Aligning the Electricity Supply to the Paris Agreement Pathway

Jakarta, 24 November 2022 – Electricity has become a primary need as well as an economic driver for everyone. The demand for electricity is predicted to continue to increase both from the industrial sector and from the residential sector. In order to meet this demand and reduce emissions in the energy sector, planning with greater use of renewable energy should be designed in the RUPTL (Electricity Supply Business Plan).

In the 2021-2030 RUPTL, PLN plans to increase renewable energy capacity by up to 51.6%. Unfortunately, the amount of this target is not enough to meet the target of the Paris Agreement, which is to limit emissions and global temperature rise at 1.5 degrees Celsius.

Akbar Bagaskara, IESR’s power system researcher, during the launching of the study report “Enabling High Share of Renewable Energy in Indonesia’s Power System by 2030” explained that as a country ranked in the top 10 largest emitters in the world, Indonesia has a responsibility to reduce its emissions systematically.

“Electrification in all sectors ranging from industry, transportation and other sectors as well as the maximum utilization of renewable energy is the main key to reducing Indonesia’s emissions and then pursuing the Paris Agreement target,” Akbar explained.

Akbar explained that the renewable energy capacity that can be added to the system reaches 129 GW consisting of 112.1 GW of solar energy, 9.2 GW of water energy, 5.2 GW of geothermal energy, 1.5 GW of wind energy, and biomass of 1 GW.

Akbar also added that this study was a follow-up of the “Deep Decarbonization of Indonesia’s Energy System” study launched by the IESR in 2021 which looked at the possibility of Indonesia’s energy system achieving net zero emission (NZE) status by using 100% renewable energy in 2050.

Kamia Handayani, PT PLN’s EVP Energy Transition and Sustainability, explained that the 2021-2030 RUPTL is indeed not suitable for pursuing the Paris Agreement target.

“RUPTL is indeed not fully aligned with the Paris agreement because there is still coal involved. We (PLN) have several scenarios to reach NZE, based on PLN’s NZE roadmap until 2060, CCS can be a technology that is utilized. Yet, we must see future technological developments to meet the NZE target,” said Kamia.

Elrika Hamdi, Energy Finance Analyst at IEEFA, added that in order to align with the Paris Agreement targets, there needs to be one agency that monitors the implementation and development of renewables.

“There needs to be an agency that ensures development targets and renewable procurement which, for example, is issued by the government in the electricity system so that curtailment can be anticipated,” said Elrika.

Ikhsan Asa’ad, Chairman of the Executive Board of PJCI, highlighted the importance of building a strong domestic renewable energy industry such as solar to meet ambitious renewable energy targets.

“Currently, the price of renewables is still relatively more expensive than PLN’s electricity, but the more massive the use, the more competitive the price is expected to be. Local industry must begin to be prepared to meet the increasing demand for renewable energy components in the country,” he emphasized.

Eko Adhi Setiyawan, Lecturer, University of Indonesia, said that there is a need for demand management to mobilize customers. In addition, it is necessary to translate the Paris Agreement terminology into more concrete targets.

The Potential Role of the Industry and Community Sectors in Accelerating a Just Energy Transition

Semarang, 10 November 2022 – The energy transition has become the focus of many parties lately. It’s not only the government that has the responsibility to provide clean and affordable energy for the entire community, the industrial sector is also starting to switch to clean energy through various efforts. For companies, today’s global product competitiveness is also determined by how the manufacturing process is carried out efficiently and by using sustainable energy sources. The collaborative action of various sectors in the use of renewable energy will support the acceleration of the energy transition on a national level.

To take a closer look at various initiatives from the industry and community sectors, the Central Java Provincial Energy and Mineral Resources Office in collaboration with the Institute for Essential Services Reform organized the “Jelajah Energi Terbarukan” activity on November 10-11 2022. This activity visits several destinations focused on industries and villages that utilize renewable energy potential. This is the second activity, after last June a similar activity was carried out with a focus on different destinations.

The journey started by visiting CV Jaya Setia Plastik, in Demak, to see how the children’s toy industry saves electricity by installing a 470 kWp on-grid rooftop solar PV.

