. International Journal of Energy Economics and Policy | Vol 8 • Issue 6 • 2018 313 International Journal of Energy Economics and Policy ISSN: 2146-4553 available at http: www.econjournals.com International Journal of Energy Economics and Policy, 2018, 8(6), 313-321. Development of Consumption and Supplying Energy in Indonesia’s Economy Siti Inayatul Faizah1*, Uus Ahmad Husaeni2,3 1Faculty of Economics and Business, Airlangga University, Indonesia, 2Awardee LPDP, Suryakancana University, Indonesia, 3Faculty of Islamic Economics and Business, Suryakancana University, Indonesia. *Email: siti-i-f@feb.unair.ac.id Received: 22 July 2018 Accepted: 03 October 2018 DOI: https://doi.org/10.32479/ijeep.6926 ABSTRACT One of the problems faced by Indonesia is the increasing energy consumption and tend to be wasteful, while the fossil energy reserves are depleted and the development of alternative energy is slow, so it is feared Indonesia experiencing energy crisis. The purpose of this article is to analyze the development of consumption and energy supply in Indonesia from 2007 to 2017. Data analysis in this research is by using combination between trend analysis and descriptive analysis. So the conclusion of this article shows that energy consumption in all sectors, namely industrial sector, household sector, transportation sector, commercial sector and other sectors tend to increase from year to year. Meanwhile, overall energy supply tends to increase, but with a smaller increase than the increase in consumption. And to overcome energy problem in Indonesia is needed energy conservation that is by conducting energy saving campaign, determination of energy conservation law, and establishment of energy conservation center. Furthermore, the Indonesian government should have a long-term plan to divert the use of energy from non-renewable sources to renewable energy use, such as the use of water, wind, biomass, biodiesel, biogas and other sustainable energy sources. Keywords: Energy Conservation, Energy Consumption, Energy Supply, Indonesian Economy JEL Classifications: D11, O1, Q4 1. INTRODUCTION Energy is indispensable in carrying out the economic activities of Indonesia, both for consumption needs and for the production activities of various sectors of the economy. As a natural resource, energy should be utilized as much as possible for the welfare of the community and its management should refer to the principle of sustainable development. From the aspect of supply, Indonesia is a country rich with energy resources both energy that is unrenewable resources and that is renewable resources (Dargay et al., 2007). Nevertheless, the exploration of energy resources focused more on fossil energy that is unrenewable resources while renewable energy has not been widely used. This condition causes the availability of fossil energy, especially crude oil, increasingly scarce which causes Indonesia is now a net importer of crude oil and its derivative products (Diputra and Jungho, 2018). According to the ministry of energy and mineral resources (2017) Indonesia’s crude energy reserves can only be produced or will be exhausted within 22.99 years, gas for 58.95 years and coal for 82.01 years. This calculation uses the assumption that no new fields are found as a source of fossil energy. Energy reserves can increase (last long) if new fields are found. From the aspect of consumption shows that Indonesia’s energy consumption has increased from year to year. In the period 2007–2017, the final energy consumption experienced an average annual increase of 2.73% from 953,334,957 BOE to 1,058,262,186 BOE. According to sector type, energy consumption in Industrial sector is the highest energy consumption followed by Households, Transportation, Non Energy Utilization, Commercial and Other (Table 1). With the depletion of fossil energy reserves on one side, while on the other hand energy consumption continues to increase become This Journal is licensed under a Creative Commons Attribution 4.0 International License Faizah and Husaeni: Development of Consumption and Supplying Energy in Indonesia’s Economy International Journal of Energy Economics and Policy | Vol 8 • Issue 6 • 2018314 a threat to the development of the Indonesian economy. Therefore efforts should be made to encourage the efficient utilization of energy use along with the search for new sources of fossil energy intensively and to develop alternative energy that is renewable resources. The main cause of inefficiency in energy utilization is the policy of cheap energy prices applied by the Government of Indonesia. According to Hakam and Asekomeh (2018), the policy of cheap energy prices by providing large subsidies has a negative impact: First, the high dependence on crude energy sources. Low price signal becomes a disincentive for diversification and conservation (energy saving). Second, fuel subsidies in the state budget threaten the fiscal sustainability of the government. Third, not optimal use of other energy sources, such as natural gas and coal whose reserves are much larger than crude oil as well as new and renewable energy. Fourth, the rampant smuggling of fuel abroad so