Green Recovery through Rooftop Solar Adoption

press release

Bali, August 9, 2022 – After the Covid-19 pandemic, economic growth in Indonesia is slowly recovering. Having contracted to minus 5.32% in the second quarter of 2020, Indonesia’s economic growth began to move positively at 5.02% in the fourth quarter of 2021. This momentum should be an impetus for the government to align the post-pandemic economic recovery with a sustainable green recovery, in line with long-term climate goals and contribute to the reduction of greenhouse gas emissions.

However, in developing a sustainable economy as part of the green recovery, we are still faced with harmonization in policies, including the policy of developing rooftop solar. Jadhie Judodiniar Ardajat (Main Expert Planner) of Bappenas said that the adoption of rooftop solar PV needs to be encouraged.

“Although the challenges, constraints and potential risks faced in the future are still relatively large, the development of solar rooftop is a chosen step, which is projected and believed to be one of the priorities and optimal steps in the framework of developing new renewable energy supply and is part of the national priority, within the framework of national energy transformation,” said Jadhie in his remarks at the “Sustainable Economic Recovery by Promoting Solar PV Development” webinar held in Bali by the Clean, Affordable and Secure Energy for Southeast Asia (CASE) project.

The Governor of Bali, I Wayan Koster stated that his party supports the adoption of rooftop solar by issuing various policy instruments, such as Circular Letter Number 5 of 2022 concerning the Utilization of Rooftop Solar PV.

“The community response has been very good. But when we want to increase it (rooftop PV adoption), there is a policy from PLN that limits the installation of rooftop solar to only 15 per cent,” he said.

While promising to discuss further with policymakers at the national level regarding the obstacles to installing rooftop PV, Koster said that the development of clean energy must be viewed as a whole, not partially.

“The use of clean energy will make the ecosystem better, including healthiness. If PLN feels a loss (on revenue), then it is better to change its business scheme,” he said.

Similarly, Fabby Tumiwa, Executive Director of IESR who is also the Chairperson of the Indonesian Solar Energy Association (AESI) encouraged PLN to review its policies to encourage massive rooftop PV penetration.

“The policy of limiting the capacity of rooftop PV installed in a building has made rooftop PV unattractive. In addition, this has made many EPCs in medium and small business scale who are members of the AESI lay off their employees due to the lack of demand to install rooftop solar,” he explained.

Daniel Kurniawan, Researcher Specialist in Photovoltaic Technology & Materials at the Institute for Essential Services Reform (IESR) and lead author of the CASE Indonesia report entitled Supporting National Economic Recovery through Power Sector Initiatives said that the Indonesian government has so far not prioritized green recovery in the context of national economic recovery post-pandemic. This can be seen from the allocation of the National Economic Recovery (PEN) budget which is still dominantly targeting the fossil energy sector which is the largest contributor to greenhouse gas emissions in Indonesia.

“Meanwhile, the budget allocation for this low-carbon development initiative is still very low, only under 1% or around Rp. 7.63 trillion of the 2021 PEN allocation of Rp. 747.7 trillion,” Daniel explained in his presentation.

Daniel identified several reasons why the government is still slow in aligning the economic recovery with the green recovery, including the assumption that the green recovery initiative is not urgent to be carried out due to its long-term nature, and the limited fiscal budget.

Responding to this, Daniel in the same report stated that the alignment of economic recovery with green recovery can be done by encouraging the adoption of rooftop PV. According to him, rooftop PV can be installed faster than utility-scale PV, plays an important role in decarbonizing the electricity sector, and creates more jobs.

“Installation of 2,000 units (9.1 MWp) of rooftop solar will create at least 270 direct jobs, 270 indirect jobs, and 170 new jobs,” he said.

For the adoption of rooftop PV, Daniel encouraged the government to, first, carry out general procurement for the installation of rooftop PV in government buildings. The cost of procuring rooftop solar can be reduced by using a long-term financing scheme that only pays for the operational costs of rooftop solar. Second, implementing a general procurement program for rooftop solar aimed at subsidized households or what IESR calls the Solar Archipelago (Surya Nusantara) program. The economic benefit is in the form of cutting electricity subsidies.

