UNPAD Research Justifies Public Fund for Renewable Energy Development

Electricity policy in Indonesia faces two different challenges at the same time. Firstly, electricty needs for Indonesian population has been growing rapidly, but secondly there is a growing need for more climate friendly energy mix. This is the classical issue of potential trade-off between development and conservation. From development perspective, access to electricity among Indonesian population, or electrification ratio, has been relatively low compared to other neighbouring countries. There is also large variation among regions and betwen urban and rural areas. From environment perspective, Indonesia has been among the biggest contributor to global greenhouse gas emissions. We have committed to international community to reduce the emissions and we should honor that commitment.

These two intertwined issues have been the background of the seminar held by UNPAD’s SDGs center titled “domestic electricity: between quality, equality and environment” held at Hotel Santika, Bandung on 30 September 2016. The seminar features prominent speakers and invite various relevant stake holders. Among the speakers were Ms Masnellyarti Hilman (former deputy minister of the environment), Dr Kindy Sjahrir (Ministry of Finance), Dr. Arief Anshory Yusuf (UNPAD’s SDGs center), and Dr. Kodrat Wibowo (Department of Economics, Unpad). The seminar was chaired by Dr. Wawan Hermawan from Department of Economics, Unpad.

Ms Masnellyarty Hilman emphasized that going for renewable energy is not only necessary but also urgent. The rationale, she argued, is very clear when we start counting all the negative aspects of fossil fuels-based electricity generation. Another necessary steps, as argued by Dr. Kindy Sjahrir, is electricity conservation. Dr Kindy Sjahrir said that electricity subsidy reform is one way of encouraging people to conserve more energy. Dr. Kodrat Wibawa added that electricity subsidy needs to take into account people’s willingness to pay.
The seminar also presented recent findings from UNPAD-funded Academic Leadership Grant (ALG) research lead by Prof. Armida Alisjahbana. The highlight of the findings was presented by Dr. Arief Anshory Yusuf, Executive Director of UNPAD’s SDGs center. The research attempts to contribute to electricity policy from preferences or demand side aspect, an angle that is often neglected.

Using a choice-modeling analysis with data collected from a survey of more than 1,500 households in Bandung city, the research, among others, try to answer this important and relevant question: In forming the preferences toward electricity services, other than standard atributes like outage frequency and its tariff, do household care about development issue like rural electrification, and also care about environmental problem like whether the electricity is generated from renewable source?. The findings from the survey suggests that people, at least in the city of Bandung, do care about these two aspects. Moreoever, people even are willing to pay a certain amount for more rural electrification and more renewable sources of electricity. This implies that from economics perspective policies with the aim to improve these two areas is potentially welfare-improving. These findings then can be used as normative justification for using public fund for accelerating rural electrification as well as renewable energy development.

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