that the level of demand is higher than the real need. Fifth, the rampant fuel pollution activities that harm the state and general consumers. And sixth, price signals distort the feasibility of investing in the downstream sector of oil and gas. Utilization of wasteful energy is shown by high energy elasticity. The average energy elasticity value in 2007–2016 period was 2.17. This means that if economic growth (GDP) increases by 1% then the final energy consumption will increase by 2.17%. This figure indicates Indonesia is a wasteful state energy. Energy in Indonesia is still widely used for activities that do not produce (Kim and Yoo, 2016). Elasticity numbers <1 are achieved when available energy has been used productively, as occurs in developed countries ranging from 0.55 to 0.65. In other words, developed countries have a strong, renewable, distributed, and evenly distributed energy retention system optimally and productively (Fotourehchi, 2017). Another indicator that shows the waste in energy utilization in Indonesia is the energy intensity. Energy intensity is the ratio between the amount of final energy consumption and GDP per capita. The more efficient a country, the less the intensity will be. So far, energy subsidies that have been implemented by the government actually lead to waste of energy, because its use is less than optimal. This is reflected in the relatively high energy intensity of 482 ton-oil-equivalent (TOE) per million US dollar. This means to generate value added (GDP) 1 million US dollars, Indonesia requires energy 482 TOE. In comparison, Malaysia’s energy intensity is only 439 TOE/million US dollar, and the average energy intensity of developed countries incorporated in the Organization for Economic Co-operation and Development is only 164 TOE/million US Dollar. This indicates that the potential for energy saving in Indonesia is still considerable (Zambrano et al., 2016). From the above description shows that the problems faced by Indonesia are increasing energy consumption and tend to be wasteful, while the fossil energy reserves are getting thinning and the development of alternative energy is slow. In more detail the development of energy consumption and supply in Indonesia along with solutions in energy consumption issues will be discussed in this article.T ab le 1 : F in al e ne rg y co ns um pt io n by s ec to r Se ct or 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 * In du st ri al 33 8, 66 5, 25 8 32 0, 30 2, 44 7 30 4, 79 1, 44 8 34 9, 04 0, 46 3 37 3, 94 7, 84 0 36 8, 11 9, 08 0 28 2, 17 5, 20 4 28 9, 80 1, 99 3 30 9, 18 4, 95 8 25 9, 12 3, 61 5 13 1, 60 1, 40 5 H ou se ho ld s 32 1, 99 2, 72 8 32 1, 93 6, 05 5 32 1, 56 9, 20 3 33 2, 20 3, 76 2 33 9, 15 3, 42 8 34 9, 08 4, 28 9 36 0, 01 6, 14 2 36 9, 89 3, 47 0 37 3, 78 6, 74 6 37 8, 04 6, 00 6 19 4, 78 9, 53 0 C om m er ci al 27 ,2 35 ,0 95 28 ,2 18 ,8 00 29 ,5 58 ,7 20 30 ,9 35 ,2 44 34 ,1 31 ,8 50 37 ,1 35 ,4 87 39 ,2 36 ,1 40 40 ,2 49 ,5 80 42 ,4 46 ,4 65 41 ,4 52 ,2 39 22 ,2 87 ,7 34 Tr an sp or ta tio n 17 4, 67 9, 83 0 18 5, 66 8, 88 2 20 9, 96 8, 39 8 23 0, 34 5, 87 0 27 7, 51 2, 76 2 32 9, 52 0, 05 1 34 1, 40 9, 71 1 34 2, 78 1, 96 0 30 7, 07 7, 74 9 30 3, 26 6, 13 9 15 2, 93 7, 16 4 O th er 25 ,2 87 ,1 55 25 ,0 68 ,6 04 25 ,2 93 ,6 06 22 ,3 40 ,4 93 27 ,2 20 ,3 38 33 ,7 09 ,2 15 31 ,1 05 ,2 54 28 ,6 94 ,6 57 32 ,8 36 ,3 85 19 ,4 40 ,2 20 13 ,6 63 ,7 53 N on e ne rg y ut ili za tio n 65 ,4 74 ,8 91 73 ,8 47 ,3 98 84 ,0 96 ,7 59 84 ,1 46 ,7 77 98 ,2 84 ,7 11 11 2, 56 5, 95 3 94 ,5 31 ,0 56 98 ,7 45 ,7 43 77 ,4 43 ,0 48 56 ,9 33 ,9 67 25 ,7 65 ,4 25 Fi na l e ne rg y co ns um pt io n 95 3, 33 4, 95 7 95 5, 04 2, 18 7 97 5, 27 8, 13 4 1, 04 9, 01 2, 60 9 1, 15 0, 25 0, 92 9 1, 23 0, 13 4, 07 4 1, 14 8, 47 3, 50 7 1, 17 0, 16 7, 40 3 1, 14 2, 77 5, 35 0 1, 05 8, 26 2, 18 6 54 1, 04 5, 01 1 *T em po ra ry d at a up to s em es te r I 2 01 7 Faizah and Husaeni: Development of Consumption and Supplying Energy in Indonesia’s Economy International Journal of Energy Economics and Policy | Vol 8 • Issue 6 • 2018 315 2. METHODS 2.1. Data Sources The data used in this study is secondary data in the form of time series data from 2007 to 2017. The data collected includes energy consumption data by sector and energy type and data of Indonesian energy supply. The main data sources are Indonesia’s energy balance data obtained from the Ministry of Energy and Mineral Resources, as well as data sources from the Central Bureau of Statistics, and other relevant agencies. 2.2. Analysis Method Data analysis method used is combination between trend analysis and descriptive analysis. Trend analysis shows the pattern or fluctuation of energy supply by type of energy and energy consumption according to the user. Descriptive analysis describes the problems and or advantages of the fluctuations that occur from the results of trend analysis presented. 3. RESULTS AND DISCUSSION 3.1. Energy Consumption in Indonesian Economy Energy consumption in Indonesia in this study is differentiated by energy user sector which includes: industrial sector, household, transportation, commercial and other sectors. Energy consumed by energy users is the final energy. 