Indonesia Energy Transition Homeworks

(Jakarta, 12 January 2023) – By definition, the energy transition is an effort to change the energy supply from previously a coal-dependent source to cleaner energy. This is the effort that the Indonesian government continues to pursue to achieve national energy security and autonomy. However, there are still many tasks that must be fulfilled by the Indonesian government.

Handriyanti Diah Puspitarini, Research Manager of the Institute for Essential Services Reform (IESR) in the Ruang Publik KBR talk show: Energy Transition in Indonesia, How Far We’ve Come organized by Berita KBR (10/01) explained that the IESR report on energy transition monitors public readiness through surveys and government readiness through research.

“Bottom-up side has supported the procurement of cleaner energy, but based on the transition readiness framework studied in the Indonesia Energy Transition Outlook 2023, the government (top-down) still has many things to improve, especially in terms of commitment and regulation,” Handriyanti said.

Meanwhile, on the same occasion, Raden Raditya Yudha Wiranegara, IESR Senior Researcher stated that from the fossil fuel side, the government has not yet paid attention to carbon emissions produced by mining, oil and gas industries.

“The government only monitors carbon dioxide (CO2) emissions, which only has a fraction of methane’s heat-trapping ability, around 29-30 times less. If there is a reduction in methane gas by only 30%, it will help abate the temperature rise by 0.5°C,” said Raditya.

Handriyanti and Raditya then discussed the upward trend of buying electric vehicles. The high price then led to the government’s proposal for subsidizing these vehicles, which is expected to stimulate public demand and lower the price of electric vehicles eventually.

However, according to them, there are several points of public resistance regarding the energy transition and the use of electric vehicles. The first is the view that fossil fuels are cheaper than renewable energy.These prices are the result of government intervention in the form of price capping, subsidies and compensation. This will surely burden the state budget when global oil prices rise. Second, there is range anxiety, which means the fear of electric vehicles inability to travel long distances.

“The government then has to work around this by increasing the number of charging stations at rest areas in-between journeys,” said Raditya.

Handriyanti and Raditya discuss the government’s progress and tasks in the matter of energy transition from a techno-economic, regulatory and funding perspective. They said that the price of renewable energy technology is becoming more affordable every year, for example, the price of solar modules is 70% cheaper than 7-10 years ago and is predicted to decrease even more. Supporting Regulations such as Presidential Regulation No. 112/2021 which stipulate ministers to make a roadmap for retiring coal-fired power plants (CFPP) needs to be supported. However, the implementation of this regulation still needs to be monitored and improved, especially considering that coal and fossil funding is currently still 10 times larger than renewable energy funding.

“The presence of international forums such as the G20 has encouraged Indonesia to make commitments towards energy transition and attract financing for those efforts. It is hoped that this financing can help Indonesia achieve its target of a renewable energy mix of 23% by 2025,” they concluded.

Power Wheeling Scheme Needs to be Kept in the New and Renewable Energy Bill

press release

Jakarta, 12 January 2023- Ministry of Energy and Mineral Resource (MEMR) decides to repeal the proposed power wheeling scheme from the issues inventory list (DIM) of the New and Renewable Energy Bill (NERE Bill) that was submitted to the House of Representatives (DPR) in December 2022. Institute for Essential Services Reform (IESR) regrets such decision and implores the government and the House of Representatives to include renewable power wheeling in the RUU EBET review.

The power wheeling scheme is the joint utilization of the electricity network. Through this scheme, independent power producers (IPP)  could sell electricity directly to the public using the transmission and distribution network owned by the State Electricity Company (PLN). IESR views that power wheeling could increase the demand and supply of renewable energy by the public, thus accelerating the growth of renewable energy and reducing PLN’s burden in providing renewable energy.

“The joint utilization of electricity network or power wheeling will provide easier access for consumers to get renewable energy supply with a competitive price. This could then foster the interest to develop existing renewable energy sources, and not depend on PLN as the off-taker. Renewable energy power wheeling could also increase the utilization rate of PLN’s energy network, providing a new source of income for the company,” said Fabby Tumiwa, the Executive Director of the Institute for Essential Services Reform.

Fabby views the power wheeling scheme as a consequence of Indonesia’s electricity system, with PLN monopolizing rights for transmission network control. Through the power wheeling scheme, electricity networks could be used communally and allow renewable energy Independent Power Producers (IPP) to sell directly to the consumers using transmission and distribution networks belonging to PLN. 

Fabby adds that the Ministry of Finance’s assessment of power oversupply as the main reason for repealing power wheeling is inaccurate. The oversupply is mostly dominated by fossil energy, hence hindering the clean energy mix target. Fabby also explained that the oversupply situation is predicted not to last long, and could end as soon as 2025, supported by the gradual increase of power demand post-pandemic.

“EBET Bill, if passed, will be implemented for a long time and could even surpass the current oversupply situation. The government needs to push for renewable energy adoption quickly, especially if they plan to retire coal power plants by 2030. In the future, power wheeling could be one of the revenue sources for PLN, by leasing electric networks,” added Fabby.

Furthermore, Deon Arinaldo, Program Manager of Energy Transformation IESR, explains that it’s too premature to worry about the state and PLN’s loss if power wheeling is implemented. Deon added that if the power wheeling scheme is back in the EBET Bill, the law would still need to be expounded, and the points could then be used to manage the potential risks to PLN and the state.

“For example, in setting power wheeling tariffs, the government can manage the price based on comprehensive studies so it can balance between renewable energy development targets with the risk of decreasing electricity demand. On the other side, PLN could still also take part in the power wheeling scheme through its sub-holding generation company,” said Deon.***