The manufacturing sector accounts for nearly 20 percent of Indonesia’s GDP in 2020, according to the Central Bureau of Statistics (BPS). A post-pandemic industrial revival will create a ripple effect into other sectors, including energy, as it will lead to a stable and eventually higher demand for electricity. By Michael Hose, Country Manager, ABB Indonesia.
Great hope is now placed on the manufacturing sector to resuscitate Indonesia’s economy. The realization of new investment and provision of job opportunities in the sector are pivotal to driving post-pandemic recovery efforts in the consumer-driven economy.
By the end of 2020, the manufacturing sector was the second largest energy user in Indonesia, behind the fuel-intensive transportation sector, according to the Industry Ministry. Industry demand for electricity will clearly not disappear and will instead continue to rise steeply to support the development of digital infrastructure and expedite the implementation of the Making Indonesia 4.0 roadmap, a central point in Indonesia’s strong commitment to Industry 4.0.
Energy efficiency in Indonesia’s manufacturing sector
The guarantee of a sufficient and reliable power capacity is of great importance in promoting growth in Indonesia’s manufacturing sector. Unless there is an extraordinary situation such as major disasters or a pandemic, cutting down on electricity consumption is obviously out of the question as Indonesia strives to boost national production capacity and increase its exports-to-GDP ratio from below 10 percent currently.
While expectations are currently being realigned due to Covid-19, the Energy and Mineral Resources Ministry has projected that the overall demand for electricity will rise by 4.9 percent annually until 2030, lower than the previous estimate of 6.4 percent. A total of 41 GW of power is expected to top up the 71 GW (as at June 2020) of installed capacity by 2030, with nearly half of it to come from renewable sources.
Energy efficiency measures lower costs and reduce carbon footprints
Energy procurement costs will continue to be one of the primary operational expenses that must be borne by companies. Efficiency measures through investment in and implementation of advanced technologies are thus becoming necessities, not only to lower costs but also to reduce carbon footprints from increased industrial activities.
Realizing sustainability with energy efficient solutions
When inadequately mitigated, a fast-evolving economy and growing manufacturing sector may risk putting more strains on the environment. Globally, industry accounts for 37 percent of energy use and 29 percent of CO2 emissions, according to the International Energy Agency (IEA) in its Tracking Industry report in 2020.
The shift to renewables is important to alleviate ecological impacts from increased power consumption
It is reassuring that the Indonesian government also considers low carbon development in planning its economy. The shift toward renewables that Indonesia is attempting now, for instance, is important to alleviate the inadvertent ecological impacts from a significant rise in power production and consumption in the future.
While the transition is still underway, priorities should also be allocated to encourage wider adoption of energy efficient initiatives and technologies to ensure there is sufficient, affordable, and sustainable energy reserves in the long run. As a large percentage of all industrial electrical energy use goes to powering electric motors, switching to energy efficient motors is obviously key to reducing energy use and carbon emissions.
Additionally, the utilization of smart, variable speed drives designed to run motors based on certain needs at a specific time – instead of at full speed all the time – has been found to help reduce energy consumption by 20-50 percent, according to an ABB independent study. Through an economic lens, the implementation of energy efficiency measures by Indonesian companies had saved up to Rp3.5 trillion in costs in 2019, the Industry Ministry has said.
The aforementioned ABB research showed that if all of the roughly 300 million industrial electric motors in active service today were replaced with higher-efficiency models and equipped with drives, global energy consumption could be reduced by up to 10 percent. Such a reduction would contribute to the 40 percent of total greenhouse gas emission reductions in 2040 that matches the target set in the 2015 Paris climate agreement.
Encouraging businesses to make the swap to energy efficient technologies in parallel with its highly promising move to decarbonize its power generation sector appears to be a no-brainer for Indonesia. These steps are beneficial in meeting Indonesia’s pledge to cut greenhouse gas emissions by 29-41 percent by 2030.
As the country is currently ranked among the world’s biggest producers of greenhouse gas emissions, which also have a large impact on global warming, every measure to help make Indonesia’s pledge comes true is important and critical in fighting climate change. The energy efficient solutions and technologies that are required are already available. All it takes now is a strong joint commitment and concerted efforts by all stakeholders to ensure continued progress and achieve its climate-resilient vision of growth.
International Energy Agency (IEA) in its Tracking Industry report in 2020
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