Singapore firms key to powering Indonesia’s green energy goals: envoy

[JAKARTA] Singapore’s green energy ambitions are set to power up, with seven consortiums exploring renewable-energy projects in Indonesia, and leveraging expanded industrial zones and strengthened bilateral partnerships to drive growth and clean energy leadership in the region.

In a recent interview with The Business Times, Singapore’s ambassador to Indonesia Kwok Fook Seng disclosed that these consortiums are actively exploring opportunities to set up onshore renewable-energy assembly facilities in Indonesia, and aiming to export clean energy to Singapore.

This development aligns with Indonesia’s stringent local content regulations, which require foreign investors to build local assembly operations for renewable energy infrastructure. 

It also comes at a time when the government is mulling prioritising domestic energy needs over exports.

“The narrative that it’s important for Indonesia to cater to its own needs before exporting to others is perfectly logical, and we want to work within that spirit,” he told BT.

Since taking on the role in 2022, Kwok has worked closely with Singaporean investors to uncover opportunities in South-east Asia’s largest economy. He emphasised that energy is not only a key driver of Indonesia’s industrial expansion, but also a cornerstone of the deepening ties between the two nations.

These efforts include investments in special economic zones and industrial areas that were significantly expanded under former president Joko Widodo’s administration.

Singapore’s Sembcorp Development is among the companies seizing this opportunity, investing in Kendal Industrial Park, a special economic zone and the largest industrial township development in Central Java.

Cross-border pacts

Indonesia is set to become a significant exporter of clean energy to Singapore, driven by a recent agreement aimed at enhancing regional energy cooperation.

This initiative, signed during the Indonesia International Sustainability Forum last September, will enable Indonesia to export renewable energy, primarily generated from solar power plants, to Singapore.

The ambassador noted growing interest among Singaporean investors in Indonesia’s emerging sectors, particularly those for green energy, industrial development and sustainable investments.

He emphasised that Indonesia’s renewable-energy projects present dual opportunities: attracting investments from Singapore companies, while enabling access to global markets through clean-energy exports, including those to Singapore.

“Many industrial park operators have told me that when tenants look for a site to build manufacturing facilities, their first question is ‘What is your energy source?’ This is a critical phase for all Asean economies as we navigate the energy transition and move towards lower emissions,” he said.

In 2023, Singapore solidified its position as Indonesia’s top investor, contributing a record-breaking S$20 billion – 15 per cent more than in the previous year.

As both nations strengthen their bilateral ties under their respective new leaderships, he expects this trend to continue in the coming years.

The leaders of Indonesia and Singapore have held several frequent bilateral meetings, resulting in strengthened green economic cooperation.

In their latest meeting, Singapore Prime Minister Lawrence Wong met Indonesia President Prabowo Subianto in Jakarta following the Indonesian leader’s inauguration.

The two leaders discussed ongoing cooperation projects, including cross-border electricity interconnection, joint development of green hydrogen in Sumatra, and solar power plant initiatives.

However, Indonesia’s push to optimise its green energy industry while prioritising domestic needs to reach its net-zero target by 2060 has led the government to reassess its green energy export plans, placing the policy under scrutiny.

A balancing act

Indonesia’s net-zero ambitions face significant hurdles; the high upfront costs of renewable energy projects, such as solar panel installations, outpace those of traditional energy sources.

This disparity leads to higher energy tariffs, deterring many from making the shift to cleaner energy sources.

To address this challenge, the ambassador suggested enabling renewable energy investors to sell not only within Indonesia, but also to global markets, including Singapore.

By expanding market access and securing higher prices, investors can achieve better returns.

He described it as a sequencing strategy that enables those taking the risk to invest in renewable energy to generate income and sustain their investments.

“This is the equation we are currently working on with Indonesia: How do we achieve this? It involves government-to-government discussions to send the right signals to the market, and encourage investors to make the necessary commitments,” Kwok said.

“While the implementation happens at a business-to-business level, we create the ecosystem to make it possible,” he added.

Indonesia benefits from relatively low electricity tariffs, largely due to its reliance on coal-powered energy. The government’s coal price cap has been instrumental in keeping coal costs for power plants low, stabilising electricity prices for consumers.

“It’s not unique to Indonesia. In many parts of the world, fossil fuel-based energy remains highly competitive due to its low costs. Introducing renewable energy requires significant capital expenditure,” he said.