Energy Cooperatives, Option for Pushing Indonesia’s Energy Transition July 12, 2019 | by

Energy Cooperatives, Option for Pushing Indonesia’s Energy Transition_img

The 12th of July this year marks the 72 years journey of cooperatives in Indonesia. After the first Cooperatives Congress in 1947, Indonesia celebrates 12th July as a National Cooperatives Day. On this day Indonesia commemorates how cooperatives have started and have evolved as a significant element in turning the wheel of the country’s economy.

Cooperatives have successfully driven Indonesia’s economic growth sustainably due to its value of openness and uphold the mutual benefit among its member. In fact, cooperatives contributed 4.48% in Indonesia GDP in 2017, which is higher than the previous year of 3.39% as well as drove entrepreneurship ratio from only 3.1% in 2016 to 8.39% in 2017.

To cope with the globalization era where technology is rapidly changing, cooperatives nowadays need to transform in order to ensure their relevance. Engaging millennials and utilization of Internet of Things in its business operations could take cooperatives to the next level. This could open up cooperatives to other business opportunities and create bigger chance for social inclusion.

Sector-wise, cooperatives in Indonesia are commonly found in agriculture, animal husbandry and fisheries sector. According to Ministry of Cooperatives and Small Medium Enterprise, cooperatives in those mentioned sectors comprised around 10% of the total 208,241 cooperatives in 2016. However, no cooperatives operate its core business under the energy sector yet until one founded recently, despite the vast potential which lies in front. Cooperatives are always intended to serve the needs of its members and energy is one of the vital needs that everyone needs nowadays.

Providing equal energy access in a sustainable way and to reach the most rural places in Indonesia has always been a challenge, especially looking at the islandic geography of the country where decentralized generation using local potential is necessary. The costly investment to extend the centralized generation to very rural area makes no economic sense. The government also finds it challenging to maintain decentralized power stations, which sometimes use new technologies like PV, results in poor maintenance due to lack of ownership of the local communities.

Hence, this is where energy cooperatives could be the solution. Energy Cooperatives could not only help the government in providing the electricity but also assist the energy transition of Indonesia towards more sustainable technologies. The nature of cooperatives is local and usually has a high ownership of its members. That’s why local energy cooperatives could increase the utilization of local renewable potentials and increase the ownership and awareness of the local communities.  

Indonesia could learn from European Countries like Denmark, Austria, and Germany, where energy cooperatives hold important roles for the energy transition. In those European countries, energy cooperatives have successfully assisted energy transitions to renewable energy sources by creating local RE markets which leads to lower costs of RE (including battery storage), encouraged multiple RE solution, and increased public awareness of RE utilization.

Taking a closer look of the Danish experience, energy cooperatives in Denmark emerged after the oil crisis in 1970. During that time, the country’s energy need relied almost 80% from imported oil. To overcome this, anti-nuclear networks began to form energy cooperatives to begin utilizing the abundant wind energy potential whom Denmark has. Since then, energy cooperatives which utilize wind to generate local electricity grew more and more in many different parts of Denmark. In 2002, it is recorded that energy cooperatives owned 40% of all installed wind turbines in the country which amounts to 2 GW of installed capacity and equals to a participation of 150,000 households. The energy cooperatives also had a significant contribution to push RE consumption in the country from 10% to around 20% of the total final energy consumption during the period of 1990 to 2010.  

It needs to be mentioned, that this success story of energy cooperatives in Denmark has been possible due to strong support of the government in the form of incentives and tax refunds for wind energy projects. To promote the RE market, the Danish government established regulations to promote certain quota for RE, give customers the freedom to choose its electricity provider and require electricity customers to purchase a certain share of electricity from RE. The government support in RE has supported energy cooperatives in Denmark to flourish. Closer in the ASEAN region, Indonesia could also learn from Philippines which already successfully implemented energy cooperatives which contributes to its electricity market since 1969. Electric cooperatives in the Philippines serve as an extension of distribution utility where it helps providing the nation electricity in the rural or off-grid areas.

Therefore, learning from the mentioned case, it is possible to extent the successful achievements of cooperatives from the economic to the energy sector. We could even go as far as to state that cooperatives could push the sustainability aspect in the energy sector.  Locality, social inclusivity, and upholding mutual benefits are cooperative values that could increase renewable energy provision using local potential in rural or island areas, where the energy access is still missing.

Energy cooperatives can also help to expand the utilization of solar PV rooftops that are regulated by the Indonesian Ministry of Energy and Mineral Resource since last year. While energy cooperative could provide co-finance for the rooftop solar installation for their members, it could also create a scheme of peer-to-peer lending or crowdfunding for community rooftop installation or even solar leasing scheme for the non-intensive capital options. However, to do these kind of business models, the support from government is needed in the form of providing a legal framework for allowing such scheme to work.  All-in-all, if it is supported, encouraged and scaled to a nation-wide movement, energy cooperatives can contribute to help Indonesia to achieve 23% RE target by 2025 and accelerate the energy transition.

Not many noticed that Indonesia has established its first energy cooperative, named Kopetindo, in February 2018. Initiated by the Indonesian Renewable Energy Societies (METI), Kopetindo has a noble vision to maximize Indonesia’s renewable energy potential through the local community empowerment. It claims to provide various services that include surveying the potential of renewable energy, coaching, and funding the installation of renewable energy-based electricity such as bioenergy, wind, and solar power. This marks a positive step to the establishment of energy cooperatives in Indonesia. However, to date there is still no update and further information on the program and progress of how Kopetindo perform since it is founded in 2018. To make it successful, the national government needs to step in and provides supporting regulations to encourage these initiatives to grow in the scale of nation-wide level for instance by introducing incentive in early years of the cooperation establishment and make a simpler permitting process for new energy cooperatives

Now, in the era where the participation of society is high, it is very likely that energy cooperatives could be a successful option for Indonesia to support and pursue a sustainable energy transformation. If thousands of cooperatives could be formed nation-wide and replicate what Kopetindo does including providing consultation to the society on how to generate and co-fund own local electricity generation from local RE, it is possible that Indonesia energy transition could be accelerated. With regulatory support from the government and engagement of many like-minded energy cooperatives like Kopetindo, it is not impossible that Indonesia could feed two birds with one scone, to achieve its RE target and provide equal energy access to all its citizen. (NS. Featured photo credit: Henning Westerkamp from Pixabay)

 

References:

August Wierling, et. al. 2018. “Statistical Evidence on the Role of Energy Cooperatives for the Energy Transition in European Countries”. [Online]. Accessible here.

Ministry of Cooperatives and Small Medium Entreprise. 2016. Annual report. [Online]. Accessible here