Quality Aspects of Energy Access for Public Should be Taken into Account

Jakarta (18/6/2021), the Ministry of Energy and Mineral Resources has launched the Patriot Energi program as one of the efforts to electrify underdeveloped, outermost, frontier (3T) villages, including transmigration areas. The Patriot Energi program invites 100 young people to receive training and then are assigned to various regions in Indonesia for 5 months – 1 year.

The tasks of these energy patriots include mapping the potential of renewable energy, assisting the PLN (Persero) de-dieselization program, and assisting village electricity independence, including assisting and training local communities to operate and maintain renewable energy installations that will be used to electrify the village.

The Minister of Energy and Mineral Resources of Indonesia, Arifin Tasrif, explained that currently, Indonesia together with all countries in the world are trying to reduce greenhouse gas emissions, one of which is produced by the energy sector. But on the other hand, the government also continues to strive to fulfill its obligations to provide access to electricity for the entire community.

“So we are also trying to achieve energy sovereignty based on green energy,” said Arifin Tasrif in his opening remark.

The government’s efforts to electrify all areas in the village through various efforts deserve to be appreciated. This initiative needs to be followed up by considering aspects of sustainability and the quality of energy access received by the public. The definition of ‘electrification ratio’ currently used by the government is still limited to whether it is connected or unconnected. The quality of the connected electricity such as voltage stability, frequency of power outages, and affordable costs has not been taken into account.

Many areas in Indonesia still receive low-quality electricity, not accessible for 24 hours, and only for the use of basic lighting and electronic equipment with very low power, but are limited for productive economic activities. In fact, to encourage access to sustainable energy and quality productivity is the key.

The government’s next homework is to ensure that every citizen has access to electricity that is not only connected but also of high quality, including improving definitions, providing road maps, as well as allocation of costs and human resources. Ensuring maintenance costs and human resources who will manage renewable energy electricity installations in the area will create a sustainable electrification program. Access to quality energy must be Indonesia’s development paradigm to achieve energy justice. 

Renewable Energy Development First, Nuclear should be the last option or not at all

Nuclear energy has created a dialogue and debate about the benefits and risks it brings. On the one hand, nuclear energy can meet energy needs, and can be used in various fields such as medical and military. But nuclear power also carries the risk of radiation leakage. There are noteworthy nuclear accidents, starting from Three Mile Island (1979), Chernobyl (1986), and Fukushima (2011). From this the question arises, is nuclear still worthy to be developed on a large scale? If so, what aspects must be considered in its development? Presenting three speakers with different backgrounds, FISCO UGM held a webinar on Nuclear Potential and Controversy to try to solve this question.

On the occasion, Fabby Tumiwa, Executive Director of IESR, said that there are several things that must be considered regarding the development of nuclear energy, including three factors of nuclear reactor safety, namely regulations or regulatory bodies, operational security, and security systems.

“The debate about nuclear power plants from the start was not solely about technology. But more about the security risks. The most feared disaster from nuclear power is the leakage of radiation into the outside environment, so the controversy is not solely about technology but rather the environment in which the nuclear power plant is located, “explained Fabby.

To ensure this security aspect, in addition to strict regulatory bodies and security procedures, the economic or cost issues required also need to be re-examined.

“The trend of nuclear power plant investment from year to year is getting more expensive. If the goal of building a nuclear power plant is to meet the growing demand for electricity, then there are other renewable energy alternatives that are more affordable and less dangerous,” continued Fabby.

Environmental factors, including public acceptance, are important and make this nuclear issue dynamic. Derajad S. Widhyharto, Lecturer of Sociology at the Faculty of Social and Political Sciences, UGM, also revealed that the public’s concern about nuclear power, both as nuclear power plants and new energy, lies in management issues.

The management aspect that is a concern for the community is further exacerbated by the dynamics of nuclear regulation which are not interrelated with the findings of surveys or research conducted by various institutions.

Alexander Agung, a lecturer in Nuclear Engineering UGM, complements this discussion with a more technical perspective on nuclear energy. Nuclear power plants were developed to meet the increasing demand for electricity, as well as to support industrialization. Countries such as the United States, Japan, and European countries do meet their electricity needs from nuclear plants.

“The existence of a regulatory body that specifically regulates and oversees the development and construction of the nuclear power plant ensures the safety of this nuclear power plant from the start, during the site selection survey to construction, even up to decommissioning” Alexander concluded.

However, in its development, it is also necessary to ensure that this regulatory body continues to work optimally so that the development of nuclear energy does not endanger the community and the surrounding environment.

Beyond 207 Gigawatts : Accelerating solar development in Indonesia

Seeing the need for an update for solar power technical potential in Indonesia, the Institute for Essential Services Reform (IESR) with technical support from the Global Environmental Institute (GEI) conducted a nationwide geographic information system-based (GIS-based) solar photovoltaic (PV) technical potential assessment in the country.

