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Hanan Nugroho


Visitors to the capital city, Jakarta, and other major cities in Indonesia are usually shocked by the city’s transportation system: heavy traffic jams; too many private cars, the so-called subsidized petroleum fuels are being burned without adding any economic value.

Our manufacturing industries are still employing low-efficient machineries consuming larger amounts of energy than the engines now popularly labeled with “energy efficient” signs. Not only the small-medium manufacturers that are not efficient but also the energy hungry: Our state-owned old refineries, power plants, fertilizers, steel companies, for example.

The fast growing modern office buildings in this tropical country prefer to set their air-conditioner temperatures too cold, use too many electricity bulbs (the low-efficient ones) rather than adapting to or taking advantage of the sun energy that is present all year.

Actually, there is big potential for energy conservation application in Indonesia. Studies suggest that we, despite our low energy consumption per capita, potentially conserve one fourth to one third of our energy consumption without worrying about losing economic productivity.

Many energy conservation actions can be implemented in simple ways, using uncomplicated technology, through minor replacement in appliances or by changing habits in the way of consuming energy. The energy conservation efforts would cost much less than the works of supplying energy.

In the case of oil for instance, conserving 50,000 bpd (barrels per day) in our transportation — which can be achieved through better traffic management and changing the dependency on private cars — would cost less than the efforts to carry out exploration, exploitation and processing works to deliver the same amount of fuel.

Oil, the energy source we are consuming largely, has been in the declining trend of production over the last three decades in this country. Our consumption, to the contrary, is getting larger and larger, has about in one decade surpassed national production capacities, which is currently stagnant below 1 million bpd.

The government is paying subsidy for the gap between the costs of providing the subsidized energy (petroleum fuels and electricity) and the revenues of selling them in the domestic market.

However, as the gap gets wider and wider (due to particularly the increase in oil prices), the government is becoming more anxious about its affordability to pay the increasing bills for energy subsidy.

While there is potential for conserving energy and these actions promise economic benefits (not to mention environmental benefits), why does our energy conservation attempt work so slowly?

First, because the government is still not giving energy conservation high priority, reflected at least in its organization in dealing with energy conservation, which so far is small and lacking skillful human resources.

In dealing with national energy management, the government puts large emphasis on the supply (production-distribution) side, but is still ignoring the importance of energy conservation or demand-side management.

The case is similar to the energy-hungry industry in Indonesia, which has not employed specialized energy managers to control energy consumption in their factories.

Second, an agency similar to the Energy Conservation Center in Japan (the world’s most energy-efficient) or that found in Thailand, and many other countries, has not been established in Indonesia.

The agency, such as the Japanese’s own, promotes energy conservation to a wide range of energy consumers/businesses, provides technical assistance, trains energy managers, conducts energy-saving competition, for example, to make energy conservation work and become a habit in that country.

To the society, the agency (a joint one between the government and privately owned, established to response to the world oil shocks in the 1970s) educates and promotes energy conservation as a “smart
lifestyle”.

Third, the energy conservation or “Rational Use of Energy” law has not been issued in Indonesia. Our new 2009 Energy Law still puts little emphasis on energy conservation. The “Rational Use of Energy” law such as that in Japan mandates the government provide a grant for auditing energy and fiscal incentives for energy saving equipment, to promote the development of ESCO (Energy Service Company) and conduct energy conservation campaigns.

Fourth, there is a large handicap because the government is still applying the energy subsidy policy on a quite massive scale. The practices, which are inefficient and frequently miss its targeted group, ensure energy is perceived as a cheap resource available unlimited, discouraging efforts to conserve and consume it in an efficient way.

There is no strong corroboration that the provision of energy subsidy has contributed to the improvement of our industry’s competitiveness.

Energy conservation is a pillar of national energy management, but we usually remember about this pillar only when oil prices are high and suddenly have forgotten about it when the price is low.

As our energy consumption grows larger, energy prices increases, while on the other side our capacity to supply energy to meet demand is decreasing considerably. There is no other way, we have to make energy conservation a higher priority in our national energy management.

When it comes to building energy conservation as a culture, however, we need more than just knowledge of energy conservation techniques. We need a strong institution which leads and manages those efforts.
The government has actually produced regulations on energy conservation and is providing a grant for doing energy audit works.

Given its limited capacities, the amount of incentives for energy conservation, targeted consumers and publications are too small to have a national impact.

We have to move forward by establishing — within the government and large industry’s organization — larger responsibilities for energy conservation, creating an energy conservation center, developing regulations on energy conservation and enforcing them, promoting energy conservation as a life style, and so on.


The writer is the senior energy planner and an economist with the National Development Planning Agency. The opinions expressed are his own