10 IETD 2021’s Recommendations to Achieve Indonesia’s Decarbonization Target

Jakarta, 24 September 2021 – Boosting the efforts to achieve energy system decarbonization targets in Indonesia, the Institute for Essential Services Reform (IESR) and the Indonesia Clean Energy Forum (ICEF) summarized 10 recommendations to the government and stakeholders referring to the dynamics of discussions during the five days of Indonesia Energy Transition Dialogue (IETD) 2021.

First, establishing a bold policy in the manifest of Indonesia’s political support to encourage decarbonization and the development of low-carbon technologies.

“As we observe today that, several policies that are correlated with decarbonization efforts are not sufficient yet. If we observe at KEN and RUEN in 2050, the portion of fossil energy is still quite large, and renewable energy is low, therefore this target needs to be changed,” said Fabby Tumiwa, the Executive Director in stating the 10 recommendations at the IETD 2021.

Fabby said the energy decarbonization process would take at least the next three decades. Hence, decarbonization needs to be supported by long-term policy certainty which is consistent and unflinching.

Second, determining the policy that creates a level playing field between renewable energy and fossil. Because the economy of renewable energy can compete with fossil energy.

“Solar and wind energy can knock out fossil energy. However, there are still existing policies that shape fossil energy as cost-cheap, therefore we need the policy to eliminate the fossil energy subsidies,” said Fabby.

By removing subsidies on fossil energy or defining the right carbon price in boosting the renewable energy economy, it will accelerate the development of renewable energy.

Third, developing a national energy plan based on reducing carbon emissions and considering the potential for expanding existing low-carbon technologies. Fabby said there have been several plans for technology utilization. But the plan needs to consider the speed of innovation in each of the world’s low-carbon technologies.

“Moreover it is also necessary to consider how the price of this low-carbon technology will be until 2050. Therefore, energy policies, particularly those related to costs, must be considered in the long term. What is affordable today, due to market distortion, could be expensive in the future,” said Fabby.

Fourth, determining the optimal plan to retire coal-fired power plants (CFPP) based on data analysis on each CFPP unit. This analysis can be used to define several strategies and the suitable implementation time for each CFPP unit.

“Then we also have to think about how much capacity remains and we must supply it (with renewable energy) when the power plant retires,” said Fabby.

Strategies to overcome the issues are such as refinancing to accelerate the retirement period of the CFPP, retrofitting the power plant, and diverting funding and investment from thermal energy to renewable energy.

Fifth, increasing the bankability of renewable energy projects by improving the project scale and comprehensive regulatory support. The development of renewable energy on a large scale has been proven to drive highly competitive renewable energy prices.

Sixth, increasing the adoption of electric vehicles by establishing the electric vehicle ecosystem. Fabby continued that it needs combinations of several policies to accelerate the penetration of electric vehicles. For instance, stipulating disincentive usage of fossil fuels such as the prohibition of using fossil vehicles and the establishment of standards for fossil fuel efficiency.

Seventh, determining the role of clean fuels towards 2050 in the deep decarbonization of the transportation system. Electric vehicles will have been dominant in the sector of passenger vehicles.

“Yet the role of clean fuels also needs to be prepared to support the decarbonization of the transportation sector which is difficult to be replaced by electric vehicles,” said Fabby.

Eighth, Indonesia needs to provide integrated policy support from multiple parties. Furthermore, Indonesia needs collaboration from various parties to attract investment in renewable energy.

“In the short term, until 2025, efforts need to be made to improve the investment climate and encourage the deployment of renewable energy. Currently, there are many national and international funding sources ready to support it. However, Indonesia is now only waiting for the government’s commitment to renewable energy targets through government policies,” said Fabby.

Ninth, the government needs to develop a low-carbon industry as a national priority industry. Indonesia has identified its potential low-carbon industry. It should be included in the National Medium-Term Development Plan (RPJMN) and the National Industrial Development Master Plan (RIPIN). For example, the battery industry, the electric vehicle industry, and the clean fuel industry.

