In Southeast Asia, Indonesia is the first country to invest in the world's giant automotive industry as well as the largest market. Indonesia has the opportunity like other countries to succeed in the electric car opportunity. The most expensive component of electric vehicles is the lithium battery for electric storage, the raw material of which is nickel, and Indonesia has the world's largest deposit of high-quality laterite nickel. With the wealth of nickel production and abundant sources of new and renewable energy (EBT), it is a great opportunity for Indonesia to carve out history bringing a bright future like in the era of 1870. But how to ensure this success?
Indonesia was once a place of sophisticated industry in Asia, even Japan and South Korea, which are now industrial giants, are no match for them. Central Java and East Java are very modern centers of world sugar production. Unfortunately, this period of progress occurred during the Dutch colonial era around 1870 and then receded because it was unable to transform. Several century-old sugar factories are still operating without significant technological changes.
The history of the "failure" of the second industry occurred back in the New Order era until now, especially in the automotive sector. In Southeast Asia, Indonesia is the first country to invest in the world's giant automotive industry as well as the largest market. However, the nickname "Detroit Asia" is actually owned by Thailand as a producer of around two million cars per year, most of which are exported. Indonesia is only able to produce half of it and even that is mostly consumed domestically.
Compared to Thailand, Indonesia's automotive industry is more of a "craftsman" due to the large number of imported components. On the other hand, Thailand is able to produce its own automotive components so as to optimize the economic multiplier effect and absorb middle and high skilled workers. Wan-Ping Tai clearly concludes that the Indonesian automotive industry is "having a market".
without technology” , ”have an industry but without industrialization”.
Problems become opportunities
Learning from the failure of two missed opportunities, can Indonesia still transform into a developed industrial country? Fortunately, the rattling of the wheels of history did not stop. Not only can, Indonesia now even has a golden opportunity.
Based on the analysis of economic complexity, Indonesia's largest import is fuel, which accounts for 14 percent of total imports. Oil is the culprit of the trade deficit and will continue to worsen without change. Indonesia is increasingly "hungry for oil" because within a year about a million cars plus six million new motorcycles are paved, and this number will continue to grow. Worse yet, our oil wells are getting old and less productive. In addition to the mounting trade deficit, emissions from burning fuel oil are the biggest air polluter that causes health and environmental quality to deteriorate.
The problem of oil trade deficit and emission pollution is actually an opportunity to build an electric vehicle industry as a solution. Vehicles with oil combustion engines also have a bleak future as they will be banned in many places. Two years from now, Costa Rica is the first country in the world to completely ban all vehicles with combustion engines. Norway follows 2025 by banning the sale of new fossil-fueled vehicles. Simultaneously India, the Netherlands, Denmark, Ireland, Israel, Sweden and others will follow by 2030 and the economic giants China and Britain follow by 2040.
Not only because of the ban on combustion engine vehicles, the future of electric cars is actually very bright because they are increasingly competitive. From research in five European countries, the use of electric cars is now 5-27 percent cheaper. The electric car calculation compares the costs incurred for the purchase of vehicles, energy and taxes which are equivalent to gasoline, diesel and hybrid cars used for four years.
In the future, electric vehicles will also be cheaper with mass production and innovation. Assuming a moderate 35 percent of sales are electric cars in 2030, this will create 200.000 new job opportunities in Europe.
Industry and Technology Transformation
Indonesia has a comparative advantage that other countries do not have in developing electric vehicles. The most expensive component of an electric vehicle is a lithium battery that stores electricity, the main raw material of which is nickel. Indonesia has the world's largest deposit of high-quality laterite nickel. With a gigafactory of which one is now being built in Morowali, Indonesia will become a world supplier that will soon be "thirsty" for electric batteries.
With domestic electric batteries without imports, the cost of producing electric vehicles will be cheaper. This means that Indonesia has the potential to move up the ranks not only to become a “champion”, but to fight for the world automotive market which reaches Rp 8.000 trillion in 2025. It is projected that 220 million electric cars will be asphalted by 2030 and reach 2 billion units in 2035-2040, especially when the action is taken. tackling emissions and climate change are increasingly aggressive.
In addition, the domestic market is also quite tempting. If sold at a price of Rp 200 million-Rp 300 million for the middle segment, the target of a 20 percent electric car sales share in 2025 will be easily achieved. The market value means at least Rp 64 trillion-Rp 96 trillion and will continue to grow. With the right policies and regulations, a 30 percent sales share should be achievable.
Indonesia has the opportunity, like other countries, to succeed in electric cars because the technology is not yet as advanced as the combustion engine. Regulations on electric vehicles are currently being drafted. Given Indonesia's strategic position, world-class automotive players from a number of countries who will immediately invest in the production of electric cars are now waiting. Departing from the historical experience of failure, "industry without industrialization" must be avoided. This means that the regulation must encourage the advancement of domestic industry, facilitate technology transfer, and use domestic components.
For example, China requires the use of domestically produced batteries for the production of their electric vehicles. Indonesia needs to consider such things. If there are components that cannot be made domestically, strict deadlines need to be made to ensure that this will happen and to strengthen research by involving universities. Foreign investment must be part of the grand strategy of industrial and technological transformation. Let the technology-less industrialization just be history, it doesn't need to be repeated.
EBT and electricity toll
Like owning a cell phone, owning an electric vehicle means charging the battery at home at night and using the vehicle the next day. If the vehicle you own is an electric car, the minimum household power requirement is 2.200 watts or ideally above 4.400 watts. That much power is needed so that the electrical needs of various other devices in the house are not disturbed when charging the car battery.