3.2. Energy Consumption of Industrial Sector Along with the development of the industrial sector led to an increase in energy consumption in the production process to produce a product. In the period 2007–2017, industrial energy consumption fluctuated up and down. In 2012, energy consumption in the industry sector is at the highest level of 480,685 BOE, while in 2016 the energy consumption in the industrial sector is at the lowest level of 354,560 BOE. The types of energy consumed by the industrial sector are biomass, coal, briquette, gas, fuel, liquefied petroleum gas (LPG), electricity and other petroleum products. From Table 1 it can be seen that during the period 2007–2017 the highest energy type consumed by the industrial sector was gas and the lowest consumption was briquette (Table 2). In its development, the type of energy consumption in the industrial sector has increased and decreased. For biomass consumed the highest in 2014 and the lowest in 2016, the highest consumption coal in 2011 and the lowest in 2013. Briquette consumption showed the lowest consumption in the industry sector, and the highest consumption was in 2009 by 220 thousand BOE. Meanwhile, gas is the type most consumed by the industry sector, the highest was in 2013 of 123.8 million BOE. For most types of fuel consumption was in 2007 amounted to 62.667 million BOE. LPG consumption in 2007 amounted to 1.431 million BOE. Furthermore, energy consumed most consumed in 2016 amounted to 41,773 million BOE. While the remaining types of consumption in the energy sector are in other types of petroleum products (the highest in 2012 amounted to 83.418 million BOE). 3.3. Energy Consumption of Household Sector Energy is needed by household for lighting purposes, cooking, heating/cooling room, and various other household activities. Energy T ab le 2 : E ne rg y co ns um pt io n in in du st ri al s ec to r (t ho us an d B O E ) Y ea r B io m as s C oa l B ri qu et te G as F ue l F ue l ot he r P et ro le um p ro du ct L P G E le ct ri ci ty To ta l K er os en e A D O ID O F ue l o il To ta l f ue l 20 07 44 ,0 47 12 1, 90 4 10 5 10 5, 31 9 3, 35 2 29 ,7 61 1, 32 8 28 ,2 26 62 ,6 67 40 ,5 89 1, 43 1 28 ,0 77 40 4, 14 0 20 08 44 ,2 35 94 ,0 35 15 5 11 2, 00 1 2, 67 6 30 ,0 95 86 5 27 ,4 82 61 ,1 18 52 ,0 73 1, 12 7 29 ,4 05 39 4, 15 0 20 09 44 ,5 21 82 ,5 87 22 0 11 7, 53 5 1, 61 9 32 ,2 38 70 6 24 ,8 88 59 ,4 51 55 ,6 63 58 8 28 ,3 23 38 8, 88 8 20 10 43 ,3 17 13 7, 48 9 12 3 11 4, 11 1 96 4 28 ,0 49 61 2 20 ,8 48 50 ,4 73 55 ,7 65 65 5 31 ,2 54 43 3, 18 7 20 11 43 ,7 24 14 4, 50 2 12 1 11 9, 64 9 67 2 36 ,8 86 71 0 21 ,8 20 60 ,0 89 69 ,9 78 62 3 33 ,5 47 47 2, 23 3 20 12 42 ,7 32 12 3, 02 2 13 0 12 3, 16 1 46 8 49 ,5 15 50 7 20 ,2 23 70 ,7 13 83 ,4 18 62 1 36 ,8 88 48 0, 68 5 20 13 44 ,3 99 42 ,7 29 13 0 12 3, 80 0 42 7 46 ,8 22 43 8 11 ,6 42 59 ,3 28 66 ,1 61 69 3 39 ,4 66 37 6, 70 6 20 14 45 ,1 88 55 ,0 64 58 12 2, 69 9 32 9 42 ,3 30 33 7 11 ,1 12 54 ,1 08 70 ,2 77 75 3 40 ,4 02 38 8, 54 8 20 15 44 ,8 28 70 ,2 28 50 12 2, 07 9 26 1 51 ,5 89 29 4 9, 71 7 61 ,8 59 47 ,5 14 78 8 39 ,2 81 38 6, 62 8 20 16 42 ,4 34 63 ,5 04 10 7 99 ,7 39 20 0 28 ,2 46 20 9 7, 25 1 35 ,9 05 70 ,2 77 82 1 41 ,7 73 35 4, 56 0 20 17 * 21 ,2 17 29 ,4 17 50 52 ,9 54 10 1 22 ,6 87 38 5, 22 6 28 ,0 52 35 ,1 39 50 1 21 ,2 16 18 8, 54 6 *T em po ra ry d at a up to s em es te r I 2 01 7, L PG : L iq ue fie d pe tr ol eu m g as Faizah and Husaeni: Development of Consumption and Supplying Energy in Indonesia’s Economy International Journal of Energy Economics and Policy | Vol 8 • Issue 6 • 2018316 consumed by households includes: biomass, gas, kerosene, LPG and electricity. The types of biomass energy consumed by households are firewood, charcoal, and others used for cooking. In total household consumption increased during the period 2007–2017. During that period household energy consumption increased by 1.87% per year (except in 2008) from 321,993 million BOE (2007) to 378,046 million BOE (2016). Increased consumption in this sector is due to an increase in the number of family members and number of households in Indonesia (Table 3). The types of energy consumed by households from the highest to the lowest are biomass, electricity, LPG, kerosene and gas. During the period 2007–2017 biomass consumption showed an increase but has a low average growth per year at 1.38%. This indicates that households have started to reduce the use of biomass energy, because there are other alternative energy that is easier and cheaper to use. With the increase of biomass energy consumption in the household sector shows that most households in Indonesia still use firewood for cooking, especially households in rural areas (Aydin, 2015). This happens because the supply of firewood in the countryside is quite large. In addition, the economic price to get firewood is relatively cheap. The results of this study are similar to the results of Jul (2014) study, which states that the type of household consumption in Indonesia is mostly non-commercial energy (fuel wood and charcoal), which is mostly from poor households. Meanwhile, rich households consume commercial energy such as gas, electricity