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Indonesia’s Renewable Energy Market Is In Its Infancy But Is Expected To Grow Quickly Over The Next Decade: Vaibhav Sahu – COO, SUN Energy

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Vaibhav Sahu

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In an exclusive interview with SolarQuarter South East Asia Magazine, Vaibhav Sahu – COO, SUN Energy spoke about the successful contributions to the solar industry, financing models offered and the RE business opportunities in Indonesia. He also gave us details of how the RE sector has performed under the covid crisis in Indonesia and the current and expected future solar PV trends in the region.

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A word about your recent successful contributions to the solar industry in Indonesia? What has been your biggest challenge so far and how did you overcome the same?

PT Surya Utama Nuansa (SUN Energy) is a leading solar project developer in Indonesia, having secured more than 200 MWp of solar projects within 5 years of operations since its establishment in 2016. SUN Energy is experienced in providing integrated solutions, from conception to construction including project siting and permitting, financing, market development, and solar leasing.

In the year 2022, SUN has completed COD of 3.7+ MW in the first quarter, with targets to complete 20+ MW by Q3, additionally, SUN is implementing a 32.5 MW ground-mounted solar project for Indo Cement as well as rooftops for 66 filling stations for SHELL, both targeted to be completed by the end of Dec 2022.

There are 3 key challenges of renewable implementation:

Market Domination: Indonesia is not yet a producer country of renewable technologies. its implementation is still influenced by the dominance of other countries markets.

Government Support: Key players are looking for more inclusive support from government regulatory authorities to help speed up the RE implementation.

Infrastructure: Suitable infrastructure and technology to support is required for renewable implementation, we need to improve a lot of things before we implement the renewable. This makes increases the project cost. Especially infrastructure related to the logistic sector.

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What are some financing models you offer as a leading solar project developer?

Whether you want to lease or own a solar power system, we have an affordable option that’s right for you!

What are the new commercially attractive RE business opportunities in Indonesia?

Indonesia matters as it is the 4th most-populous country and will be the 4th largest economy in the world by 2050. That growth will generate increased demand for energy, which will create new opportunities for renewable energy companies.

Estimated Market Value of Renewable Energy and Related Projects (USD millions)

Other commercially viable RE opportunities are as follows:

The geothermal market in Indonesia became the world’s second-largest geothermal power producer, with a number of projects coming online and new concession areas awarded.

The hydropower market is estimated to be USD 12.9 billion, broken into two major segments: medium and large hydropower (> 10 MW) at USD 9.5 billion and small hydropower (< 10 MW) at USD 3.4 billion.

The bioenergy market is estimated to be USD 2.5 billion. This is comprised of biomass at USD 650 million, biogas at USD 200 million, waste-to-energy at USD 1.5 billion, and biodiesel generators at USD 166 million.

The market for smart grid solutions is expected to open during the 2020 to 2025 period. Currently, battery energy storage systems (BESS) and advanced micro-grids are currently in the pilot demonstration stage. Given government emphasis on improving grid operability and PLN’s recognition of the value of smart transmission and distribution system control and BESS, we have estimated these markets to be USD 153 million and USD 280.5 million, respectively.

How has the renewable sector in Indonesia performed under the Covid crisis? 

The COVID-19 pandemic brings significant shocks to the world economy and energy. The implementation of lockdown and large-scale social restrictions in a certain period of time has resulted in many industries going out of business and millions of people losing their jobs. However, the success of Indonesia’s energy sector will depend on how the sector reimagines itself—and how public and private leaders address fundamental long-term challenges. Revitalizing Indonesia’s energy sector following the pandemic will require bold moves, difficult decisions, and significant investments. Players will need to reimagine and reform to address both short- and long-term challenges.

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COVID-19 in Indonesia resulted in lower demand for power and fertilizer combined to slow growth in demand for gas from 5 to 6 percent to only 1.4 percent. In total, energy demand drop by about 7 percent in 2020 while GDP shrinks by as much as 1 to 4 percent. The pandemic has also affected corporate profits in the energy sector, dampening enthusiasm and reducing available resources for immediate new investments. State-run power companies Pertamina and PLN reported a $768 million loss and almost no net profit in the first half of 2020, respectively.

COVID-19 outbreak has disrupted China’s manufacturing industries sector including RE brought uncertainty to the supply chain causing delays on construction timelines and financings, however, the delays just came in the Q3 or Q4 of 2020 as most manufacturers already shipped most of the products for the early 2020 projects. Unlike fossil energy, RE demand is not affected by temporary disruption such as the COVID-19 outbreak. Overall, the full effect of the COVID-19 has yet to be seen for coal, gas, and RE.

What are the current and expected future Solar PV trends in the region?

The solar photovoltaics (PV) market is estimated to reach USD 769.3 million, broken into two major segments: utility-scale at USD 675.5 million and rooftop at USD 93.8 million. Both segments are in the early stages of development as government policies and PLN procurement practices are just now taking effect. In addition to larger grid-connected solar PV projects, the government and PLN are promoting smaller systems (250 kW to 5 MW) on small island isolated grids currently served exclusively by diesel generators. Foreign developers are involved as developers of the larger utility-scale projects. Imports of solar PV panels and inverters account for the majority of the equipment opportunities in the market for both utility-scale and rooftop solar PV segments.

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Indonesia’s renewable energy market is in its infancy but is expected to grow quickly over the next decade. For foreign renewable energy companies to be part of Indonesia’s growth story, they will need to play by local rules.  Indonesia is not a transactional market where companies can set up meetings by email, fly-in, and fly-out. The only way to succeed in Indonesia is to build strong personal relationships first, before securing deals; an on-the-ground local presence is essential. Patience & perseverance are required. But for those renewable energy companies, like SUN Energy, willing to make the long-term investment and commitment, the opportunities in Indonesia over the coming decades are substantial.

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