“The Solar Archipelago program will save electricity subsidies from the APBN amounting to Rp. 1.3 trillion per year or Rp. 32.5 trillion for 25 years of the economic life of rooftop PV. In addition, this program can also reduce greenhouse gas emissions by up to 1.05 million tCO2 per year for the installation of 1 GWp of rooftop solar,” he explained.

Third, encourage adoption or small scale by providing financial incentives in the form of subsidies or installation of free kWh meters or fiscal incentives such as tax exemptions and other steps that can attract people to install rooftop solar power plants.***

The video on demand of the “Sustainable Economic Recovery by Promoting Solar PV Development” webinar can be accessed at the following link: 

Energy Transition Development in the Southeast Asia Region

press release

Jakarta, 1 August 2022 – Achieving the renewable energy mix target of 23% in 2025 in the Southeast Asian region needs strong collaboration among the countries to support the sustainable energy transition and shift the fossil fuel investment into renewable energy.

It was confirmed by Fabby Tumiwa, Executive Director Institute for Essential Services Reform (IESR) on the webinar ‘The State of Southeast Asia Energy Transition’ (29/7). According to him, Southeast Asia is growing to become a region that is entitled the second largest powerful economy in Asia after China so the energy demand will continually increase in the future.

“Many countries in the Southeast Asia region still relied on fossil energy such as coal, gas, and oil. Meanwhile, Southeast Asia is a region that is vulnerable to the impact of the climate crisis. Collaborative measures of transition from fossil into renewable energy in this region may give significant contributions toward global efforts to achieve the Paris Agreement target,” he said.

Indonesia itself has a 23% target for renewable energy mix in 2025 and 31% in 2030. Nonetheless, according to Handriyanti Puspitarini, the IESR study found that if there was no policy change, then Indonesia would only achieve 15% of the renewable energy mix in 2025 and 23% in 2030.

“If we look at the trend from 2013-2021, the renewable energy market has increased though in slow progress. In the meantime, according to the IESR study, Indonesia has technical potential in renewable energy for more than 7.000 GW. Meanwhile, the utilization only reaches 11,2 GW,” Handriyanti explained. 

She examined the duration of permission matters and the complexity of the mechanism for procuring renewable energy projects in Indonesia makes investors reluctant to invest in Indonesia.

“Indonesia needs to increase its political aspect, policy and financial regulation to encourage the massive development of renewable energy, especially based on the results of IESR study, public awareness of the energy transition and climate change begin to increase,” she said.

On the other hand, in 2021, the commitment to increase the renewable energy mix in Malaysia had been conveyed by the Ministry of Energy and Mineral Resources Malaysia through Malaysia’s Energy Transition Plan until 2040.

“Malaysia increased the renewable energy mix target from 20% in 2025 to 31% in 2025 and 40% in 2030. Malaysia’s commitment would no longer establish a new CFPP to achieve carbon neutrality as soon as possible by 2050,” explained Anthony Tan, Executive Officer (Sustainability & Finance), All Party Parliamentary Group Malaysia on Sustainable Development Goals (APPGM-SDG) at the same occasion.

However, according to him, the Malaysian government also needs to encourage energy efficiency and holistic sustainable transportation planning.

“Malaysia needs a holistic national energy policy. Besides, Malaysia must develop or change National Automotive Policy to become a holistic National Transport Policy to reduce the utilization of fossil energy in the transport sector,” said Antony.

Vietnam’s commitment to achieving zero emission in 2050 was also conveyed by Nguyen Thi Ha, Sustainable Energy Program Manager at Green Innovation and Development Centre (GREENID). She explained that Vietnam was committed to ceasing the 7-8 GW CFPP operation to support decarbonization in the energy system by increasing the renewable energy mix on offshore wind turbines by 11,7 GW (9,7%) in 2030 and 30 GW onshore wind turbines (10,5) in 2045. The Solar Park itself will achieve 8,7 GW (7,2%) in 2030 and will increase by 20,6% in 2045.

To achieve zero emission, it will need significant investment in the energy sector, transportation, agriculture, and industry.

