Tirto | Indonesia, Third Clause & Desire Not to Build New Coal-Fired Power Plants

The Executive Director of the Institute for Essential Services Reform (IESR) Fabby Tumiwa told Tirto in Glasgow, Scotland, Friday (11/5/2021), calling the plan to eliminate coal and the signing of this new statement a “big leap” for Indonesia. He also emphasized the need for public communication regarding the coal phase-out plan. He said, misinformation can lead to “wild” perceptions and opinions, which are counterproductive and undermine public trust in the government.

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IDX Channel | Trillions of Energy Subsidy Considered as Barrier to Transition to Renewable Energy

Fabby Tumiwa, Executive Director of IESR, said that ending fossil fuel subsidies will create a level playing field for renewable energy. Moreover, fossil energy subsidy funds will be much more beneficial if they are diverted to the most vulnerable communities, building education and health facilities, developing renewable energy, and accommodating the impact of the energy transition for workers in the affected fossil energy industry.

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Warta Ekonomi | IESR Says Fossil Energy Subsidy Could Linger Energy Transition

The government should review the benchmark DMO pricing policy for power generation and make plans to end this policy. To be in line with the Paris Agreement, coal power plant generation must peak in 2020 and discontinue the coal completely by 2037. According to an IESR study, the cost to transform Indonesia’s energy system requires USD 25 billion per year until 2030 and rises sharply thereafter to USD 60 trillion per year.

Read more at Warta Ekonomi

Fossil Energy Subsidies Hinder Energy Transition

press release

Jakarta, 12 November- Despite the commitment to step up climate action and achieve the Paris Agreement target of keeping the earth’s temperature below 1.5 degrees Celsius, the G20 countries, including Indonesia, are still providing significant fossil energy subsidies. The Institute for Essential Services Reform (IESR) views fossil energy subsidies as counterproductive to energy transitions and achieve decarbonization in the middle of this century.

At the early stage of the pandemic, the G20 countries disbursed at least USD 318.84 billion to support fossil energy. Meanwhile, according to Climate Transparency 2021 data, Indonesia has spent USD 8.6 billion on fossil fuel subsidies in 2019, 21.96% of which was for oil and 38.48% for electricity.

Indonesia had succeeded in reforming fuel and electricity subsidies in 2014-2017 but still allocated a fairly large fossil energy subsidy. Energy subsidies increased by 27% in the period 2017-2019.

“The provision of fossil energy subsidies not only hinders plans and efforts to cut greenhouse gas emissions and decarbonization but also results in inefficiency in energy use. It also creates loss due to untargeted subsidies, and makes renewable energy difficult to compete with,” said Fabby Tumiwa, IESR Executive Director.

Ending fossil fuel subsidies will create a level playing field for renewable energy. Moreover, in his opinion, fossil energy subsidy funds will be much more beneficial if they are diverted to the most vulnerable communities, building education and health facilities, developing renewable energy, and accommodating the impact of the energy transition for workers in the affected fossil energy industry. 

“Energy subsidy reform on the consumption side should not be carried out haphazardly so that the poor do not have access to quality energy at affordable prices. On the other hand, financial reforms need to be followed by collecting and applying the poor family databases and targeted subsidy distribution schemes,” explained Fabby. 

Fabby believes that the pricing policy for Domestic Market Obligation (DMO) coal and gas for PLN is a form of subsidy and has made the price of electricity from coal-fired power plants and gas-fired power plants not reflect the actual costs. This policy also makes PLN prioritize the use of coal-fired power plants over renewable energy, which is cheaper.

“The government should review the DMO price benchmark policy for power generation and make a plan to end this policy. This is in line with the government’s decision to not grant permits for the construction of new coal-fired power plants outside the 35 GW program and plans for early retirement of coal-fired power plans before 2030,” said Fabby.

Climate Transparency 2021 analysis shows that to achieve the Paris Agreement targets, all regions of the world must phase out coal-fired power plants between 2030 and 2040. By 2040, the share of renewable energy in power generation must be increased to at least 75%, and the share of unabated coal-fired power plants is reduced to zero. While in the National Energy Policy, Indonesia promised to reduce coal by 30% by 2025 and 25% by 2050. Meanwhile, to be in line with the Paris Agreement, electricity generation from coal must peak in 2020 and stop coal completely by 2037.

