What is Solar Energy and How is it Developed in Indonesia?


Jakarta, December 19, 2022 – The role of energy is critical for increasing economic activity and national security. Thus, energy management, including supply, utilization, and exploitation, should be carried out fairly, sustainably, optimally, and in an integrated manner. Moreover, Indonesia has ratified the Paris Agreement and submitted its commitment to reduce greenhouse gas emissions with an unconditional target of 31.89% in 2030 with its capabilities and a conditional target (with international support) of 43.2%.

Based on the Deep Decarbonization of Indonesia’s Energy System study released by IESR, Indonesia can achieve the target of the Paris Agreement being carbon neutral by 2050. This decade is essential because Indonesia must reach peak emissions in the energy sector by 2030 and reinforce a mix of renewable energy in the electricity to 45%.

Developing the renewable energy sector is a mitigation action to reduce greenhouse gas emissions (GHG) and support sustainable energy. Hence, Indonesia continues to intensify the use of renewable energy. Solar energy is one of the renewable energy choices that continue to be encouraged for its use in Indonesia.

Quoted from the Sustainable Professional Development Module for Solar and Wind Energy Conversion, Ministry of Education and Culture, solar energy is obtained by converting solar energy through specific equipment into resources in other forms. Furthermore, French scientist Edmond Becquerel discovered that certain materials would give off electricity sparks when sunlight struck in 1839. Even though the sun is located about 149 million kilometresr from the earth, its rays can be used as a renewable energy source. In solar panels, the sunlight is converted into electrical energy using photovoltaic technology (photovoltaic/PV).

Based on the Indonesia Solar Energy Outlook 2023 report issued by IESR, solar power will play an essential role in deep decarbonization in Indonesia in 2060 or sooner in 2050; at least 88% of installed power capacity will come from solar power in 2050. Unfortunately, the use of solar energy in Indonesia has only reached 0.2 GWp of installed capacity and will generate less than 1% of total electricity generation by the end of 2021.

However, Indonesia’s solar energy progress can be seen from the lower price of solar PV electricity obtained through a power purchase agreement (PPA) entered into by PT PLN (Persero) with Independent Power Producers (IPP). The cost of PPA solar PV has fallen by around 78% from US$0.25/kWh to US$0.056/kWh between 2015 and 2022. For this reason, IESR predicts that at least with the addition of large-scale solar PV projects, decreasingsolar module prices, and improving the investment climate, solar PV investment per unit prices will continue to fall, approaching the world price trend. In addition, in terms of project pipeline development for large-scale solar PV, there are currently eight projects with a total capacity of 585 MWp (which have been tendered).

IETO 2023: Accelerating the Rapid Steps of the Energy Transition in Indonesia

Handriyanti Puspitarini, Peneliti Senior IESR

Jakarta, December 15, 2022The Institute for Essential Service Reform (IESR) launched the Indonesia Energy Transition Outlook (IETO) 2023 report. IETO 2023 is the 6th edition; previously, this report was titled Indonesia Clean Energy Outlook in 2017 but changed its name in 2020. Its transformation widens the analysis from initially focusing solely on clean energy developments to analyzing the energy system, including its funding system.

Deon Arinaldo, Manager of the Energy Transformation Program, IESR, stated that Indonesia’s energy transition had entered a new phase. It’s reflected in several published policies supporting adopting low-carbon and low-emission technologies, such as Presidential Decree 112/2022. In addition, the achievement of funding commitments for the energy transition Just Energy Transition Partnership (JETP) and infrastructure projects resulted from the G20 Summit. IESR also reviewed this topic in the IETO 2023 report.

“Funding is one of the keys to a successful energy transition in Indonesia. Furthermore, we also highlight the role of solar power in the energy transition and the development of electric vehicles,” he said.

Fabby Tumiwa, Executive Director of IESR, presented at the report’s launch and discussed the Indonesia Energy Transition Outlook (IETO) 2023 organized by IESR with the support of Bloomberg Philanthropies, explained that the earth’s temperature has increased by at least 1.1°C. Without intervention, the temperatures can reach 2.8°C. Furthermore, Fabby emphasized that a transition to renewable energy is crucial to limiting the increase in the earth’s temperature to more than 1.5°C.

“The IESR study shows that solar PV is coupled with a storage capacity of 50% and 100%, so renewable energy will be cheaper than operating a coal-fired power plant (CFPP) after 2032. That is, when we still maintain fossil power plants in the energy system, we will face an increase in much more expensive energy costs,” explained Fabby Tumiwa.

