New legislation stresses renewable energy development

Ika Krismantari, The Jakarta Post, Jakarta

The final draft of the soon-to-be-enacted energy bill highlights the need to develop renewable energy, with a number of articles requiring the government to provide incentives to industry players.

The bill, a copy of which has been obtained by The Jakarta Post, says that the government must increase the percentage of energy produced by renewable resources in order to avoid a future energy crisis due to the country's high dependence on oil-based fuels.

The bill also requires the government to provide incentives in the form of financial assistance to players involved in the distribution and utilization of renewable energy.

The renewable energy sector includes biofuels, and hydro, geothermal, solar and wind power.

Months before the commencement of the bill's deliberation, which started in December 2006, President Susilo Bambang Yudhoyono issued a presidential decree on national energy policy so as to ensure sustainable energy supplies for the future.

The decree requires a gradual reduction in dependence on oil-based fuels by increasing the proportion of renewable energy used in the household, transportation, electricity and commercial sectors.

It states that renewable energy should account for 17 percent of the nation's energy consumption by 2025, with oil's share being reduced to 20 percent. At present, oil accounts for 52 percent, with renewable energy providing less than 5 percent.

To help encourage the biofuel business, the Energy and Mineral Resources Ministry is in talks with the tax service to design incentives, such as tax holidays, for the firms involved. This is intended to support the 58 deals worth US$12.4 billion that were signed earlier this year for the development of oil palm plantations and biofuel processing facilities.

The ministry also plans to make the use of biofuel compulsory in certain circumstances so as to make the business more economically viable, Evita H. Legowo, an assistant to the energy and mineral resources minister has said.

Despite these steps, however, state oil and gas company PT Pertamina -- which has been appointed by the government as the sole distributor of biofuels -- has been complaining about how it continues to suffer losses on their distribution.

Under the bill, the government is required to set up a National Energy Board charged with monitoring the implementation of national energy policy, and determining the steps needed to overcome possible obstacles and the threat of future energy crises.

The board will be chaired by the President, and have the energy and mineral resources minister as a member.

The energy bill is likely to be enacted into law by the next House plenary meeting later this week.

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