Development Background

An adequate and environmentally sound supply of energy is one of the pre-conditions for sustainable economic and social development. However, economic progress, population growth and rising consumer demand saddle Indonesia with considerable energy problems, which year after year are becoming more and more acute. If the use of fossil fuels in meeting demand continues to follow historic trends, severe environmental damage at a local, regional and global level will be unavoidable.

Besides coal, the global energy supply outlook indicates that low-cost fuel reserves will be exhausted within a few decades. From the global climate viewpoint, the message is that the release of greenhouse gases into the atmosphere must be reduced and stabilized at environmentally tolerable levels. Therefore, the prospect of future success in mitigating climate change rests on improvements in energy efficiency and the increased use of renewable energy (RE) sources.

Equally as important as the reduction in CO2-emissions called for by concerns about global climate change are the efforts made for achieving sustainable improvements in Indonesia's living conditions, particularly in rural areas where large parts of the population have no access to commercial energy markets.
In remote rural areas, the use of decentralized RE-technologies, often represents the least-cost solution for the generation and supply of energy. The key to a market-based dissemination of new technologies that protect natural resources and the environment is the availability of financing options. The on-going energy sector reforms together with the gradual removal of subsidies on oil and electricity are contributing to an improved competitiveness of RE-technologies against conventional energy sources in Indonesia.

What also calls for a new, more efficient provision of energy services are the forces of economic growth and the associated environmental degradation in urban areas where industry and commerce as well as other consumers continue to use fossil energy in an inefficient way. In urban environments, harmful emissions have become an increasing health risk and a threat to the ecology. This situation is contributing to the emergence of a number of specific market niches particularly suitable to be serviced via renewable energy sources.

This framework is addressed by common energy sector policy goals

• Covering the basic energy needs to improve the living conditions in developing countries.
• Securing economic progress that is environmentally, economically and socially sustainable.
• Strengthening of the technological capabilities of developing countries in the energy sector.
• Reducing the dependence of developing countries on energy imports.
• Dissemination of RE-technologies in rural areas.
• Promotion of grid-connected RE-plants reducing the CO2-emissions of the power sector.
• Measures focusing on the rational use of energy and the utilization of renewable energy in urban areas.
• Supporting developing countries in implementing the resolutions of the United Nations Conference on Environment and Development, notably the Framework Convention on Climate Change.

By harnessing the abundant indigenous hydraulic potential of the country to develop environmentally friendly mini hydro power plants, MHPP provides an exemplary approach of addressing these critical issues.