We live in a world where ever-increasing global warming is inducing environmental catastrophe at an alarming rate. In order to avoid surpassing the 1.5° Celsius threshold set by the UN Intergovernmental Panel on Climate Change, we will require a mobilisation of industrial might and technological innovation on a global scale never seen before.

At the core of this challenge lies the need to urgently transition away from fossil fuel energy towards renewable energy sources. As discussed in a previous edition, the shared interests of Australia and Indonesia – two countries already experiencing the effects of climate change – might benefit from collaborating on transmission projects which exports Australian solar and wind generated energy to Indonesia via undersea cable. Despite the economic and political challenges, these may not necessarily be insurmountable and there may be a way forward which powers through the politics.

Mitigating challenges

One major challenge facing a project of this scale is the global shortage of transmission lines and technical labour supplies. The demand for transmission lines has surged in recent years with customer waiting times having ballooned. Some within the industry have gone as far to say that Australia is on the brink of the “a third electrical infrastructure revolution,” though of course, this will depend on a skilled labour force. Rather than relying on transmission technology and skills being imported from overseas, Australia and Indonesia would both benefit from focusing on developing transmission line manufacturing capabilities domestically.

Another potential obstacle is whether Indonesia will be willing to sacrifice its sovereign energy supply. In recent years, the so-called trend towards “resource nationalism” has become politically popular in Indonesia. An agreement to see Australia supply Indonesia with renewable energy should not be intended to make Indonesia reliant upon Australian energy, but rather, supplement Indonesia’s existing power supply, particularly as demand is forecasted to increase at 4.9 percent annually. Given that President Joko Widodo has set the ambitious target of phasing out coal-fired power stations by 2050, Australian renewable energy can support this transition as Indonesia’s domestic renewable energy sources are developed.

Figure 1. Specific photovoltaic power output
Source: Global Solar Atlas

While Indonesia has high renewable energy potential (geothermal and biomass predominantly), it has limited capacity to develop solar and wind energy potential. Australia, by comparison, has one of the highest solar and wind energy climates in the world [as seen in Figure 1]. This means in the transition to a renewable energy market, high energy demand populations such as Indonesia will need to draw on a variety of available energy sources. It is likely that importing renewable energy from overseas will be necessary for Indonesia to reach its renewable energy targets, and Australia would be wise to adopt a proactive stance in this respect.

In addition, ASEAN members have been working towards establishing a regional power grid (the ASEAN Power Grid or APG) since 1997, suggesting broader support for a renewable energy transition. Although progress in regional integration has been slow, numerous bilateral power purchase agreements have occurred within the region. Australia might benefit from being able to export its plentiful renewable energy supply into such a regional energy grid – enhancing not only Australia’s bilateral relations with Indonesia, but its standing and interconnectedness with ASEAN members.

While concerns about whether such projects can be financially viable have been voiced, such projects are not lacking for green-focused investors. Tech billionaire Mike Cannon-Brookes, for instance, is a clear believer in the scheme. A spokesperson for his private investment vehicle, Grok, said “We are confident Sun Cable will be an attractive investment proposition and remain at the forefront of Australia’s energy transition.” At this point in time, it remains to be seen whether renewable energy projects like Sun Cable can attract the necessary investment required to jumpstart the project.

Figure 2. Australia’s projected levelized cost of electricity for standalone solar PV and wind generation relative to the average cost of electricity generation in Indonesia and the average wholesale electricity price in Singapore in 2019. Source: Bourke et al. 

As to whether Indonesia can afford Australia’s renewable energy, Burke et al [Figure 2] have shown that Australia is capable of producing solar and wind energy at a price much cheaper than what Indonesia is currently paying for electricity generation. Although this does not account for the high initial costs of building the transmission infrastructure, as transmission, solar, and wind technologies continue to develop, renewable energy alternatives will only become more competitive.

Last, the opportunity to develop a new industry of sustainable energy production for export in Australia also presents a new opportunity to recalibrate Australia’s approach to sustainable development vis-à-vis native titleholders. As Burke and others point out, many Aboriginal communities have received minimal benefit from Australia’s mining boom over the past two decades. Perhaps the construction of solar and wind farms across Western Australia and the Northern Territory can provide the impetus for resource companies to engage and negotiate with Aboriginal native titleholders, ensuring real benefits for communities.

Although there are clear challenges for a project of this scale, the potential for Australia and Indonesia to emerge as regional leaders in the green energy transition is clear. Although lithium exports will undoubtedly play a role in this future, it is important that Australia looks beyond lithium and other minerals and adopts a more ambitious approach to energy trade with Indonesia and the Southeast Asia region. Although the demise of Sun Cable invites important questions about the viability of such a project, a relationship beyond lithium would enhance bilateral cooperation and security, ensure greater access to reliable energy supply, reduce greenhouse gas emissions, and hopefully benefit native titleholders.

Aaron Bronitt is a 2022 New Colombo Plan Scholar (Indonesia).

This article is published under a Creative Commons License and may be republished with attribution.