PLTS Atap di CV Jaya Setia Plastik
PLTS Atap di CV Jaya Setia Plastik

“Currently, what is actually installed on our roof is 1,300 kWp, but we have not used the other 470 kWp connected to PLN because we are currently constrained by regulations that limit the installation of rooftop PLTS to a maximum of 15% of the total installed power,” Wahyu representative of CV Jaya Setia Plastik explained. 

Djarum Kretek Oasis, which is located in Kudus, Central Java, also experienced similar challenges. Having several types of green industry initiatives such as the use of biomass boilers, rooftop PLTS, water storage ponds equipped with wastewater treatment facilities, Djarum is still determined to continue to increase its renewable energy capacity.

“Our roof area can still accommodate more solar PV, but due to regulatory limitations we have not been able to add capacity,” said Suwarno, Deputy General Manager Engineering at PT Djarum.

The limitation of rooftop PV capacity has become a concern of various parties because it has become one of the obstacles for consumers, especially the industrial sector, to install or increase the capacity of their rooftop solar. Currently, the Ministry of Energy and Mineral Resources and PLN are in the process of revising the Minister of Energy and Mineral Resources’ decree no. 26/2021 which regulates the installation of rooftop PV for PLN consumers.

Apart from utilizing solar rooftop, Djarum Oasis has also designed a sustainability scheme for its factory comprehensively covering various aspects, one of which is by utilizing the pruning trees of ‘trembesi’ (Samanea saman) planted on a number of toll roads as part of its CSR, as wood chips for biomass boiler fuel.

The first day’s journey continues towards the waste-to-energy plant Putri Cempo, which is in the Surakarta area. This plant has signed a Power Purchase Agreement (PPA) with PLN and will be on COD at the end of 2022. Elan Suherlan, Director of PT SCMP (Solo Metro Citra Plasma) explained, Putri Cempo waste-to-energy plant exists to overcome the waste problem in Surakarta city which can no longer be accommodated by the Waste Processing Site. PT SMCP, which won the tender for the plant construction, started its construction in 2021.

“Later Putri Cempo waste-to-energy plant will produce 5 MW of electricity and will be distributed to PLN,” said Elan.

What needs to be observed is a clear calculation of the greenhouse gas emissions resulting from this waste-to-energy plant.

The first day of “Jelajah Energi” was closed by visiting Krendowahono Village, which has utilized biogenic shallow gas for 30 households. Biogenic gas is produced from organic compounds such as plants and grasses that decompose with the help of bacteria. Because it comes from residues of organic compounds, biogenic gasses are generally found in shallow soil layers. Since its amount is relatively small and dispersed, biogenic gas must be compressed (increased pressure) so that it is easy to flow and use.

Several villages in Central Java have quite a lot of potential for biogenic gas, including Gabus Village, in Ngrampal District, Sragen, Rajek Village, in Grobogan, Bantar, and Pegundungan Villages in Banjarnegara, which can be used as an alternative energy source for cooking. The biogenic gas utilization installation is also relatively low and can be used communally.

Solihin, head of RT 6, Krendowahono Village, explained that the discovery of swamp gas started with residents who were going to make a well for a water source but when water was found at a certain depth, the water could actually catch fire.

“After we reported it and a team came to check it, turned out that this gas can be used for households,” he said.

Mrs. Uni, one of the beneficiaries of the swamp gas, admitted that by using the swamp gas she could save on cooking fuel quite significantly.

“Usually in a month I can use 4 of 3 kg of LPG gas, now it’s only 1,” she said while showing her kitchen. Uni admits that she still uses LPG gas as a fuel reserve for cooking because the stove from swamp gas only has 1 burner.

Currently the local communities are designing an operational system for the swamp gas network, starting from the operating hours of the machine, the amount of contributions, and maintenance costs.

ISEO 2023 Launch: Indonesia Needs Clear Targets and Effective Implementation to Develop Solar Energy

Jakarta, 27 October 2022 – The Institute for Essential Services Reform (IESR) launched the Indonesia Solar Energy Outlook 2023 report. This report was originally part of the Indonesia Energy Transition Outlook (IETO) which has been routinely published every year since 2018. Starting this year, the solar energy section is made in a separate report to provide a more in-depth report on the development of solar energy in Indonesia and the supporting ecosystems that solar energy needs to grow in Indonesia.