Fabby Tumiwa
The Executive Director of IESR, Fabby Tumiwa attended the launch and discussion of the Indonesia Energy Transition Outlook 2023

Fabby continued that enlarging the portion of renewable energy in Indonesia’s energy system is far more profitable than utilizing fossil energy or maintaining fossil energy with carbon capture technology, such as carbon capture and storage (CCS). However, 87% of the electricity consumed by Indonesia still comes from fossil energy and only 13% from renewable energy. For this reason, Fabby said three things needed to be done to encourage the energy transition.

“First, make the most of Indonesia’s renewable energy potential for the electricity, transportation, industrial and other sectors. Based on the latest ESDM study, Indonesia has far more than enough renewable energy potential to achieve 100% renewable energy to achieve net zero emissions (NZE). By increasing renewable energy, we also have to reduce coal power plants. Second, boost investment for the energy transition,” said Fabby.

The IESR study assesses that Indonesia will need USD 25-30 billion in investment from now until 2030 to support the achievement of net-zero emissions (NZE) by 2060 or sooner. A no-regrets policy is required to obtain investment, or once there is a policy, it cannot be revoked or terminated. Second, it is necessary to reform policies that hinder renewable energy. Thus, said Fabby, the government must review the domestic market obligation (DMO) for coal mining because this policy contradicts Indonesia’s efforts to promote renewable energy. Third, managing the energy transition process. The energy transition is a risky action because it will cause an increase in costs in the short term, and at the same time, we are still dependent on coal energy. Moreover, the energy transition process needs to be managed effectively so that the energy transition process will be smooth.

On the same occasion, the Secretary General of the Ministry of Energy and Mineral Resources (ESDM), Rida Mulyana, explained that the energy transition is one of the priority issues at the G20 Indonesia Presidency in 2022. It can be seen by the Bali Compact agreement, which can serve as a guide to achieving the NZE 2060 or faster. Furthermore, Indonesia already has a road map for the transition of new renewable energy (NRE) to net zero emission in 2060, created by the Ministry of Energy and Mineral Resources.

Sekretaris Jenderal Kementerian Energi dan Sumber Daya Mineral (ESDM), Rida Mulyana
Secretary General of the Energy and Mineral Resources (ESDM) Ministry, Rida Mulyana, attended the launch and discussion of the Indonesia Energy Transition Outlook 2023

“Indonesia plans to build massive solar PV starting in 2030, followed by onshore and offshore wind power plants starting in 2027, and geothermal will also be maximized. Indonesia will optimize hydroelectric power plants, we will send the electricity to load centers on other islands, and nuclear power plants will operate in 2039,” said Rida Mulyana.

Akbar Bagaskara, IESR Electricity System Researcher, stated the electricity system is low-hanging fruit to reach NZE. The electricity system contributes 250 MtCO2 emissions, or about 40% of emissions in the energy sector. Renewable energy status in the energy mix is ​​12.67%, while the 2025 target is 23%. Thus, said Akbar, Indonesia needs to reduce its fossil capacity and seek alternative energy sources to achieve this target.

“At least Indonesia can use renewable energy that has not been maximized, such as solar and wind. Then, the transmission network (grid) must also be made flexible. However, regulations are needed regarding guidelines for operational systems and negotiations for generating units,” said Akbar.

In line with Akbar, Raditya Yudha Wiranegara, IESR Senior Researcher, explained that what can be done to provide renewable energy penetration is to operate CFPP flexibly. Technically, this operation requires changes in the main components of the CFPP.

“Flexible operation will require flexibility regarding power purchase agreements and fuel supply contracts. According to the IEA, by making these contracts more ‘flexible,’ there will be savings of 5% of the total operating costs for a year, or the equivalent of USD 0.8 billion. Grid Code should also be made more detailed. This is also necessary so that operators have guidelines for operating regulations in a flexible manner,” stated Raditya.

Julius Christian, IESR Clean Fuel Specialist Researcher, explained that until now, fossil energy consumption in transportation had reached 87%, the industry has reached 56%, and buildings have reached 41%. In the transportation sector, using electric vehicles is a crucial strategy for a low-carbon transportation system because it has higher energy efficiency and uses renewable energy. Julius explained that up to now, 199 buildings had been certified as green buildings in Indonesia, even though large buildings should already have green building certification.

“We need to focus on four things to accelerate the energy transition; 1) regulations encourage people and industries to switch to carbon-efficient technologies; 2) the government needs to socialize more to increase public awareness to switch to low-carbon; 3) incentives and financing schemes are also worth considering; 4) preparing the supporting ecosystem,” said Julius.

On the other hand, Martha Jessica, IESR Social and Economic Researcher, said the importance of collaboration between the central government and local governments to promote the energy transition and achieve NZE. Currently, 71.05% of provinces in Indonesia have established Regional Energy General Plans (RUED), in which each region sets its energy mix targets.