“According to the World Bank study, the required total financing for decarbonization is approximately USD 114 million in 2022-2040,” Thi Ha explained.

Vietnam has also planned a new strategy to develop an environmentally friendly transportation system.

“Even from 2025, Vietnam will commit to replace 100% of its buses with electric buses and equip it with supportive infrastructure for Vietnam’s electrification of the transportation system,” said Thi Ha.

Power plants in Vietnam are dominated by 57% of coal in 2020, along with a renewable energy mix of 21% in 2020.

Bert Dalusung, Energy Transition Advisor Institute for Climate and Sustainable Cities (ICSC) said that for the first time the Philippines has a clear plan for renewable energy development.

“In this clean energy scenario, the Philippines is targeting a 30% and 50% share of renewable energy in the power generation mix by 2030 and 2040,” said Bert.

Bert added that the Philippines government realized that renewable energy would be a key element in the climate change agenda. Thus, citing President Ferdinand Marcos’ statement, the government will examine all transmission and distribution systems to accommodate the development of renewable energy and lower energy costs for consumers and industry. ***

The Webinar “The State of Southeast Asia’s Energy Transition” is available on the IESR Indonesia YouTube channel.

Seize the Energy Transition Funding Opportunity

press release

Jakarta, 28 July 2022- Indonesia’s energy transition requires significant investment to develop renewable energy generation, clean fuels, power grids, and energy storage. However, Indonesia also has a huge opportunity to attract investment in the renewable energy sector while developing innovative financing instruments

G20 Seminar
One out of three panel sessions at the G20 seminar series that discuss sustainable financing opportunities for energy transition in Indonesia (27/07/2022). (Doc. Seminar Secretariat )

“Indonesia at least needs investment for the energy transition of around USD 1 trillion by 2060”, said Minister of Energy and Mineral Resources, Arifin Tasrif in his speech at the G20 seminar series entitled “Unlocking Innovative Financing Schemes and Islamic Finance to Accelerate a Just Energy Transition In Emerging Economies”

Based on a study by the Institute for Essential Services Reform (IESR), investment needs for decarbonization of the energy sector range from USD 20–25 billion per year between 2020 and 2030 and around USD 40–60 billion per year from 2030 to 2050. 

“Indonesia owns renewable energy potential and energy needs that will continuously grow. In many ways, Indonesia should become a main investment target. Unfortunately, inconsistency on policy, regulation and lack of integrated coordination across sectors makes investors perceive Indonesia as a high risk investment market,” explained Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR).

According to the IISD (International Institute for Sustainable Development) report in 2020, only 7.8% of total investment was allocated for renewable energy in Indonesia. The rest is still focusing on fossil fuel. Peter Wooders, Senior Director Energy of IISD emphasized that the G20 should set a clear direction towards clean energy – which gradually includes a move away from supporting fossil fuels. 

“While public finance is not enough on its own, its role is essential – and many mechanisms can help”, he added. 

Therefore, in this G20 Seminar Series, the discussion about Islamic financing was elevated such as waqf, sukuk and green bonds to enrich the perspective of energy transition financing potential. 

Islamic finance also plays an important role in funding various sustainable projects, including renewable energy. According to Indonesia Islamic Economic Masterplan 2019–2024, renewable energy has received some support through the Murabaha (the principle of buying and selling) scheme, as well as donations through zakat. 

Anna Skarbek, CEO Climateworks Centre stated that investment opportunities in climate transition and innovations in investment models across ASEAN region are profound. 

Yet, Kuki Soejachmoen, Executive Director of Indonesia Research Institute for Decarbonization (IRID) as well as the seminar’s moderator reminded that any financing mechanism must pay attention to inclusivity and just/ fairness for everyone. Energy transition impact will gradually meet the end of fossil fuel and its relevant supply chain business, early retirement, new job opportunity, new skill, new industry – hence, it must be addressed in a good manner. 

$200 million Grant Commitment from Australia to Indonesia  

In his opening remarks, Andrew Hudson, CEO Centre for Policy Development, specifically raised the recent grant commitment dialogue between President Joko Widodo and Prime Minister Anthony Albanese, as a real example of the importance of cross-border dialogue. 