and kerosene. In addition to biomass energy, electrical energy during the 2007–2017 period showed an increased growth. During the period 2007–2017 the consumption of electric energy showed an average annual increase of 4.2%. Increased electricity consumption by households is due to cheaper electricity prices compared to kerosene and LPG prices. Meanwhile, kerosene consumption by households showed a declining trend, caused by the Indonesian government policy on kerosene conversion to LPG which started in 2008. So from 2008 kerosene consumption decreased significantly. Meanwhile, LPG consumption has increased significantly every year, and the highest consumption of LPG occurred in 2016 amounted to 57,398 million BOE. 3.4. Energy Consumption of Transportation Sector The means of transportation is necessary in order to mobilize goods and people from one place to another. In relation to energy consumption, the transport sector in question includes means of transportation driven by machinery or motor vehicles. There are three types of energy consumed by the transportation sector, namely fuel, gas and electricity. From Table 4 it can be seen that transportation sector energy consumption shows an increasing trend during the period 2007–2017 except in 2015. During that period the total energy consumption of the transportation sector increased with an average growth per year of 3.31%. The types of energy consumed by the transportation sector from the largest to the smallest are fuel, gas and electricity, respectively. In its development fuel consumption showed an increasing trend, while gas and electricity consumption fluctuated (Table 5). The amount of fuel consumption by the transportation sector is due to the increasing number of motor vehicles using fuel, both public and private vehicles. In addition, travel by vehicle is less efficient because of poor road infrastructure so it takes a long travel time. Long travel time will increase fuel consumption. 3.5. Energy Consumption of Commercial Sector The commercial sector includes residential institutions. The commercial sector also includes waste treatment facilities. Common uses of energy associated with this sector include space heating, water heating, air cooling, lighting, cooling, cooking, and running other equipment. This sector also includes generators that generate electricity and or heat output beneficial to support the activities of the commercial entity mentioned above. The use of energy consumption in this commercial sector can be seen in Table 5. Based on Table 5 data shows that the type of energy electricity is the type of energy that dominates the use of energy in commercial sector with the highest amount in 2016 amounted to 33.103 million BOE. Meanwhile, the type of energy fuel is in second position with the highest consumption in 2015 of 7,428 million BOE. Biomass is third in energy use in the commercial sector with the highest amount in 2007 of 1,402 million BOE. While LPG is in the fourth position with the highest amount in 2016 amounted to 4.234 million BOE and gas was in the fifth position with the highest amount in 2014 of 1.447 million BOE. 3.6. Other Energy Sector Consumption Other sectors in this article fall into sectors not mentioned in the previous section, such as trade, hotels and restaurants, and others. The reason for the inclusion of these sectors into other Table 3: Energy consumption in household sector (thousand BOE) Year Biomass Gas Kerosene LPG Electricity Total 2007 234,557 132 50,229 8,064 29,010 321,993 2008 237,459 131 40,096 13,487 30,763 321,936 2009 240,736 130 24,255 22,767 33,682 321,569 2010 250,571 135 14,439 30,386 36,673 332,204 2011 253,727 114 10,072 35,326 39,914 339,153 2012 256,594 134 7,015 41,123 44,217 349,084 2013 260,328 122 6,396 45,839 47,330 360,016 2014 263,495 114 4,929 49,810 51,545 369,893 2015 263,275 116 3,903 52,130 54,362 373,787 2016 263,215 137 2,995 54,302 57,398 378,046 2017* 131,607 68 1,514 33,134 28,466 194,790 *Temporary data up to semester I 2017, LPG: Liquefied petroleum gas Faizah and Husaeni: Development of Consumption and Supplying Energy in Indonesia’s Economy International Journal of Energy Economics and Policy | Vol 8 • Issue 6 • 2018 317 sectors because these sectors have a small composition in energy consumption. Other sectors consume the type of energy of fuel, gas, biomass and electricity. In Figure 6 it can be seen that the total energy consumption of other sectors tends to increase with an average growth per year of 3.72%. Based on the type of energy, other sectors consume the largest fuel energy followed by gas and kerosene energy. In its development, energy consumption of fuel and gas by other sectors showed an increasing trend, while kerosene consumption showed a declining trend (Table 6). 