Technical potential estimates represent the achievable electricity generation potential (terawatt-hours), including its capacity potential (gigawatt-peak) and suitable land area (square kilometers), given the topographical (geographical) and land-use constraints as well as PV system performance. The technical potential is different from economic or market potential, as it does not consider projected costs and policy and regulatory limits (other than those related to land-use), and thus, do not represent the level of the generation that might actually be deployed, but rather an upper-boundary estimate of development potential. Using publicly available GIS data, this report covers both national- and provincial-level results of Indonesia’s spatial analysis and focuses on large-scale (utility-scale) ground-mounted solar PV applications.

The analysis of this report is the first step of a series of activities to assess potential solar PV projects in Indonesia and provides an overview of national solar power potential before zooming in to the potential regions. The estimation of the technical potential starts with first assessing the suitable areas and terrain for solar PV development. Then, by considering the solar resource potential in the areas and taking some technology-specific assumptions, the technical potential can be calculated. Several constraints to determine the suitable areas include certain terrain features (e.g., ground slope), protected areas, land-use restrictions, water bodies, and others.

Our findings show that Indonesia’s solar PV technical potential ranges between 16 to 95x larger compared to the current national estimates by the Ministry of Energy and Mineral Resources (MEMR), which is 207 GW (see Table 4).

As the assessment goes into provincial and cities/regencies level, the findings can be used to inform policymakers, PLN, business players, and other relevant stakeholders to accelerate solar development in Indonesia, starting by updating Indonesia’s solar potential figure and identifying potential solar projects across the country.

Here are some of the key recommendations that policymakers and PLN could do:

  1. The government could update their nationwide solar technical potential figure, to reflect the more detailed potential for solar energy development in Indonesia. The current assessment shows Indonesia’s solar potential is higher (16 to 96x) than the current official figure (207 GW) and it has the potential to supply Indonesia’s future energy demand.
  2. The municipal government and its respective PLN’s regional office could work together on identifying prospective locations in their jurisdictions. Case studies such as for Bali and Sumba could be entry points to more detailed planning. Assessment should include current and projection of electricity supply and demand in the area, grid study, financing needs, as well as related policies and incentives.
  3. Further technical assessments can be conducted, particularly to zoom in on specific locations at the cities/regencies level and even smaller, not only for utility/large-scale solar but also for floating solar and rooftop solar.

Coal as Stranded Assets: Potential Climate-related Transition Risk and Its Financial Impacts to Indonesia Banking Sector

An important issue to be discussed at the G20 Summit

Based on the Task Force on Climate-related Financial Disclosures (TCFD), transition risk is one of the financial risks that can arise from the process of adjusting to a low-carbon economy, both from policy/legal, technology, market, and reputation risks. One of the financial impacts of these risks is stranded assets, in which assets suffered devaluations and even became unusable. As a coal-producing country, this study can serve as a reminder for Indonesia which has the potential to lose if it does not consider the potential value of stranded assets in the future. Therefore, all parties, especially investors and financial institutions, must pay attention to this risk and be cautious in making investment decisions.

Coal contribution in the national energy mix is still high. With the power sector still being the largest domestic coal consumer, the government is reluctant to move away from coal-fired power plants (CFPPs). CFPPs are likely to become stranded assets due to more competitive investment costs from renewable energy power generation technology. With the existence of a merit order, the utilization of the CFPPs in the power system will decrease.

The government also looked at coal downstream industries as an attractive opportunity to increase the added value of coal. This industry is likely to engender stranded asset risks in the future since the economic viability of these projects is still in doubt with the need for various incentives from the government. The coal upstream/mining industry also has the potential to become stranded assets where the proven reserves must remain below the surface of the earth.

Stranded assets from the coal industries will directly have a negative impact on the financial sector which is involved in financing these projects. The global trend of moving away from coal financing projects is expected to increase the demand for domestic financing sources, including from the banking sector. This can further increase risks and impacts on the domestic financial system. Furthermore, if this risk is not properly managed, it could have a wider impact on financial stability through various transmission mechanisms.

In response to the emergence of climate-related risks, the Indonesian government has developed policies and regulations to foster sustainable finance. However, the implementation is still focused on efforts to take advantage of opportunities that arise. Meanwhile, efforts to mitigate risks are still low. Indonesia should begin to explore the lessons learned from the responses that have been made at the global level so as to improve the utilization of sustainable finance towards climate mitigation.

This study encourages recommendations for various actors to avoid the risk of coal project-stranded assets. The government should present clear signals in implementing climate policies so that economic actors can anticipate. The central bank and financial regulator should undertake thorough research such as assessment of climate-related financial risks, and disclose it by following the TCFD recommendations. Meanwhile, financial institutions/investors should manage investments and portfolios that are exposed to climate-related risks, as well as disclose this risk information to the public. This information is important to avoid incorrectly price or value assets, which are leading to a misallocation of capital.

The transition risks are not a single country issue, so it needs also to be mainstreamed through various means including through the international discussion forum. The momentum of the Indonesian presidency at the G20 Summit in 2022 and Indonesia’s Minister of Finance as co-chair of the Coalition of Finance Ministers for Climate Action in 2021-2023 can be used as a medium for discussion and raise the awareness of global countries towards this issue.