“It is crucial that we engage in a dialogue that shares experiences of the action required for effective,scalable and impactful cross-border investment in climate transition by both public and private-sector investors. We need to use the ambition and momentum of the $200 million climate and infrastructure partnership announced between Australia and Indonesia at the recent leaders’ meeting”

On the road to G20 Summit, this seminar series was held by Energy Transition Working Group (ETWG) Indonesia G20 2022 and T20 Indonesia, in collaboration with the Centre For Policy Development (CPD) Australia, Climateworks Centre, International Institute for Sustainable Development (IISD), Indonesia Research Institute for Decarbonization (IRID), and the Institute for Essential Services Reform (IESR), supported by Asia Investor Group on Climate Change (AIGCC). 

Strengthening a Just Energy Transition with Sustainable Finance

press release

Jakarta, 28 July 2022– The energy transition is crucial and urgent to be implemented to reduce greenhouse gas (GHG) emissions and limit the earth’s temperature below 1.5 degrees Celsius by 2050, according to the Paris Agreement. Strengthening the just energy transition requires sustainable and innovative funding.

IESR - Wapres - Meneteri Keuangan - Menteri ESDM
Vice President Ma’ruf Amin took a picture with keynote speakers and representatives from each partner organization at the G20 seminar series hosted by the Ministry of Energy and Mineral Resources (Doc. Seminar Secretariat)

Minister of Energy and Mineral Resources, Arifin Tasrif in his speech at the G20 seminar series entitled “Unlocking Innovative Financing Schemes and Islamic Finance to Accelerate a Just Energy Transition In Emerging Economies” said Indonesia already has an energy transition roadmap to achieve carbon neutrality by 2060 or earlier.

“PLN through its national energy supply business plan (RUPTL) by 2021-2023, has also targeted the cleaner business plan by adding power plants generated from renewable energy up to 51.6%. Indonesia has planned to build an archipelago super grid to ramp up renewable energy development and maintain electrical stability and security,” said Arifin.

Arifin added that at least Indonesia needs investment for the energy transition of around USD 1 trillion by 2060.

“Therefore, Indonesia continues to create strengthened relations with cooperation with partner countries and international financial institutions to find innovative funding mechanisms,” he said.

Adding up, Yudo D. Priaadi, Chair of the Energy Transition Working Group (ETWG) G20 2022, said that innovative financing and Islamic (Islamic) financing have the potential to open opportunities to increase accessibility and inclusiveness toward sustainable financing.

“We must deploy an effective and proven platform as well as securing the investment,” he said.

Mahendra Siregar, Chairman of the Board of Commissioners of the Indonesia Financial Services Authority, stressed that besides using sustainable financing to fund the energy transition, it should also be aligned with poverty alleviation efforts. He stated that the energy transition plan with sustainable financing also needs to provide profit.

“OJK plans to balance the transition and green economy, social stability, and alleviate poverty. OJK convinces the banks and public credit companies to address climate change,” he explained on the same webinar.

Kuki Soejachmoen, Executive Director of the Indonesia Research Institute for Decarbonization (IRID), said that the energy transition does not only focus on the gradual transformation of the GHG emitting sectors, but also on new jobs, new industries, new skills, new investments and other opportunities to create a resilient society.

“The inclusiveness and fairness in the energy transition process are significant for society, the economy, industry and the environment,” said Kuki.

A just energy transition also needs to ensure access to quality energy for all, especially for the poor.

“The energy transition, one of which is by retiring coal-fired power plants, as is being reviewed by the Ministry of Energy and Mineral Resources of 9.2 GW. According to the IESR study, it requires about USD 4.3 billion. But it will provide long-term benefits for the people of Indonesia,” explained Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR).

He believed that managing energy transition with a people-centered approach will ensure the benefits and costs involved in the transformation of the energy system are distributed fairly and protect the most vulnerable in society.