4. ENERGY SUPPLY IN INDONESIA’S ECONOMY Energy supply in the future is a problem that is always the concern of all nations because human welfare in modern life is closely related to the amount and quality of energy utilized. For Indonesia which is one of the developing countries, the provision of energy is a very important factor in encouraging development. Along with the increasing development in various sectors, economic growth and population growth, the need for energy will continue to increase (Anastacio, 2017). In meeting the energy needs, national energy supply is supplied from domestic and imported production. Energy supply from domestic production is highly dependent on technology and energy infrastructure. Energy infrastructure consists of energy conversion infrastructure (in the form of oil refineries, gas and power plants), energy transmission and distribution infrastructure (oil pipelines, gas pipelines, transmission and distribution networks), and physical infrastructure (ports, roads, fire). The fact is that Indonesia has limitations in this regard. Exploration technology and energy infrastructure require large and long-term capital. Therefore, government policy is needed to increase investment in energy sector. With these limitations, to meet domestic energy demand, it can be imported from other countries (Harris, 2017). Oil imports depend on how much energy, world oil prices and the Rupiah exchange rate against the US dollar are. 4.1. Coal Supply Coal plays an important role in meeting energy demand and ensuring energy availability for industry and power generation. Consumption on the type of coal energy is used by power plant and industry sectors. Table 7 shows that the power plant sector is one of the industries with the highest consumption of coal with the highest consumption in 2016 of 74.4 million tonnes. While the rest is used by industry sector with the type of iron and steel, ceramic and cement, pulp and paper, and briquette. Besides, coal is also used by households as fuel for cooking. The utilization of coal as an energy source is due to the fact that coal reserves are still available and their prices are relatively cheaper than LPG, kerosene and gas (Table 7). The magnitude of the role of coal as a source of energy other than fuel cannot be separated from the availability of coal that can be consumed by the community as one source of energy. Table 8 shows that coal production tends to increase. During the last 11 years (2007–2017) coal production has increased an average AQ2 Ta bl e 4: E ne rg y co ns um pt io n in tr an sp or ta ti on s ec to r (t ho us an d B O E ) Y ea r G as F ue l E le ct ri ci ty To ta l A vg as A vt ur R O N 8 8 R O N 9 2 R O N 9 5 R O N 9 0 So la r 51 So la r 53 K er os en e A D O ID O F ue l o il B io R O N 8 8 B io R O N 9 2 B io s ol ar To ta l b io fu el 20 07 49 12 14 ,8 45 10 2, 78 4 2, 75 2 92 1 0 8 0 22 48 ,6 43 53 54 9 32 6 58 3, 60 4 17 4, 57 9 52 17 4, 68 0 20 08 12 4 11 15 ,5 26 11 1, 37 7 1, 73 6 66 9 0 8 0 18 49 ,1 89 35 53 5 25 7 95 6, 04 1 18 5, 49 5 50 18 5, 66 9 20 09 19 1 9 16 ,2 62 12 1, 22 6 2, 68 2 60 8 0 13 0 11 52 ,6 92 28 48 4 61 7 11 8 14 ,9 59 20 9, 70 9 68 20 9, 96 8 20 10 19 5 12 20 ,7 79 13 0, 48 6 3, 90 7 66 3 0 29 0 6 45 ,8 45 24 40 5 0 0 27 ,9 39 23 0, 09 6 54 23 0, 34 6 20 11 18 1 13 20 ,9 83 14 4, 33 0 3, 64 3 1, 71 7 0 41 0 4 60 ,2 89 28 42 4 0 0 45 ,8 04 27 7, 27 8 54 27 7, 51 3 20 12 15 4 14 22 ,9 67 16 0, 91 0 3, 88 4 87 1 0 80 0 3 80 ,9 30 20 39 3 0 0 59 ,2 27 32 9, 30 0 66 32 9, 52 0 20 13 18 5 16 24 ,4 99 16 6, 80 0 4, 95 6 92 5 0 15 0 0 3 76 ,5 29 17 22 6 0 0 67 ,0 25 34 1, 14 6 79 34 1, 41 0 20 14 20 7 8 24 ,9 12 16 7, 96 0 6, 19 4 90 3 0 21 6 0 2 69 ,1 87 13 21 6 0 0 72 ,8 68 34 2, 48 0 95 34 2, 78 2 20 15 24 6 17 25 ,5 46 15 8, 91 4 16 ,0 95 1, 62 4 2, 21 4 25 0 0 2 84 ,3 20 12 18 9 0 0 19 ,7 37 30 8, 92 1 12 6 30 9, 29 2 20 16 20 5 16 27 ,4 81 12 2, 99 2 27 ,9 11 1, 69 6 33 ,8 32 68 7 48 0 1 46 ,1 67 8 14 1 0 0 75 ,3 43 33 6, 75 7 13 7 33 7, 09 8 20 17 * 10 2 6 14 ,8 37 40 ,3 50 15 ,4 52 73 3 33 ,8 36 80 1 52 0 1 37 ,0 81 2 10 2 0 0 42 ,8 81 18 6, 60 1 70 18 6, 77 3 *T em po ra ry d at a up to s em es te r I 2 01 7 Faizah and Husaeni: Development of Consumption and Supplying Energy in Indonesia’s Economy International Journal of Energy Economics and Policy | Vol 8 • Issue 6 • 2018318 of 14.03% per year. Furthermore, in the period of 2007–2017 (semester 1), total coal production is 3.808 billion tons and total coal exports amounted to 2,958 billion tons, only 9.28% are consumed domestically and 90.72% of the remaining is exported. Thus domestic coal production is more exported than used for domestic purposes (Table 8). Indonesia’s coal export destination countries are countries in Asia such as Japan, China, Taiwan, India, South Korea, Hong Kong, Malaysia, Thailand and the Philippines. Other export destinations are Europe such as Netherlands, Germany and England, as well as countries in America. The largest importers of Indonesian coal are China (22.8%) and India (20.7%). The type of coal exported Indonesia is Steam Coal type. 4.2. Crude Oil Crude oil as raw material to produce fuel, such as gasoline (premium), diesel, diesel oil, kerosene and lubricants. Thus, crude oil has a role in meeting the energy needs. Crude oil is sourced from non-renewable natural reserves, thereby depleting its reserves in line with the increasing demand for energy. Table 9 shows that Indonesia’s crude oil supply tends to decline over the 2007–2017 period from 8.40 Billion barrels in 2007 to 7.53 Billion