The data center industry in Indonesia has been experiencing significant growth in recent years due to the country’s expanding digital economy. However, the industry is not without its challenges. One of the main challenges faced by the data center industry is the transition to renewable energy.
According to Hendra Suryakusuma, Chairman of Indonesia Data Center Provider Organization (IDPRO), the lack of access to renewable energy sources, cost, and lack of governmental commitment are among the key reasons for the sluggish transition to green data centers in Indonesia.
Lack of Access
Indonesia is currently one of the largest emitters of greenhouse gasses globally, but despite efforts to increase its renewable energy sources such as solar, wind, and hydropower plants, renewable energy only provide around 12% of the country’s electricity.
According to Hendra, the lack of access to renewable energy sources in Java is a significant challenge for data centers looking to transition to green energy.
“Data centers require a significant amount of energy to operate, and without renewable energy sources or lack of access to those sources, data centers will continue to rely on fossil fuels. Java is where most data centers operate so there should be efforts to make it more accessible,” said Hendra.
Indonesia has more potential solar energy than all the world’s power plants combined but photovoltaics accounted for less than 200 megawatts on electricity grids across Indonesia in 2021. That was less than 0.1 percent of total installed capacity.
Hendra added that the cost of transitioning to renewable energy is another challenge. The standard tariff from the State Electricity Company is high, and there are no special pricing or incentives for data centers to transition to renewable energy sources. The average cost per megawatt of solar PV capacity in Indonesia is also higher than in other Southeast Asian countries such as India and Thailand.
The standard tariff from PLN (State Electricity Company) is 1,600 rupiah (appx US$0.11) per kwh.
“PLN is monopolizing the business in Indonesia and we do not have the tariff for renewable energy from PLN. PLN has launched the Renewable Energy Certificate where data centers have to pay 35 rupiah more per kwh, which will be going to PLN’s fund to build renewable sources. In other countries, there are many other types of incentives to promote the adoption of renewable energy, we should be learning from those countries,” he added.
Land prices are also prohibitively expensive in Java admitted Hendra. He notes that it is not financially feasible for businesses to purchase land and construct renewable energy plants on their own.
Lack of Political Willingness
According to Hendra, the government has been slow in pushing renewable energy to industries such as data centers as PLN has spent a significant amount of money on coal power plants. The lack of government support and proper regulation is also preventing data centers from transitioning to renewable energy sources.
Indonesia has set an ambitious target for reducing carbon emissions by 31.89% on its own or 43.2% with international support by 2030. However, there are 99 coal plants with a combined installed capacity of 33.6 GW that may join the carbon trade this year. Under a 2021 law, Indonesia was supposed to collect taxes on above-quota carbon emissions by power plants in April 2022, but that has been delayed over concerns about purchasing power.
“There is an over-supply of power in Java and I believe the government is looking at the return of investments from the coal power plants, over the need to push and support renewable energy adoption across industries such as data centers,” he said.