Background

The rapid decline in the cost of renewable energy technologies, particularly solar PV and wind, has prompted countries to commit to net-zero emissions. The global average power generation cost for solar PV and wind (onshore and offshore average) fell to 4.8 and 5.5 cents/kWh respectively, which is a reduction of more than 60% in the last decade. In 2021, the Indonesian government also submitted a long-term strategy (LTS) to the UNFCCC, with a more ambitious scenario of the NDC that expects GHG emission reductions after 2030 and reaching the NZE in 2060 or earlier. Furthermore, in the energy sector, the Indonesian Ministry of Energy and Mineral Resources introduced the Net Zero Emission Scenario in the Electricity Sector, which targets 87% renewable energy (RE) and 13% reduced fossil power generation (i.e. CCS coal and CCS Gas) with a total capacity of 672 GW in 2060¹.

Even though the Indonesian government’s commitment to climate change mitigation has been strengthened, the electricity system in Indonesia is practically still very dependent on coal-fired power plants (CFPP), which contribute around 67.5% of the share of the power generation mix in 2022². It is estimated that this will continue to increase in the next few years, given the approx. 13.8 GW of CFPP contracts are in progress³. Thankfully, a stronger commitment has been expressed by the government through Presidential Regulation 112/2022 on the Acceleration of Development of Renewable Energy for the Supply of Electricity, which establishes a new price ceiling mechanism for renewable energy, which has the potential to attract more investment and developer interest. Furthermore, the directive is the initial legal basis for CFPP’s early retirement and mandates the CFPP’s retirement roadmap. However, there are still aspects that are lacking, for example, an incentive scheme so that renewable energy can be more competitive.

Indonesia may be in the process of transitioning from fossil-fuel power generation to renewable energy. How the transition will impact power system costs is unclear, as it depends on the amount of renewable energy to be integrated, the type of technology, and the time of development. Comparative tools for examining how each technology competes with each other and projections can assist in increasing understanding of what a power system will cost in transition. Levelized Cost of Electricity (LCOE) is a common tool for doing such analysis. To compare different storage technologies to provide specific services to a power system, a similar Levelized Cost of Storage (LCOS) can also be used.

With those, the Institute for Essential Services Reform published a report and launched the LCOE and LCOS platforms which will provide information on data and projections of electricity costs across various technologies in Indonesia. These reports and research tools are accessible to the public to serve as reference data for everyone, in calculating and estimating future electricity costs.

¹ https://www.irena.org/publications/2022/Jul/Renewable-Power-Generation-Costs-in-2021

² https://iesr.or.id/pustaka/indonesia-energy-transition-outlook-ieto-2023

³ https://web.pln.co.id/statics/uploads/2021/10/ruptl-2021-2030.pdf

Objective

The objectives of launching this assessment report & tool are as follows:

• Launched the IESR report on Levelized cost of electrical updates for various power plants in
• To launch the IESR LCOE tool and showcase its capabilities to stakeholders
• To discuss the benefits of having an LCOE tool
• To discuss policy advocacy related to energy transition/renewable energy implementation that can be driven by evidence such as LCOE tools