If electric vehicles develop, the demand for electricity will increase significantly and Indonesia will soon experience a shortage of electricity. This means, electricity production needs to be increased rapidly. Considering that electric vehicles are also aimed at reducing emissions, it is ironic that power plants are generated from pollutant emissions. Therefore, electricity producers that must be encouraged are from new and renewable energy (EBT) and this is in line with the low-carbon development (PRK) direction launched by Bappenas.
Indonesia is very rich in renewable energy sources and the potential is huge, for example from solar, hydro, wind, geothermal, biomass and marine power. Currently, Indonesia's power plants produce 64,2 gigawatts and the electricity potential from NRE is at least 7 times that amount. The potential of 442 gigawatts of NRE is a very powerful energy economic opportunity and currently only 2,5 percent has been developed.
In addition to boosting the availability of electricity, Indonesia also needs to strive for "equality of electricity", that is, all islands have the same reliability and electricity supply. As is well known, Java has an excess of electricity supply, but many other islands have a shortage. If the need for electricity for conventional needs is not sufficient, then what if the need for electric cars is added?
After Indonesia has land, sea and air toll roads, now is the time for this country to have an "electric toll road". What is meant by "electric toll road" is an unbroken electricity network connecting Indonesia. Inter-island electricity connection is possible by connecting the islands via a submarine power cable. Indonesia already has submarine cables to overcome the digital divide that connects inter-islands through the Palapa Ring project, if the total length of fiber optic submarine cables reaches 35.000 kilometers.
The use of underwater power cables is also widely used in the world, one of the longest connecting the Netherlands and Norway, reaching 580 kilometers or more than half of the island of Java. Compared to pulling high-voltage cables on land which requires building towers, pulling cables at sea is a much faster process.
The electricity toll road initiated by the government is still limited to crossing the island of Sumatra, but not yet with a big vision of connecting Indonesia. That vision needs to be expanded, of course with a priority to connect large, densely populated islands or urgency. In the end, not only for electric cars, the availability of electricity will also trigger the rise of industry or productivity in areas that are less able to develop due to limited energy supply.
Electricity “co-creation” and prosumer
The electricity toll road will connect all electricity consumers throughout Indonesia with the same reliability. Electricity toll roads must also be connected to all (on grid) electricity suppliers, whether large, medium, small or even home-scale electricity producers. This means that the electricity needs that are connected throughout Indonesia will be supplied by "gotong royong" to all energy producers in the country.
The electricity toll road facilitates energy equity in Indonesia as well as a tremendous energy business opportunity through the electricity co-creation paradigm. The State Electricity Company (PLN) does not have to worry about being rivaled or having its business eroded. The focus is to be the sole distributor of electricity in Indonesia, which is efficient, with only a thin margin, but the huge volume has the potential to make this BUMN the most profitable.
Another problem that is worried about the development of electric vehicles is the availability of "electric gas stations" which is still very minimal. In addition to "electric gas stations" being added, other ways can be done by requiring a certain minimum space for indoor or outdoor parking for charging electric vehicles. This is a new business, in Western Europe there are more and more facilities like this.
In addition, for houses that have a certain large yard and meet the requirements, they are also allowed to provide a place for charging electric vehicles. This is a kind of retail gasoline seller, namely “retail electricity seller” or “home electric gas station”. Like in the parking lot, what is needed is simple, namely only fast charging plugs, an electricity meter and payment facilities using e-money or fintech that are connected to PLN.
On a home scale with rooftop solar panels, every citizen can charge an electric vehicle from their own electricity production. Or if there is excess, it can be sold to PLN. If they are more willing to bother and do business, they can "retail electricity" and be regulated by PLN. This is the era of consumers, citizens at the same time being producers and consumers of electricity at the same time.
Then, if the potential of EBT is utilized optimally, will there be an excess supply of electrical energy? Indonesia is still very far from it. Indonesia's electricity consumption is currently only 1.048 kWh per capita. No need to compare with developed countries. Malaysia and China's consumption has quadrupled, not to mention when electric cars are used. In addition, in the end, gas stoves will need to be replaced with electric stoves, but the priority now is on electric vehicles due to the large trade deficit and environmental pollution.
Ensuring success
The potential of the electric vehicle industry and the electric energy business from EBT is very bright. This sector has the potential to be a big leap for Indonesia to become a developed country, absorb green jobs massively and get out of the middle income trap. How to ensure that this happens?
From the author's experience as a working partner of the government, to ensure the success of such a giant thing requires a strong commitment from the president. Cross-ministerial problems will inevitably occur and the president is the key to solving problems. Without the determination of the president, regulations, ego-sectoral or inter-ministerial interests will cause protracted problems. In this regard, Bappenas plays a role in designing synergies and determining directions, policies, strategies, targets and a rigid timeline across ministries and agencies.
Another determining factor is the importance of choosing ministers who have a strong vision, are clean, have high commitment and determination. This is very important because it will move the ranks to the bottom, as well as withstand the temptations and enormous pressure of disrupted interests that are worth hundreds of trillions. The ministers most closely related in this regard are the ministers of industry and ESDM. The cooperation and integrity of these two ministers will determine success.
In addition, the Presidential Staff Office (KSP) is needed to monitor the progress of priority programs and become a problem solver if needed, especially if there are cross-ministerial problems. The vision of this paper is clear, the steps and descriptions are also operational. It's been enough industrial failures twice, let's carve out history to bring Indonesia a bright future. Let's get out of our comfort zone, the difficult and steep road must be taken.
“The Great Leap of Industry and Energy” from Setyo Budiantoro, Association of Development Economists Prakarsa, published in Kompas Newspaper Thursday, 13 June 2019.