“Industrial development needs to be aligned with the domestic technology research and development plan. Moreover, we need to commercialize and scale up domestic technology projects to increase the demand for technology. And it needs to be prioritized to maximize the potential of sustainable natural resources,” explained Fabby.

“The low-carbon technology industries are solar panel manufacturing, battery manufacturing, and hydrogen production. Moreover, training and preparation of workers are needed to support the development of the industry from year to year,” added Fabby.

Tenth, the government needs to prepare local workers for future low-carbon industries by supporting domestic industries and maximize the positive socio-economic impact of the potential development of low-carbon technology industries in Indonesia.

The IETD 2021 event lasts for 5 days which includes 13 main sessions and several additional sessions. IETD 2021 involved more than 80 speakers and panelists international and national leading, as well as the participation of more than 1500 users from all over the world.

De-risking Instruments for Renewable Energy Funding

Jakarta, September 24, 2021 – The world is moving in accelerating the energy transition to clean energy to pursue the Paris Agreement target of preventing the earth’s average temperature from rising above 1.5 degrees Celsius. Renewable energy financing in Indonesia is increasingly wide open as the commitment of developed countries to assist the transition of renewable energy in developing countries. This funding requires the support of government policies to minimize the funding risks and increase investment interest in renewable energy.

It was said by Deni Gumilang as advisor to Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in the fifth day of the Indonesia Energy Transition Dialogue (IETD) 2021, Friday (24/09/2021).

Deni said that currently there are various kinds of de-risking instruments in funding renewable energy for Indonesia, including the provision of guarantees, green bonds, and concessional debt. However, in his opinion, the de-risking instruments need to be supported by policies and regulations to reduce the risk of renewable energy investment, such as by setting clear renewable energy targets.

“So far, there are still many differences in emission reduction targets within the government. If there is consistency in the target, the collaboration between all stakeholders will be easier to be implemented, ” added Deni.

Moreover, Deni explained that Indonesia needs to consider the technical support for integrated renewable energy development, create a licensing climate that supports small-scale projects, and increase the credibility of renewable energy projects to be bankable in obtaining funding.

In response to this, the President Director of PT SMI, Edwin Syahruzad, said that PT SMI has provided a de-risking project by providing technical support. This makes it easier for developers to access technology and funding a renewable energy project.

Member of the Indonesia Clean Energy Forum (ICEF), Faisal Basri said that renewable energy is needed to encourage Indonesia’s economic development. Because, if decarbonization is not immediately implemented, Indonesia is predicted to have a large energy deficit.

“If we don’t immediately decarbonize, then by 2040 we will have an energy deficit of USD 80 billion. Because we will import more energy than export. It happens because our needs (on energy) will grow higher. Therefore, we need a long-term plan of macroeconomics by more accelerated decarbonization,” said Faisal.

However, he thought that, in reality, the government’s policies have not supported renewable energy. As it is reflected in Indonesia’s State Budget, which still provides hundreds of trillions of subsidies for fossil energy.

Faisal believes that the government needs to put forward the right policies to support the research of renewable energy and ensure the development of the renewable energy industry, to ensure that Indonesia will be a player too, rather than just a consumer.

Supporting the statement of Faisal, Lisa Wijayani, Manager of the Green Economy Program, IESR revealed that the synergy of economic growth with energy transition is essential to provide positive benefits for human life.

“There are several opportunities that can be developed, such as through the development of electric vehicles, implementing energy efficiency, creating a green industry so it can generate many green jobs,” said Lisa.

Arunabha Ghosh, Founder, and CEO of the Council on Energy, Environment, and Water (CEEW) added the importance of aligning human resource development to meet with green jobs that will be created forward with the energy and economic transformation of the country.

“In India, we have a skill council for green jobs which is set up to improve manpower in renewable energy. Within the skills council, there are various programs to train tens of thousands of people from various backgrounds, they graduate from well-known universities, not have from top universities” he explained.