Surbana Jurong eyes larger slice of Indonesia's trillion-dollar renewable energy sector

Jakarta

INDONESIAN President Joko Widodo has set some ambitious targets for South-east Asia's largest economy to reduce its dependence on fossil fuels and achieve net zero carbon emissions by 2060.

According to reports from the Ministry of Energy and Mineral Resources, converting to renewable energy would save the country US$53 billion in costs annually from air pollution by 2030.

But to achieve these cost savings, the country needs US$16 billion in new investments in the renewable energy sector.

Greening Indonesia's economy, however, will not be easy and will require a phased transition approach given its heavy reliance on coal and fossil fuels.

Currently, 80 per cent of the country's energy requirements is generated by fossil fuels with 60 per cent coming from coal.

But for Singapore-based Surbana Jurong, being involved in helping Indonesia transition from a heavy dependence on fossil fuels to a more balanced energy mix offers the company new growth opportunities.

"Indonesia has immense possibilities," said Tan Wooi Leong, senior director (energy and industrial) at Surbana Jurong.

"Public sentiment is very important. Indonesians are becoming more environmentally conscious while the government has committed to reduce greenhouse gases. In my view, that is a turning point to getting things done."

Surbana Jurong operates in 7 geographical areas in the world, with South-east Asia being a key region. Within Asean, however, the Singapore market contributes to the majority of its business.

"The potential for growth in the rest of Asean is huge and Indonesia is one of our top markets to expand into," Tan told The Business Times during a recent visit to Jakarta.

"Potentially, investors are looking at billions of dollars in investments into the renewable energy sector making it a trillion dollar industry."

Surbana Jurong and its wholly owned local entity PT SMEC Denka already have a number of projects and clients in Indonesia, including the Sinar Mas Group, Adaro Energy and state-electricity firm PLN.

The goal, however, is to be involved in developing energy transition solutions involving large infrastructure projects such as airports, public transport, new urban centres, water and wastewater, and transit-oriented development.

"We are also aiming to be involved in the push for the new capital project in Kalimantan including their green renewable energy," said Tan.

Indonesia's new capital Nusantara will need around US$30 billion in investments and is poised to become the country's first fully green city.

"We see parallels between Indonesia's next stage of growth and what Singapore has experienced," he noted.

"Indonesia is on a major infrastructure building drive from industrial parks to airports and that is where we see ourselves contributing."

He added that industrial parks can take 20 to 30 years to develop fully and hence the right systems and energy mix must be determined early to ensure long term sustainability.

"We must start from the beginning and bring in a more sustainable energy mix given the manner in which industrial parks develop. We design the energy mix to include hydropower, wind, solar, geothermal and waste to energy," said Tan.

"Indonesia is very heavily reliant on thermal coal," he noted. "To transition to greener solutions will be challenging and if we want to create a reliable power source, we must make sure it's sustainable so that is where the transition is important."

The process cannot be achieved overnight as industries need stability and reliability in terms of power supply and it can potentially be challenging to meet that with renewables.

"It is unimaginable to make the switch overnight so we have to look at transitioning the business and transitioning the economy," said Tan.

Where the big change is required is in developing the power grid. The conventional way of centralising power generation and supplying to a wide region is changing to a more localised power generation grid or decentralised microgrid.

Given that Indonesia is an archipelagic nation, linking the power grid among the thousands of islands spread across 5,000 km will always prove impossible.

"That is why we developed the islanded grid whereby power supply is decentralised and there can be a higher reliance on renewables," Tan said.

Transitioning from fossil fuels to renewables will take time and huge investments, especially in the larger cities on Java and Sumatra where thermal coal is likely to dominate for years to come.

But as the outer islands begin to develop, renewables and energy storage can play a larger role in their energy mix and lead the nation in moving towards a more sustainable future, said Tan.