Challenges Amidst in the Rise of Investment in Renewable Energy

Jakarta, 22 September 2021 – Electricity is projected to become the predominant energy resource in future energy systems due to electric vehicles and the electrification of the industrial sector. For this reason, it is essential to ensure that the energy source in the electrification of the sector comes from clean energy. However, the development of renewable energy in Indonesia still faces various challenges, both from a technical perspective, as well as from a regulatory, economic, social, and environmental perspective.

It was explained by a senior researcher of the Institute for Essential Services Reform (IESR), Handriyanti Diah Puspitarini on the third day of Indonesia Energy Transition Dialogue (IETD) 2021, Wednesday (22/09/2021). Yanti said that from the regulation, Indonesia does not have comprehensive policies in fully supporting the development of renewable energy.

“Until now, no comprehensive regulations are supporting fully renewable development related to the tariffs, incentives, subsidies, and risk reduction. It has been prepared but not yet launched,” said Yanti at the event organized by the Indonesia Clean Energy Forum (ICEF) and IESR

Moreover, analyzing the investment, Yanti explained other challenges, such as the lack of availability of funding from local financial institutions and the limited number of bankable renewable energy projects. She said that to overcome these challenges, firstly need clear regulatory support. On another hand, public awareness also needs to increase to support the potential of renewable energy.

Responding to the statement, Director General of New Renewable Energy, and Energy Conservation of Ministry Energy and Mineral Resources of Indonesia, Dadan Kusdiana conveyed that in Energy and Mineral Resources studies, it was explained that technical solutions can be solved as long as the new renewable energy in Indonesia is economical.

“Because we have the technology and resources to absorb emissions, we can maximize what we have to reduce emissions,” said Dadan.

Furthermore, Dadan also revealed that related to project funding, currently, many investors are already queuing up to invest in renewable energy. To make effective financing, in his opinion, the government still needs to prioritize the types of renewable energy that will be developed.

“In the National Electricity Supply Business Plan (RUPTL) (green-ed) that has been signed, we will give a wider focus to solar PV. Meanwhile, existing projects such as geothermal projects will continue to be expanded, as well as hydropower projects,” he explained.

In line with Dadan, CEO of Pertamina Power Indonesia, Dannif Danusaputro confirmed that many parties want to invest in new renewable energy (NRE) projects in Indonesia. It is because funding support from investors is increasingly limited to invest in fossil energy projects by extending the climate commitments of many countries in the world.

“The problem is they are looking for a project that is quite big, and we didn’t have too many bigger projects, let say above 50 MW. The bigger project needs to be developed to become more bankable,” said Dannif.

Ulrike Lehr, Head of Socio-Economic and Policy, IRENA, highlighted that the average world economic growth is predicted to be higher in 2050 if it boosts low-carbon economic growth. The social problems that may arise related to job losses in the fossil mining and fossil fuel industries can be easily compensated by the creation of jobs in other industries that will grow faster.

“There are sets of policies that are needed, we believe that there should be holistic policies set combining the deployment policies that are mainly oriented at deploying the (renewable) technology, integrating policy to integrate it into the grid and new energy system, structural change and just transition policy, also civil society is buying into the energy transition and is providing a high level of acceptance,” said Ulrike.

Coal-fired Power Plant (CFPP) Retirement Policy is Important to Accelerate Decarbonization of Energy System in Indonesia

Jakarta, 22 September 2021 – As one of the extensive contributors of carbon emissions in Indonesia at 32% over 20 years, decarbonization of the energy sector is vital to achieving net-zero emissions that are compatible with the Paris Agreement. The power generation sector, especially coal-fired power plants as the largest source of emissions in the energy sector, therefore it is essential to apply the right policies for coal-fired power plants.