Energy Transition Working Group (ETWG) Indonesia G20 2022 and T20 Indonesia, in collaboration with Australia’s Center for Policy Development (CPD), Climateworks Centre, International Institute for Sustainable Development (IISD), Indonesia Research Institute for Decarbonization (IRID), and the Institute for Essential Services Reform (IESR), and supported by the Asia Investor Group on Climate Change (AIGCC), organized the G20 seminar series entitled “Unlocking Innovative Financing Schemes and Islamic Finance to Accelerate a Just Energy Transition In Emerging Economies.”

First-ever just transition plan for coal retirement in Indonesia finds a feasible pathway for a 2045 phase-out

press release

An accelerated plant-by-plant retirement strategy makes solidifying a 2045 coal phase-out target possible. 

Internationally assisted phase-out and a coordinated national approach will support Indonesia’s 2050 net-zero goal and a 1.5ºC global pathway.

Jakarta, Indonesia; Maryland, United States, August 2, 2022—A new first-ever analysis released today by the Center for Global Sustainability (CGS) at the University of Maryland and the Institute for Essential Services Reform (IESR) shows Indonesia can accomplish an accelerated coal phase-out by 2045 with international financial support. The analysis finds that Indonesia must decrease coal power generation by 11% over the next eight years and then ramp up retirement by over 90% before 2040 to retire the country’s 72 coal-fired plants. 

“Our analysis finds that through a just coal transition, Indonesia can take critical actions now that will set the country up for both an accelerated retirement and stronger international climate commitments before COP27,” says Ryna Cui from the Center for Global Sustainability, University of Maryland. “Meanwhile, the financing needed to implement a just coal power phase-out is estimated at 27.5 billion US dollars, which requires strong domestic effort and international support.”

Though Indonesia has committed to ambitious goals of reaching net-zero by 2060 or earlier, and phasing out coal in the 2040s with international assistance, their continued reliance on coal for both domestic energy and foreign exports presents challenges. But with the structured plant-by-plant retirement schedule showcased in this report, Indonesia can head to COP27 this November and signal to the world its commitment by setting a strong and feasible target to phase out coal power by 2045. 

The framework developed in this paper starts with developing pathways for national 2050 net-zero emissions and then structuring clear plant-by-plant retirement pathways through an integrated modeling approach. The retirement schedule is constructed based on an individual plant’s technical, economic, and environmental performance. 

“This analysis offers a detailed plant-by-plant retirement timeline that is financially feasible based on our systematic assessment of the benefits and costs of implementing a just, rapid coal-to-clean energy transition,” says Fabby Tumiwa, Executive Director of IESR. “First, we find that Indonesia can rapidly phase out coal and meet domestic and international goals, but importantly we find that they can do so in a way that benefits the public health and economy.”  

An accelerated retirement will cost over $32 billion through 2050, but the positive benefits from avoided coal power subsidies and health impacts amount to $34.8 and $61.3 billion—2-4 times larger—than the costs of stranded assets, decommissioning of plants, employment transitions, and state coal revenue losses. 

“Indonesia has adopted climate targets in line with international commitments. Today’s paper presents a pathway to help reduce over 2,600 MtCO2 emissions through a coal phase-out,” says Nathan Hultman, Director, Center for Global Sustainability at the University of Maryland. “This contribution will reap significant benefits for not only the Indonesian people but the world; new approaches to international financial support will likely be a critical component to achieve the most rapid transition possible.”

“To realize a 2045 coal phase-out and its economic and societal benefits, the Indonesian government must adopt strong policies that build on political and social momentum towards a clean energy transition,” says Raditya Wiranegara, Senior Researcher, Institute for Essential Services Reform (IESR). “But it is not on Indonesia alone to implement such an accelerated plan. As we head into COP27 in Egypt, where all eyes will be on finance, adaptation, and loss and damages, the international finance community must step up to help deliver on these goals.” 

Responding to this study, Andriah Feby Misna, Director of Various of New and Renewable Energy, said that early retirement of coal phaseout has become the government’s concern towards net zero emissions 2060.

“According to government modeling, the coal phase out will still last until 2056, while encouraging early retirement of coal phaseout outside PLN could be in 2050. If we want to speed it up in 2045, more in-depth calculations are needed,” she says.