Based on IESR calculations in the Deep Decarbonization of Indonesia’s Energy System study, the cost to transform Indonesia’s energy system to achieve zero emissions in 2050 will reach USD 25 billion per year until 2030. It will escalate sharply thereafter to USD 60 trillion per year.

“Fossil energy subsidies increase the negative impact of GHG emissions as well as add the burden on the state due to economic losses and state financial expenditures to overcome disasters caused by climate change. These subsidies can be diverted to help accelerate the energy transition using renewable energy so that we can achieve the renewable energy mix target of 23% by 2025,” said Lisa Wijayani, Program Manager of the Green Economy, IESR.

At the G20 Declaration last October in Rome, the G20 countries agreed to extend their commitment to reducing inefficient fossil fuel subsidies. IESR views that Indonesia can use the opportunity of Indonesia’s leadership at the G20 in 2022 to encourage real action to exit the burden of financing fossil energy.

“The commitment of the G7 countries to provide climate finance of USD 100 billion by 2025 is still not enough. Therefore, G20 countries must contribute, one of which is by carrying out financial reforms towards renewable energy that supports a green economy. Indonesia as the leader of the G20 countries in 2022, can encourage G20 member countries to carry out financial reforms,” ​​said Lisa.

She said every financial policy that leads to support for fossil energy must receive attention and be strictly inventoried by the Global Stocktake (GST) as part of monitoring the climate action of the Paris Agreement. 

According to a report by the Independent Global Stocktake (iGST), a civil society consortium to support GST, the GST can offer a platform for countries to collaborate in reforming fossil fuel consumption subsidies.

“Information that is inventoried into the GST must also include social elements in it so that the objectives of climate finance in achieving economic growth and social inclusion can be achieved. This GST process must include organizations representing economic, environmental, energy, and social elements, especially gender issues and other vulnerable communities, to ensure that the just transition takes place,” said Lisa.


Showing Commitment, Indonesia is Ready for Early Retirement of Coal Power Plants

Throughout 2021, responding to the global demand for climate action to align with the Paris Agreement, Indonesia has updated several documents such as the NDC which targets carbon neutrality by 2060 or earlier and released the ‘green’ RUPTL which is claimed to provide more space for renewable energy. Recently, Indonesia stated that assessment about the opportunity to retire coal-fired power plants early will be conducted. Although it is not yet ambitious to comply with the Paris Agreement targets, Indonesia’s decision should be appreciated and its implementation carefully looked after.

Indonesian Minister of Energy and Mineral Resources, Arifin Tasrif, at the COP-26 Climate Change Summit, signed the Global Coal to Clean Power Statement declaration. The Minister of Energy and Mineral Resources approved 3 of the 4 points of the declaration, i.e (1) encouraging the development of renewable energy & energy efficiency; (2) Phasing-out coal in the 2040s; and (3) strengthening domestic and international efforts to support a just energy transition.

Arifin explained that Indonesia is currently conducting a simulation to retire PLTU of 9.2 GW before 2030. A total of 3.7 GW of the 9.2 GW of power plants will retire early and be replaced with renewable energy power plants. This progressive plan demands a comprehensive roadmap for the coal transition.

Met separately, Fabby Tumiwa, Executive Director of IESR emphasized that the transition to leaving coal in Indonesia needs to be carefully prepared.

According to him, a comprehensive coal transition roadmap needs to be prepared to ensure that the transition that occurs is a transition that takes into account the needs of all parties involved and affected by the abandonment of coal for energy supply, and ensures that everyone has access to reliable and affordable energy.

In the event “From Coal to Renewables: the Energy Transition in Emerging Markets” organized by Accenture in the COP-26 series in Glasgow, Fabby Tumiwa explained, as one of the largest coal producers in the world, 60% of Indonesia’s coal is destined for export. Another important thing to note is that 85% of Indonesia’s coal production is only concentrated in 4 provinces.

“Coal’s role in Indonesia is not only as income for the state, but also as basic income for coal-producing provinces. When there is a transition, and coal will slowly be abandoned, these areas need to be considered because otherwise they will be in danger of collapsing,” explained Fabby.

As a country that relies heavily on fossil energy and with a fairly complex situation, the government’s openness to decarbonization by 2060 or earlier is seen as a step forward and achievable by Fabby Tumiwa.

“86% of electricity in Indonesia is generated by coal-fired power plants. Making the transition to renewable energy in this situation is certainly not easy. But that doesn’t mean it’s impossible,” said Fabby.