Signed the Global Declaration to Phase Out Coal, Indonesia Needs to Prepare a Coal Transition Roadmap

Jakarta, 05 November 2021- At the 26th World Leaders Summit on Climate Change or COP-26, Indonesia signed the Global Coal to Clean Power Transition declaration. On the same day, the Minister of Energy and Mineral Resources, Arifin Tasrif, also stated that the government was reviewing the opportunity to early retire coal-fired power plants with a total capacity of 9.3 GW before 2030 (4/11/2021) which could be done with funding support reaching $48 billion.

Although Indonesia has decided to exclude the third point of the Global Coal to Clean Power Transition, which demands to cease the issuance of new permits and the construction of unabated coal-fired power plants, the Institute for Essential Services Reform (IESR) appreciates the steps taken by the Indonesian government, especially the leadership shown by the Minister of Energy and Mineral Resources at COP-26, to encourage a just energy transition through the development of renewable energy as widely as possible and to phase out coal-fired power plants as part of Indonesia’s action to prevent a global crisis.

“The openness of the Indonesian government to make an energy transition, through one of which is reducing the power plant in stages, should be appreciated. Post-Glasgow, the government, and the National Energy Council must accelerate the preparation of a comprehensive roadmap and strategy for the energy transition in Indonesia. Dependence on fossil energy will end if we do not rapidly increase the capacity of renewable energy. The policy focus is no longer coal as the first option, but renewable energy must be the main choice. So the energy transition needs to be carefully designed, with the priority of developing and utilizing renewable energy as much as possible and optimizing energy efficiency,” said Fabby Tumiwa, Executive Director of IESR.

Fabby emphasized that the decision to gradually stop fossil fuels, especially coal-fired power plants, is inevitable, not only from the perspective of the climate but also from the economic side of technology.

“Remarkably, with innovation and the price of renewable energy and storage technology is more competitive than fossil energy, the use of renewable energy to ensure the reliability of energy supply to achieve net-zero emission is becoming more feasible,” said Fabby.

The results of the IESR analysis from the study of Decarbonization of Energy Systems in Indonesia projected that renewable energy complemented with storage batteries will increase significantly by 2045. The share of batteries will reach 52% of the total storage system, followed by hydrogen at 37% and other storage systems around 11%. The share of electricity demand covered by energy storage increases significantly from around 2% in 2030 to 29% in 2045. The main users of battery storage will come from utility-scale systems, and to a lesser extent from commercial and industrial areas, and housing systems.

Concerning the early 9.3 GW of coal-fired power plants with details of 5.5 GW of early retirement without replacement to renewable energy power plants and 3.2 GW of early retirement with the replacement of renewable energy plants, Deon Arinaldo, Manager of the IESR Transformation Program, views this as a progressive step for decarbonization of energy system in Indonesian. However, according to IESR’s calculations, to implement the Paris Agreement targets and keep the global average temperature rise below 1.5C, there is around 10.5 GW of steam power plants that need to be retired before 2030.

“There is still a difference of 1.2 GW that needs to be retired and can be targeted for coal-fired power plants outside PLN’s business area,” said Deon.

Referring to the study of Indonesia’s Energy Decarbonization System, at least it requires investment in renewable energy and other clean energy of USD 20-25 billion per year until 2030 and increasing thereafter for the gradual financing of coal and the development of renewable energy for emission-free by 2050. However, phasing out coal-fired power plants will avoid the risk of financial loss from the stranded assets which reached USD 26 billion after 2040.

With large funding requirements for the gradual cessation of coal-fired power plants, Indonesia is working with ADB to launch the Energy Transition Mechanism (ETM) program, which is expected to raise around $3.5 billion to launch 2-3 coal-fired power plants per country.

“The existence of ETM, which will provide a financing platform, is expected to be able to provide a source of funds to retire the steam power plant and encourage the larger investment flows in renewable energy. This is crucial so that Indonesia can optimally plan the transformation of its energy system,” concluded Deon.***

COP26: A “Soundless” Recital by Jokowi

Many parties are waiting for President Joko Widodo’s speech at COP26. Jokowi is expected to declare more ambitious commitments to reduce emissions and deal with climate change as well as to outline concrete steps towards net-zero emissions. Indonesia’s strategic position as the leader of the G20 countries in 2022 should make Indonesia take one step ahead to lead efforts to reduce emissions for G20 member countries.

Unfortunately, in his speech at the High Level Segment for Heads of State and Government COP26 session, President Jokowi did not announce a higher climate ambition target nor a concrete commitment to support the Paris Agreement target to limit the increase in the average temperature of the earth below 1.5 degrees Celsius and achieve carbon neutral by the middle of the century. The IPCC AR6 report has stated clearly that we have less than a decade left to keep the earth’s temperature rise at 1.5 degrees Celsius. The opportunity to increase Indonesia’s climate ambitions is still open and of course the Government must take it and make the best use of it to save the earth from the damage caused by climate change.

Efforts to reduce emissions and address climate change must be seen as both a responsibility and an opportunity to transform Indonesia’s economic system from a carbon-intensive one to a more sustainable low-carbon economic system. According to the IESR Deep Decarbonization study, the transformation of the energy system will create 3.2 million new jobs in the renewable energy sector. An ambitious commitment by setting targets for reducing ambitions that are larger than the current NDC and building a comprehensive energy transition roadmap will send a good signal for investors to invest in Indonesia. This will encourage Indonesia’s economic strength to become more globally competitive.

Previously at the G20 Summit which took place on October 30-31 2021, the leaders of the G20 countries agreed to achieve net-zero emissions by the mid of this century. However, this commitment has not yet been accompanied by a target for the phase-out of coal-fired power plants. Holding a strategic role in the G20 leadership, Jokowi could actually take the opportunity to encourage G20 countries to stop operating coal-fired power plants and switch to renewable energy. Of course, in this case, Indonesia also needs to implement a policy of abandoning coal so that it can set an example for other G20 countries.

In addition, there is a difference between actions and facts on the ground in Jokowi’s speech at COP 26. He mentioned that he would build the largest PLTS in Southeast Asia and encourage the use of renewable energy to reduce emissions in the energy sector. However, until COP 26 took place, supportive policy support for the PV mini-grid ecosystem, such as the Revised Regulation of Ministerial Regulation 49/2018 concerning the Use of Rooftop Solar Power Generation Systems by Consumers of PT Perusahaan Listrik Negara (Persero) as well as Presidential Regulations concerning new and renewable energy, had not been officially issued.

More ambitious climate action is urgently needed now as the effects of climate change are becoming more frequent as La Nina returns. The Climate Transparency report 2021 states that changes in La Nina and El Nino patterns will have an impact on the onset and duration of the rainy season in Indonesia. This affects the agricultural sector such as rice production. The World Bank’s global risk analysis places Indonesia in the twelfth of 35 countries that face a relatively high risk of death from exposure to floods and extreme heat. Ranked as the fifth country with a population that lives in areas lower than the coastal zone, Indonesia is also vulnerable to sea-level rise.

Indonesia is able to make a significant contribution to tackling climate change and preventing worse impacts from the climate crisis. Utilizing vast forests as carbon sinks, having renewable energy potential reaching 7879.4 GW, and playing a strategic role in the G20 Indonesia should be able to achieve and exceed the current NDC target of reducing emissions by 29% on its own and up to 41% with international support from business as usual in 2030. By doing this, Indonesia will not only save the environment but also transform the economic system, as well as demonstrate leadership innovation to the members of the G20 countries.