'Alternative energy needs incentives'

Ika Krismantari, The Jakarta Post, Shanghai

A package of clear-cut incentives is needed if Indonesia's renewable fuel projects are to become a reality, says a senior executive of the world's third largest energy company, Shell.

Shell Hydrogen vice president Duncan Macleod said that it was urgent for the government to provide support in the form of financial assistance and tax incentives for energy companies planning to invest in the environmentally friendly fuel sector.

"For a start, it is not easy to develop clean fuel. That's why we need the government's support, maybe in terms of a mandate or financial support. But in the long run, when the business has developed and a lot of players have been involved, let the market decide where it will go," Macleod said.

A number of companies, including Britain's BP, China's CNOOC and a number of local firms, are lining up to enter the country's biofuel sector, with total investment commitments standing at some Rp 160 trillion as of last July.

However, none of the plans have been realized to date pending government regulations making the use of biofuel mandatory and the introduction of incentives.

Though the government issued a special regulation earlier this year to provide incentives for the development of biofuel feedstock plants, it is short on detail and implementation procedures.

Macleod said Indonesia should learn from China, which has shown a strong commitment to supporting the development of clean and sustainable energy through state financial assistance.

During the ongoing Michelin Challenge Bibendum conference being held here to promote sustainable mobility through the development of various sources of energy, Shell, with the support of the Shanghai government and China's Tongji University, launched the first hydrogen refueling station for fuel cell vehicles.

"This is a trial project, and not commercially operational yet. We aim to create awareness among the people about the existence of this clean energy," Shell China downstream director Dennis Cheong told The Jakarta Post.

Tail-pipe emissions from hydrogen fuel cell vehicles contain virtually no carbon, so that the technology has the potential to significantly improve local air quality.

Clean energy is very important for China, which is the world's second largest automotive market with more than 8 million cars sold per year, and whose demand for energy is expected to more than double in the next two decades.

As well as government support to turn alternative energy projects into reality in Indonesia, Macleod also stressed the importance of a level playing field for all players involved in developing non-conventional fuels so that they would be able to compete with conventional subsidized fuels.

"If you have highly subsidized fuel products in the market, then it will be hard to be able to develop other kinds of alternative energy," Macleod said.

Shell is the world's largest distributor of transportation biofuel, with 3.5 billion liters sold in 2006.

In Indonesia, Shell currently sells high-octane fuels in 18 locations in Jakarta, off-loading some 18 million liters of gasoline every month.