Based on the analysis of the Institute for Essential Services Reform (IESR), there are two policies to reduce emissions from coal-fired power plants to comply with the Paris Agreement, which is moratorium and retirement of the coal-fired power plants from their usual lifespan 30 years to 20 years. This is stated by Deon Arinaldo as Program Manager of Energy Transformation, Institute for Essential Services Reform (IESR) in his presentation at the Indonesia Energy Transition Dialogue (IETD) 2021 organized by the Indonesia Clean Energy Forum (ICEF) and the Institute for Essential Services Reform (IESR).

Deon said that implementing the policy requires an optimal roadmap to minimize costs and impacts as low as possible. In his opinion, it can rely on data and in-depth analysis carried out for each unit of the coal-fired power plant (CFPP) in Indonesia.

“What needs to be analyzed is the age of the coal-fired power plant because it is related to the contract, the contract effectiveness, operational cost compared to the retirement cost, the readiness for planning the electricity system, and non-technical aspects such as employment, pollution & human resource capabilities,” explained Deon.

Moreover, in compiling a roadmap for coal-fired power plant’s retirement, Deon said many strategies can be considered, including refinancing, and investment in renewable energy, repurposing, and retrofitting the CFPP.

“Economically, renewable energy generation is much cheaper than coal-fired power plants. If this policy is not implemented immediately, the State Electricity Company (PLN) is projected to become the company with the second-largest asset with the possibility of stranded assets of up to USD 15 billion,” added Deon.

State Electricity Company (PLN), through Herry Nugraha, Head of the Center for Excellence, said that his party responded to the National Electricity Supply Business Plan (RUPTL) and prepared a decarbonization roadmap by conducting various studies and analyzing data on coal power plants in Indonesia.

“We routinely record how much capacity, when retirement, the performance of each power plant, reliability, production of CO2 of each unit is calculated annually for the evaluation,” explained Herry.

The Director of Electrical Engineering and Environment of the Ministry of Energy and Mineral Resources, Wanhar, explained that the Energy Transition Mechanism (ETM) has included a mechanism to replace the capacity of the coal-fired power plant with new renewable energy (NRE).

“Indeed, need a study to do it, in collaboration with the Asian Development Bank. Also, we have held discussions with stakeholders in the coal industry about this mechanism,” he said.

Architrandi Priambodo, Senior Energy Specialist, Asian Development Bank (ADB) admits that currently, his party is developing an ETM that ensures an equitable or just energy transition.

“In the end, it is the community that receives and enjoys the electricity, so we ensure that the retirement of coal-fired power plants does not harm workers, the environment and supports social aspects, including inclusiveness,” said Chitra.

Roy Torbert, principal of the Rocky Mountain Institute, added that the funds obtained from the refinancing process could be used to invest in renewable energy and help affected communities, such as workers, to transition to new jobs.

Leaving coal-fired power plants requires innovation in renewable energy technologies that will take them over. Muhamad Reza, Engineering Expert, Business Development & Energy System Business Line Manager, Tractebel Engineering Indonesia stated that when variable renewable energy (VRE) enters the system, not only does the load fluctuate but also slightly from the generation side.

“The anticipation is that we must look for technology that can meet those needs, and we need to ensure its technical and economic feasibility,” said Reza. He added that energy storage technology or batteries will hugely help these problems.

Regarding PLN’s readiness, Djoko Prasetijo, Deputy Chairperson of Conseil International des Grands Réseaux Électriques (CIGRE) Indonesia stated that PLN does not need to worry about dealing with the entry of VRE.

“PLN’s colleagues (State Electricity Company) are used to dealing with variability, for example, demand from morning to night is also different. If, for instance, there are thousands of MW (solar PV-ed) in Java, our grid is supposed to be able to handle 3,000 – 4,000 MW as long as Solar PV (PLTS) is spread geographically,” he concluded.

The IETD 2021 event is in collaboration with Clean, Affordable, and Secure Energy for Southeast Asia (CASE), a partnership project from several countries in Southeast Asia and is funded by the Federal Government of Germany. Further information can be accessed at

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