TEMPO.CO, Jakarta - The Energy and Mineral Resources Deputy Minister Arcandra Tahar lamented on the high interest rates that local banks impose for new renewable energy funding. Local banks are imposing an average interest rate between 10 and 11 percent.
The high rate, he said, is inhibiting the government's goals to develop new energy. With an investment return rate of around 14 percent, business actors are less inclined to work on something with just a three-percent profit.
Arcandra said Indonesia needs to have an interest rate average of just four to five percent to help pursue the goal of reaching a clean energy mix of 23 percent by 2025. To date, the clean energy contribution is 11.9 percent.
The Water Power Developers' Association chairman Riza Husni disagrees with the deputy minister. He said that the problem hampering clean energy development is not the high bank interest rate—but the selling prices of electricity that are too cheap.
Regulations in Indonesia limit the selling price of electricity based on the cost of production.
This policy, Riza said, has lowered Indonesia's rating in the Renewable Energy Country Attractiveness Index (RECAI) by Ernst and Young to below 40. In 2015, Indonesia was at the 38th position.
"Suppressing clean energy prices will lessen investment attractiveness and makes Indonesia dependent on fossil energy," he argued.
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