the unprecedented growth in the Indonesian renewable energy space in the last several years, Indonesia has a prosperous road ahead for clean tech. With viable solutions through geothermal, solar, hydro, and wind platforms, combined with successful implementations of these solutions through organizations like Kopernik and Fluidic Energy, Indonesia’s weak grid environment is emerging as one of its potential strengths. Indonesia has showcased its ability to not only grow its clean tech industry, but also thrive in it, given the proper combination of governmental support, strategic partnerships between start-ups and established energy and financial organizations, and technological know-how. Indonesia’s renewable energy industry is one that is on track to thrive and drive investment in this country for many years to come.