“One province that has shown a commitment to the development of renewable energy is Central Java. Interestingly, there is a new commitment to green recovery this year. This is defined as using public budgets to target the site level, especially for renewable energy development. Approximately IDR 8.9 billion has been budgeted for this commitment. This development has succeeded in increasing the income of its users by 2-3 times, where farmers get an easier water source through solar water pumps,” said Martha.

Handriyanti Puspitarini, the IESR Senior Researcher, said several essential things in Indonesia’s energy transition status, namely, fossil energy use, had increased this year due to the increasingly vibrant economy. Still, this condition is sure to change due to the large amount of foreign assistance to reduce emissions, especially in the electricity sector. She considered that regulations supporting renewable energy penetration need to be available. She gave an example that limiting the capacity of a rooftop solar PV by 15% would reduce people’s interest in utilizing it and suppress community participation regarding the renewable energy mix on a national scale.

“Thus, changes are needed, such as increasing financial support for rooftop solar PV project developers, clarifying tariff schemes and licensing processes, and increasing developer access to capital with lower interest rates. Implementation of President Regulation112/2022 also needs to be observed next year. Some people also think that this is the time for Indonesia to do an energy transition and utilize other energy sources such as solar, water, and wind,” said Handriyanti.

Tempo | Lack of Energy Transition Investment

The Institute for Essential Services Reform (IESR) notes the energy transition investment is still falling short. During the 2017-2021 period, the average increase in investment realization on renewable energy was only US$ 1.62 billion. From January-September 2022, the completion was only US$ 1.35 billion, or 34 percent of the ambitious target of US$ 3.97 billion.

Read more on Tempo.

Racing in Indonesia’s Energy Transition Momentum

Jakarta, 15 December 2022 – Various global geopolitical events throughout 2022 have affected the increase in the price of fossil energy commodities. As a sector that influences and drives other sectors, the energy sector plays an important role in various aspects ranging from socio-economic to political. The global energy crisis in 2022 can be an opportunity for Indonesia to take advantage to accelerate the energy transition.

Indonesia’s energy market, which still relies heavily on subsidies, has made Indonesia feel less impacted by the global energy crisis due to soaring fossil commodity prices. However, it cannot be denied that the government’s fiscal capacity is no longer as large as the past 2-3 years considering that so many energy subsidies have been issued.

This was conveyed by Dannif Danusaputro, President Director of PT Pertamina New & Renewable Energy at the launch of the Indonesia Energy Transition Outlook 2023 report, by the Institute for Essential Services Reform (IESR), Thursday 15 December 2022.

“The increasingly narrow fiscal space will inevitably force the government to adopt unpopular policies and this can be captured as a momentum for accelerating renewable energy,” explained Dannif.

It is not only the global energy crisis that can become a momentum for accelerating renewable energy, but also the commitment to finance the energy transition in Indonesia. At the G20 Summit in November 2022, Indonesia received US$20 billion in energy transition funding through the Just Energy Transition Partnership (JETP) scheme. This fund is disbursed by the International Partners Group which consists of the G7 countries plus Denmark and Norway.

Suzanty Sitorus, Executive Director of Viriya ENB, said that JETP’s funds are not sufficient to finance the energy transition process in Indonesia, but that does not mean that its role is not important.

“What is more important is what (these funds) are intended for. Will the USD 20 billion lay the foundations for us to have a faster transition or not,” said Suzanty.

She added that it is important for Indonesia to learn from South Africa (a previous recipient of JETP funding), about an investment plan that suits the needs of the recipient country.

Harris, Director of Geothermal, Directorate General of Electricity at the Ministry of Energy and Mineral Resources, stated that since the G20 Summit, the interest of entrepreneurs to invest in renewable energy, especially geothermal, has increased. This is a good thing for pursuing renewable energy targets in RUPTL.

“I don’t think the current RUPTL needs to increase the target, but we have to make sure that the existing target of 51% renewable (around 20.9 GW) is actually achieved,” said Harris.

He added that it was important to ensure that the RUPTL target was achieved because several times the government did not achieve the RUPTL target.

In addition to adding the installed capacity of renewable energy, energy efficiency is also one of the strategies to achieve net-zero emission status, especially in the industrial sector. Octavianus Bramantya, a member of the Net Zero Hub daily work team, KADIN, explained that the industrial sector is quite aware of the need to transition to cleaner energy sources, but they are still waiting for regulatory certainty.

“There has been an explosion of net-zero pledges from companies. Companies are no longer competing through price and product quality, but because there is a carbon footprint assessment for exports, companies have started to be motivated to think about their carbon footprint,” said Bramantya.

Companies engaged in foreign markets have considered this. Local companies still see this carbon calculation as an obstacle, so it is a challenge for KADIN Net-Zero Hub to help restructure capex values and show that low carbon development is actually profitable.