Advancing Strategies for Increased JETP Funding

press release

Jakarta, August 29, 2023 – The comprehensive investment and policy plan (CIPP), which was initially scheduled for August 2023 to be the end of same year, is considered necessary by the Institute for Essential Services Reform (IESR) to refine the CIPP document to meet the agreed targets and formulate a robust cooperative effort for a just energy transition (Just Energy Transition Partnership/JETP), as well as opening more comprehensive public consultations.

The Executive Director of IESR, Fabby Tumiwa, stated that to reach the goals outlined in the JETP, which include reducing peak greenhouse gas emissions by up to 290 million metric tons of CO2 by 2030 and achieving a renewable energy mix of 34% by the same year, as well as attaining Net Zero Emissions (NZE) by 2050, a minimum of 150 billion is required.

One strategy involves decreasing the capacity of coal-fired power plants (CFPP) before 2030 through either natural or early retirements. IESR  has estimated that a gradual reduction of up to 8.6 GW in CFPP capacity is necessary until 2030. It is important to note that this figure does not account for any reductions in off-grid CFPP capacity outside the PLN’s jurisdiction.

“Until now, IPG and GFANZ’s interest in providing CFPP early retirement funding is shallow, even though a reduction in CFPP is needed to increase penetration of renewable energy,” said Fabby.

IESR estimated the early retirement costs at USD 4 billion, which is lower than the amount assessed by PLN previously. Fabby suggests that IPG should provide funding for the early retirement of CFPP due to its involvement in maintaining the credibility of JETP.

In addition, IESR believes that improving the CIPP document will clarify the funds needed for priority projects, such as constructing renewable energy pipelines. Based on the IESR study, Indonesia must invest USD 1.3 trillion to meet the Paris Agreement objective for the energy transition until 2050, which averages USD 30 billion to USD 40 billion per year. Until 2030, a minimum of USD 130 billion is necessary.

IESR believes that the allocation of the grant portion in the JETP scheme needs to be increased to support broad aspects of a just transition and the transformation of crucial actors so they can implement the ambitious CIPP soon. At least the portion of the grant required is around 10%-15% or USD 2 billion to USD 3 billion in the JETP scheme to execute the energy transition in Indonesia. IESR knows that increasing the grant allocation on the proposed scale requires intense cooperation and commitment from the Indonesian government and international partners in JETP. Through close collaboration, all parties involved can work together to meet this financial need and ensure the success of a sustainable energy transition in Indonesia.

“JETP needs to support the energy transition process in Indonesia, not just determine priority projects to achieve targets. Because JETP requires systemic changes, it requires increasing the capacity of key actors such as PLN and related ministries/agencies, grant funding to compile regulatory/policy changes, as well as supporting affected actors if JETP is implemented later, for example, workers in coal mines or the general public near the CFPP project,” explained Deon Arinaldo, Program Manager Energy Transformation, IESR.

IESR also emphasizes the importance of involving more comprehensive public consultations in the decision-making process related to JETP. Opening up opportunities for a wide range of stakeholders to provide input will ensure that the project accurately reflects community needs and aspirations. Increasing transparency and community involvement will enhance the legitimacy of JETP and lead to more enduring outcomes.

“The public, the primary beneficiary, should have the right to contribute to the CIPP document. Their participation will ensure that the aspects of a just transition, which is one of the spirits of JETP, are reflected accurately as they better understand the real conditions on the ground. The JETP secretariat only held one FGD session with the civil society community at the beginning of compiling this document. In the second leg of the document preparation process, it is hoped that the number of FGD sessions will be increased to more than once. Also, it is crucial to distribute this draft document in advance so that it can be studied before the FGD session,” said Raditya Wiranegara, Senior Analyst of IESR.

Indonesia Needs to Synergize Policy and Strategies to Accelerate Energy Transition

press release

Bali, August 29, 2023 –  Institute for Essential Services Reform (IESR) alongside the Energy Transition Policy Development Forum (ETP) hosted a discussion to bridge the gap between policy and practices in accelerating energy transition in Indonesia. This discussion was a side event at the ASEAN Energy Business Forum 2023, held on Friday (25/08).

Business representatives were from Quantum Power Asia, Suncable, PT TML Energy and the Indonesian Biofuel Producers Association. The policymakers included the Ministry of Investment/BKPM, Vice Ministry of Finance, Coordinating Minister of Maritime Affairs and Investments; The Regional Government of Bali  and Perusahaan Listrik Negara. 

Both businesses and policymakers representatives shared their challenges, expectations, plans, and collaborative strategies to make energy transition work in Indonesia. An underlying challenge faced with both stakeholders is financing. On one side, businesses face a lack of incentives while generating renewable energy projects and subsidies make it harder for renewables to compete with conventional energy sources. On the contrary, policymakers need investment to be able to generate projects. 

In its report titled “Indonesia Sustainable Finance Outlook (ISFO) 2023”, IESR observed that there are significant investment risks associated with renewable energy due to unattractive tariffs. The tariffs contribute to lower private investor confidence in renewable energy projects. Furthermore, the lack of transparency in the procurement process for renewable energy projects highlights the necessity for improving the investment environment and the bankability of renewable energy projects. This improvement would lead to increased confidence among private investors and greater trust from international funders.

Businesses are keen to support the development of renewable energy in Indonesia. However,regulations need to be settled first to shorten the negotiations process between government and private sectors. Furthermore, aligning the energy transition agenda between government bodies, harmonizing regional and national policies, and interconnectivity are the key points of the discussion between the two stakeholders.

Fabby Tumiwa, the Executive Director of Institute for Essential Services Reform, encourages the Indonesian government to learn from policies and best practices from other countries to accelerate energy transition. Although these said policies and strategies need to be adapted as “Indonesian-style” (the solutions should be based on national wisdom and situation) policies and practices to accommodate the complexity of the Indonesian energy sector.

“Indonesia needs an energy ecosystem to enable investment and partnerships. We need to be perceptive, we need innovations and a different approach from Perusahaan Listrik Negara (PLN) to boost energy transition. PLN needs to prepare for the ecosystem and it has to be supported by policies from the Ministry of Energy and Mineral Resources to foster public and private financing. Although there are different expectations from businesses and policymakers, we have to keep moving forward, despite our limitations,” stated Fabby.