barrels in 2017. According to the Indonesian Petroleum and Gas Management Agency, Indonesia’s oil production has declined due to the scarcity capacity that can not accommodate domestic and aging oil needs (+30 years), requiring substantial investment to curb the rate of natural decline. While efforts to buffer production through new Table 5: Energy consumption in commercial sector (thousand BOE) Year Biomass Gas Fuel LPG Electricity Total Kerosene ADO IDO Total fuel 2007 1,402 274 2,774 4,285 7 7,066 1,308 17,185 27,235 2008 1,395 357 2,214 4,333 5 6,552 1,044 18,871 28,219 2009 1,388 730 1,339 4,642 4 5,985 1,029 20,426 29,559 2010 1,381 963 797 4,039 3 4,839 1,026 22,726 30,935 2011 1,374 1,290 556 5,311 4 5,871 1,112 24,485 34,132 2012 1,367 1,625 387 7,130 3 7,520 1,139 25,485 37,135 2013 1,360 1,422 353 6,742 2 7,098 1,269 28,088 39,236 2014 1,353 1,447 272 6,095 2 6,369 1,379 29,701 40,250 2015 1,346 1,435 216 7,428 2 7,645 1,444 30,576 42,446 2016 1,340 1,272 165 4,067 1 4,234 4,234 33,103 41,452 2017 667 636 84 3,267 0 3,351 918 16,717 22,288 *Temporary data up to semester I 2017, LPG: Liquefied petroleum gas Table 6: Energy consumption in others sector (thousand BOE) Year Gas Kerosene ADO IDO Fuel oil Total fuel 2007 3,156 2,295 15,098 198 4,539 25,287 2008 3,420 1,832 15,268 129 4,420 25,069 2009 3,722 1,108 16,335 105 4,002 25,294 2010 4,006 660 14,230 91 3,353 22,340 2011 4,432 460 18,713 106 3,509 27,220 2012 4,941 321 25,120 76 3,252 33,709 2013 5,121 292 23,754 65 1,187 31,105 2014 5,157 225 21,475 50 1,767 28,695 2015 4,879 178 26,172 44 1,563 32,836 2016 3,776 137 14,330 31 1,166 19,440 2017* 1,239 69 11,510 6 840 13,664 *Temporary data up to semester I 2017 Table 7: Coal sales (ton) Year Total Iron and steel Power plant Ceramic and cement Pulp and paper Bri-quette Others 2007 61,470,000 282,730 32,420,000 6,443,864 1,526,095 25,120 20,772,192 2008 53,473,252 245,949 31,041,000 6,842,403 1,251,000 43,000 14,049,899 2009 56,295,000 256,605 36,570,000 6,900,000 1,170,000 61,463 11,336,932 20102 67,180,051 335,000 34,410,000 6,308,000 1,742,000 34,543 24,350,508 2011 79,557,800 166,034 45,118,519 5,873,144 n.a. 33,939 28,366,165 2012 82,142,862 289,371 52,815,519 6,640,000 2,670,701 36,383 19,690,889 2013 72,070,000 300,000 61,860,000 7,190,000 1,460,000 36,383 1,223,617 2014 76,180,001 298,000 63,054,000 7,187,400 1,458,170 15,623 4,166,808 2015 86,814,099 399,000 70,080,000 7,180,000 4,310,000 13,174 4,831,925 2016 90,550,000 390,000 75,400,000 10,540,000 4,190,000 30,000 0 2017* 46,327,000 123,956 41,500,000 3,349,977 1,331,727 21,340 0 *Temporary data up to semester I 2017 Faizah and Husaeni: Development of Consumption and Supplying Energy in Indonesia’s Economy International Journal of Energy Economics and Policy | Vol 8 • Issue 6 • 2018 319 field production are highly dependent on the performance of contract contractors, because in the petroleum industry requires enormous capital and high technology. The decline in Indonesia’s crude oil production will have an impact on increasing domestic fuel needs. Therefore, to meet domestic needs it is necessary to import crude oil. The demand for crude oil imports is expected to continue to increase in line with the increasing population growth and economic growth in Indonesia is expected to improve (Nor and Masron, 2018). 4.3. Natural Gas From Table 10 shows natural gas production during 2007–2010 increased by an average of 2.3% from 2,805,540 MMSCF (Million Standard Cubic Feet) to 3,407,592 MMSCF. However, during the period 2011-2016 natural gas production tends to decline. During that period natural gas decreased by 0.93% annually from 3,256,379 MMSCF to 3,070,239 MMSCF. This low gas production is due to limited gas production capacity. Gas production plants are old and investments in exploration activities to build new gas and oil wells are lower. According to Moremadi and Yadollah (2018), the low investment in oil and gas is caused by a number of uncertainties, including security issues, high taxes and uncertainty surrounding the implementation of the new oil and gas law number 22 year 2001, the uncertainty of the government’s position in developing wells aged gas, new oil and renewal of contracts at existing oil wells. The implication is that some oil and gas companies suspend their investment plans throughout 2012–2021 (Table 10). 4.4. Electricity During the period 2007-2017 electricity sales in Indonesia increased by an average of 6.24% per year. The most widely used electricity consumption sector is the household sector with average consumption from 2007-2016 of 69.313 GWh (Giga Watt hour). While the lowest electrical energy consumption in the transportation sector (Table 11). With the increasing consumption of electrical energy then automatically the supply of electrical energy also increases. The increase in electricity supply is caused by an increase in electricity demand from various sectors due to the improvement of the people’s economy. Increased demand for electrical energy encourages the development of the discovery of electrical energy derived from renewable energy, such as hydropower, geothermal energy, micro hydro, biomass, solar and wind. Table 12 shows the renewable energy that can generate electrical energy. From the table only about 3.32% of renewable energy that can be utilized into electrical energy, the rest cannot be used optimally because of limited technology owned. 