Feby said that the government is currently designing a roadmap for early retirement for coal-fired power plants. According to her, the IESR and CGS studies at the University of Maryland can be harmonized with studies currently being carried out by the government. She continues, if there is international assistance, it is hoped that the early retirement of the coal-fired power plants can be accelerated.

To hear from authors, global experts, and policymakers about this new analysis, tune into CGS and IESR’s webinars on Wednesday, August 10, 2022: Financing a Just Coal Phase-Out in Indonesia.

Download the report to learn more about a financing strategy for Indonesia’s coal phase-out.

The research behind this report was funded by Bloomberg Philanthropies. ***

Coal Funding Discontinued, Southeast Asian Countries Must Plan the Energy Transition Measures

press release

Jakarta, 1 August 2022 –Climate mitigation actions by encouraging the use of renewable energy have led countries that fund coal-fired power plants (CFPP) to shift their investment to renewable energy. This transformation will bring implications and challenges that need to be worked on by the countries that have been the destination for fossil energy investment in Southeast Asia.

China, Japan, and South Korea are the top three countries that fund fossil energy projects in Southeast Asia. As much as 123 GW CFPP operated outside China gained financial support or even Engineering, Procurement, and Construction (EPC) support from China. Those fossil energy projects were developed within the last two decades. In September 2021, President Xi pledged to support the developing countries that carry out an energy transition to renewable energy. He also said that China would no longer fund CFPP overseas. Ever since it was declared, as much as 12,8 GW of coal that had been planned to develop was canceled.

Moreover, several companies and domestic financial institutions in China also ended funding coal projects, such as the Bank of China (BOC) which gave up on funding coal mining and new CFPP overseas, except for the projects that had signed the loan agreement, or Tsingshan Holding Group, a major player in the industrial zone overseas, especially in the steel industry, announced that it would not establish new CFPP abroad.

Isabella Suarez, an analyst, at the Center for Research on Energy and Clean Air at the webinar ‘The State of Southeast Asia Energy Transition’ held by the Institute for Essential Services Reform (IESR), explained that for the first time, President Xi’s statement was formulated within China domestic policy. Besides, there is also a progressing narrative to develop together the green development implementation within Belt and Road Initiatives framework.

According to Isabella, what China needs to do to ensure the implementation of its promise is to determine the period and its achievement target. 

“On the other hand, the countries that have received fossil energy project funding need to begin the cancellation of CFPP development and infrastructure & network efficiency, and implement the green development within Belt and Road Initiatives,” said Isabella.

Aside from China and Japan, Dongjae Oh, Program Lead for Climate Finance Solutions for Our Climate (SFOC) explained that South Korea has also become the third largest country in the world that funds CFPP projects. As much as 87% (USD 8,6 million) of the coal downstream funding from South Korea was allocated to Southeast Asia (2011-2020).

In April 2022, the South Korean President declared to stop the new funding for CFPP projects overseas. However, according to Dongjae, South Korea still relied on other fossil energy such as oil and gas.

“If we compare the coal funding that only reaches USD 10 million, oil and gas funding can reach USD 127 million within 10 years,” said Dongjae.

Indonesia becomes one of the largest beneficiaries of oil and gas industries from South Korea. This investment will make the Southeast Asia region shift its energy into oil and gas.

Dongjae added that if it is the case, the Southeast Asia region will fail to achieve the Paris Agreement target as the gas emits a significant amount of greenhouse gas emissions. Besides, sustaining fossil energy using CCS will only increase the energy price.

“The South Korean government and Southeast Asia have to cooperate in intensifying the termination of coal operations and accelerate the transition into renewable energy. On the other side, South Korea must stop coal and gas funding or investment, considering renewable energy prices are getting cheaper,” Dongjae asserted.

Lisa Wijayani, Program Manager Green Economy IESR said that the funding ending in fossil energy from China and South Korea was a concrete step to supporting energy transition globally.

“Indonesia is supposed to benefit from this chance to expand renewable energy development. A clear policy of green taxonomy and green investments should be able to attract investors to shift their funding into the green sector such as renewable energy,” she said. ***

The Webinar “The State of Southeast Asia’s Energy Transition” is available on the IESR Indonesia YouTube channel.