Launching of Report and Discussion on Indonesia Energy Transition Outlook 2023: Tracking the Progress of Energy Transition in Indonesia

Background

In 2022, as the COVID-19 pandemic began to subside, the global economy began to return to normal. As a result of increased economic activity, energy demand has returned to growth to pre-pandemic levels. Several extraordinary events also occurred in 2022 that affected the energy commodity market, mainly the war conflict between Russia and Ukraine, which pushed up the prices of all commodities. Indonesia is also a country that feels the impact. The increase in the price of fossil energy commodities has affected the subsidy and compensation budget in 2022, which has increased up to three times and prompted the government to set an increase in fuel prices and basic electricity tariffs for several customer groups.

Indonesia as a country that has ratified the Paris Agreement through Law no 16/2016, has confirmed its position to achieve net zero emission in 2060 or earlier. Furthermore, as the G20 presidency this year, Indonesia has also determined the energy transition as one of the three focuses of the G20 discussion. After going through discussions and various meetings, Indonesia and several donor countries that are members of the International Partner Group agreed on a Just Energy Transition Partnership (JETP) which stated a funding commitment of up to 20 billion dollars in the next 3-5 years to support the energy transition in Indonesia, especially in the electricity sector. As a follow-up, this funding support needs to be put in the form of an investment plan and a policy change plan that needs to be prepared by the Indonesian government.

Apart from the electricity sector, Indonesia’s energy transition also needs to be encouraged and accelerated in various other energy sectors such as transportation and industry. Based on the IESR Deep decarbonization of the energy system study (2021), the electrification of transportation and industry is a key strategy while also encouraging energy efficiency. Several government programs that have been encouraged include setting targets for electric vehicles and their infrastructure as well as the electric motorbike conversion program. In the industrial sector itself, initiatives such as the Net Zero Hub, initiated by the Indonesian Chamber of Commerce and Industry (KADIN) show a similar movement from business and industry players to reduce greenhouse gas emissions and even reach net zero sooner than 2060.

These developments show that Indonesia’s energy transition is entering the take-off phase. The next question is, is the current energy transition process in line with the targets of climate crisis mitigation and sustainable development? If not, what options can Indonesia focus on in accelerating the energy transition soon?

The progress and development of the energy transition in Indonesia are specifically reviewed in one of the flagship IESR reports which are launched at the end of each year: Indonesia Energy Transition Outlook (IETO). The IETO, which has been published since 2017, previously entitled Indonesia Clean Energy Outlook (ICEO) aims to monitor the development and progress of the energy transition in Indonesia as a whole, as well as identify challenges and opportunities in the following year. This report includes an analysis and review of policies, developments in the status of technology, and the energy transition ecosystem.

Over the years, IESR has attempted to increase the scope and rigour of the IESR analysis in this report. The sixth edition of the IETO also collects various perspectives from stakeholders in the energy sector and curates them with in-depth studies to present a strategic analysis of how to transition energy and transform towards a low-carbon energy system in the country. The launch of this year’s IETO was also preceded by several special reports highlighting the energy transition process from the perspective of energy transition finance (Indonesia Sustainable Finance Outlook/ISFO) and also solar energy (Indonesia Solar Energy Outlook/ISEO). A follow-up report that will focus more on the development of electric vehicle implementation, the Indonesia Electric Vehicle Outlook/IEVO will complement this year’s IESR IETO report series.

Through the IETO, IESR intends to inform policymakers and all stakeholders in the energy sector regarding the effectiveness of policies and improvements needed to help accelerate the development and transition of clean energy in the country. By doing this, he hopes, Indonesia can ensure energy security, a competitive economy, and a transition to a sustainable energy system shortly.

IETO 2023 will be launched in a special meeting which is also intended to obtain views/perceptions from policymakers and actors on trends that will occur in the coming year in the energy transition. The discussion at this meeting will highlight the energy transition processes that are occurring in various energy sectors in Indonesia and will be followed by an analysis of the energy transition readiness framework in Indonesia’s electricity sector as well as various lessons learned in 2022 to overcome challenges in driving the energy transition in 2023.

Objective

The Indonesia Energy Transition Outlook (IETO) 2023 launch meeting and discussion were held with the aim of:

1. Inform and introduce the IESR Indonesia Energy Transition Outlook (IETO) flagship report.
2. Conduct a review and evaluation of the development of the energy transition (fossil energy, renewable energy and energy efficiency) in Indonesia during 2022 in the context of the impact of government policies and regulations issued on relevant stakeholders, as well as a 2023 review.
3. Review the evaluation and readiness of the energy transition (transition readiness framework) in the Indonesian electricity sector with policymakers and stakeholders
4. Provide a space for policy dialogue for stakeholders with policymakers and business actors as well as civil society organizations in the process of formulating and implementing a more sustainable energy transition policy.