5. SOLUTION TO OVERCOMING ENERGY PROBLEMS IN INDONESIA Solving a problem must be a matter of what is being experienced. As has been pointed out in the previous section that the energy problem that Indonesia is facing today is the problem of energy Table 8: Coal supply (ton) Year Production Export Import Steam Coal Antracite Total 2007 216,946,699 0 216,946,699 163,000,000 67,534 2008 240,249,968 0 240,249,968 191,430,218 106,931 2009 256,181,000 0 256,181,000 198,366,000 68,804 2010 275,164,196 0 275,164,196 208,000,000 55,230 2011 353,270,937 0 353,270,937 272,671,351 42,449 2012 386,077,357 0 386,077,357 304,051,216 77,786 2013 474,371,369 0 474,371,369 356,357,973 609,875 2014 458,096,707 0 458,096,707 381,972,830 2,442,319 2015 461,566,080 0 461,566,080 365,849,610 3,007,934 2016 456,197,775 0 456,197,775 331,128,438 3,898,932 2017* 230,365,346 0 230,365,346 185,591,205 1,870,722 *Temporary data up to semester I 2017 Table 9: Crude oil reserves (billion barrels) Year Proven Potential Total 2007 3.99 4.41 8.40 2008 3.75 4.47 8.22 2009 4.30 3.70 8.00 2010 4.23 3.53 7.76 2011 4.04 3.69 7.73 2012 3.74 3.67 7.41 2013 3.69 3.86 7.55 2014 3.62 3.75 7.37 2015 3.60 3.70 7.31 2016 3.31 3.94 7.25 2017 3.17 4.36 7.53 Table 10: Natural gas production (MMSCF) Year Associated Non associated Total 2007 433,630 2,371,910 2,805,540 2008 472,897 2,412,431 2,885,328 2009 467,570 2,593,326 3,060,897 2010 471,507 2,936,086 3,407,592 2011 472,552 2,783,827 3,256,379 2012 405,465 2,769,175 3,174,639 2013 352,561 2,768,277 3,120,838 2014 304,693 2,871,098 3,175,791 2015 376,669 2,739,473 3,116,142 2016 467,813 2,602,426 3,070,239 2017* 241,785 1,216,720 1,458,505 *Temporary data up to semester I 2017 Faizah and Husaeni: Development of Consumption and Supplying Energy in Indonesia’s Economy International Journal of Energy Economics and Policy | Vol 8 • Issue 6 • 2018320 waste (Liddle and Lung, 2013). On the other hand, increased energy consumption is not balanced with the supply of sufficient energy, so that Indonesia has an energy deficit. Thus, it is necessary to find solutions to these problems, among others, by converting (saving) energy and applying appropriate economic policies. 5.1. Energy Conservation As has been stated earlier that based on the value of elasticity and intensity of energy utilization Indonesia is one of the countries with the utilization of energy wasted in the world. Therefore, intensive efforts are needed in order to improve the efficiency of energy utilization. According to Dudin et al. (2016) several strategic steps that need to be taken to streamline the energy conservation movement: First, energy-saving campaigns, conducting energy audits (free), disseminating energy conservation techniques, providing incentives for energy efficiency utilization. Second, prepare the Energy Conservation Act. And third, establish National Energy Conservation Center, as did Japan and Thailand. Strategic steps put forward by Dudin et al. (2016) is based on the idea that letting the energy-consuming pattern of consumption be wasteful will be very detrimental, both in terms of economy, environment and efforts to maintain the benefits of the energy resources themselves. Since the “disease” caused as a result of ignoring these energy conservation efforts is already severe enough, the conservation of energy as a necessity should not be postponed again in Indonesia. Conservation (saving) energy will bring many benefits. By conserving energy as if finding new energy sources. If Indonesia can save fuel consumption by about 10%, it means “finding” a new oil field that can produce about 150,000 barrels per day, which in reality costs considerable expenses for exploration and production. The cost that can be saved by doing conservation is huge. In addition, energy conservation is also set forth in the Presidential Instruction issued in 1982 (INPRES No. 9/1982) which is then refined by Presidential Decree No. 43 in 1991. In the community emerged Non-Governmental Organizations (Energy Efficient Society) who pay attention to energy conservation. An ESCO was established by the government which then made it a state-owned energy company (PT KONEBA). PLN (National Electric Company) undertook several demand side management projects to reduce electricity consumption on the usage side. The Department of Energy undertook a number of energy conservation demonstration projects, for example in government office buildings (something similar was done at college campus buildings). The government even issued a document of RIKEN (Master Plan for Conservation of Energy) which was not followed by a clear action plan. 5.2. Economic Policy The formulation of the right economic policy can overcome the national energy consumption and supply. In addressing the issue of energy availability that cannot meet domestic energy needs, it is necessary to enact policies in the short term, medium term and long term. In the short term, efforts are needed to improve efficiency and productivity of energy utilization, among others, by the conversion of fuel to gas for households, and the elimination of fuel subsidies (Lee and Chang, 2008). A low interest rate policy and stable exchange rate are also needed to counter the negative impact of rising world oil prices that could lead to declining consumption and energy supply (Sari and Soytas, 2007). In the medium term, efforts are needed to increase investment from aspects of fossil energy production, processing and distribution, and efforts to convert fuel-based energy use by the industrial sector to other types of energy (Devereux and Lane, 2003). Along with that, efforts need to increase the number and capacity of oil and gas refineries to reduce the level of dependence on the final energy sourced from imports (Apostolakis, 1990). Efforts to increase the number and capacity of power plants also need to be done to eliminate electricity deficits, focused on the use of energy other Table 11: Electricity sales (GWh) Year Electricity sales/tariff segment Total Household Commercial Industry Street lighting Social Government Transportation 2007 47,325 20,524 45,803 2,586 2,909 2,016 85 121,247 2008 50,184 22,845 47,969 2,761 3,082 2,096 81 129,019 2009 54,945 24,715 46,204 2,888 3,384 2,335 111 134,582 2010 59,825 27,069 50,985 3,000 3,700 2,630 89 147,297 2011 65,112 30,093 54,725 3,068 3,994 2,787 88 159,867 2012 72,133 30,880 60,176 3,141 4,496 3,057 108 173,991 2013 77,211 34,369 64,381 3,251 4,939 3,261 129 187,541 2014 84,086 36,128 65,909 3,394 5,446 3,484 155 198,602 2015 88,682 36,773 64,079 3,448 5,941 3,717 205 202,846 2016 93,635 39,852 68,145 3,498 6,631 4,022 223 216,004 2017* 46,437 20,145 34,609 1,751 3,398 1,977 114 108,431 *Temporary data up to semester I 2017 Table 12: Potential of renewable energy for power generation Renewable energy Potency Installed generator capacity Water power 75.67 GW 4200.00 MW Geothermal 27.00 GW 800.00 MW Mini/micro hydro 458.75 MW 84.00 MW Biomass 49.81 GW 302.40 MW Sun 4.80 KWh/m2/day 8.00 MW Wind 9.29 GW 0.50 MW Source: Blue print national energy management 2006–2025 Faizah and Husaeni: Development of Consumption and Supplying Energy in Indonesia’s Economy International Journal of Energy Economics and Policy | Vol 8 • Issue 6 • 2018 321 than fuel, such as power plants using coal and gas energy. In the long run, efforts to shift energy use from unrenewable resources to renewable energy use, such as water, wind, biomass, biodiesel, biogas and other sustainable energy sources. In other words, a green energy strategy is needed. 6. CONCLUSION The trend of energy consumption of various sectors shows that in the period 2007–2017, industrial energy consumption fluctuated up and down. In 2012, energy consumption in the industry sector was at the highest level of 480,685 BOE, while in 2016 energy consumption in the industry sector was at the lowest level of 354,560 BOE. In total household consumption increased during the period 2007–2017. During that period household energy consumption increased by 1.87% per year (except in 2008) from 321,993 million BOE (2007) to 378,046 million BOE (2016). Transportation energy consumption shows an increasing trend during the period 2007–2017 except in 2015. During that period the total energy consumption of the transportation sector increased with an average growth per year of 3.31%. Type of energy electricity is the type of energy that dominates the use of energy in commercial sector with the highest amount in 2016 amounted to 33.103 million BOE. Total energy consumption of other sectors tends to increase with an average growth per year of 3.72%. The trend of energy supply by type of energy shows that during the last 11 years (2007–2017) coal production has increased by an average of 14.03% per year. If further noted, in the period 2007–2017 (semester 1) total coal production of 3.808 billion tons. Indonesia’s crude oil supply tended to decline during the 2007–2017 period from 8.40 Billion barrels in 2007 to 7.53 Billion Bars in 2017. Natural gas production during 2007–2010 increased by an average of 2.3% from 2,805,540 MMSCF (Million Standard Cubic Feet) to 3,407,592 MMSCF. And electricity sales in Indonesia increased by an average of 6.24% per year. The most widely used electricity consumption sector is the household sector with average consumption from 2007–2016 of 69.313 GWh (Giga Watt hour). In order to overcome energy problems in Indonesia, energy conservation is needed in various layers, both from the management aspect of energy management and from among the community. In addition, there is also a need for low interest rate economic policies and stable exchange rates to encourage energy investment in order to increase crude oil production and counteract the negative impacts of rising world oil prices that lead to a decline in energy supply. In the long run, efforts should be made to shift energy use from unrenewable resources to renewable energy use, such as water, wind, biomass, biodiesel, biogas and other sustainable energy sources. 7. 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