Fabby Tumiwa, Executive Director of IESR, in his remarks at the Shine Bright: Advancing G20 Solar Leadership event organized by IESR with the support of Bloomberg Philanthropies, and in collaboration with the International Solar Alliance, and the Indonesian Solar Energy Association, stated that solar energy prices remain competitive despite the existence of increase in the price of raw materials for the manufacture of solar panels. Fabby also emphasized the importance of developing the solar industry for both Indonesia and all G20 countries which are in the spotlight in efforts to reduce global emissions.

“Developing cooperation in solar manufacturing among G20 countries will secure the supply of solar module and cell production, balance systems to meet future demand, and reduce product monopolies.”

On the same occasion, the Minister of Energy and Mineral Resources, Arifin Tasrif, emphasized the need for support from the industry and local solar module manufacturers to meet the requirements for the Local Content Requirement (LCR) considering that Indonesia has mineral materials to make solar modules and batteries.

“Easy access to financing, incentives, and other financing facilities is very important to provide the cost of a feasibility study and increase investment in renewable energy, one of which is solar,” said Arifin.

Ajay Mathur, Director General of the International Solar Alliance, said that to make solar energy the energy of choice, three things that must be taken as strategic steps. First, providing the latest information, analysis, advocacy, and establishing relationships with various parties. Second, providing adequate resources so that solar energy investments ‘flow’ is important because investors will assess and weigh various situations that can affect the return on their investment capital.

“ISA approved the creation of a solar energy financing facility that provides risk capital guarantees,” explained Ajay.

Ajay added, the third step, it is important to build the capacity and capability of various parties who handle the development of solar energy such as policymakers, operators, and regulators.

Daniel Kurniawan, the lead author of the Indonesia Solar Energy Outlook 2023 report, presented some findings from this report. One of them is that although solar energy is getting more and more attention until Q3 2022 only 0.2 GWp of solar has been built.

“Based on the 2021-2030 RUPTL, PLN plans to add 3.9 GW of solar energy in 2025, of which 2.45 GW will be procured under the IPP scheme and 1.45 GW will be auctioned directly by PLN. However, until Q3 2022 there are only eight IPP projects with a capacity of 585 MWp,” explained Daniel.

Presidential Decree number 112/2022 which was issued in September 2022 is expected to provide fresh air for the energy transition in Indonesia, at least with regulations on renewable energy prices and instructions to accelerate the termination of coal-fired power plants.

To encourage the acceleration of the use of solar energy, the ISEO 2023 report recommends some steps, including PLN which can arrange a schedule for renewable energy auctions, especially solar for 2023. Previously, the government had to set ambitious and binding targets for renewable energy in certain years, for example 30% in 2025-2030, 90% in 2040, and 100% in 2050. With a target like this PLN must make room for solar energy in the PLN network.

“The IEA analysis shows that the Java-Bali and Sumatra systems can accommodate 10% of solar energy from their total capacity with flexible PLTU operations,” explained Daniel.

Although the system is technically capable of handling solar energy variability, the main challenge in realizing greater solar penetration is contractual inflexibility (particularly due to the take-or-pay clause in the coal plants power purchase agreement with the IPP as well as the primary energy supply contract for gas).

Daniel also added, considering the readiness of the domestic solar manufacturing industry, the percentage of Local Content Requirement (LCR) needs to be adjusted for a limited time, for example until 2025. While preparing the domestic manufacturing industry for decarbonization.

Finally, ISEO 2023 also recommends that PLN review the policy on limiting the installation of rooftop solar PV.

Henriette Faergemann, Environment, Climate Action EU Delegates to Indonesia and Brunei Darussalam, stated that it is important to create an ambitious and consistent energy transition policy to provide a strong signal to investors and financial institutions so that they are interested in participating in financing the energy transition.

“There is good progress for Indonesia in formulating its policies, but there are still many things that need to be done and improved if Indonesia wants this (energy transition) to happen quickly,” Henriette explained.

Joshua Wyclife, Chief of Operations International Solar Alliance, agrees that structural change is needed and this change starts with policy. Joshua also stated that this ISEO report is one way to increase awareness for various parties about the current situation of solar energy development in Indonesia.

“One way to maximize solar potential in Indonesia is to increase the level from awareness to advocacy, by various parties through various ways such as workshops, facilitating training programs with existing resources,” said Joshua.

Meanwhile, Rahmat Mardiana, Director of Electricity, Telecommunications, and Information at the National Planning Agency (Bappenas), stated that this report would be studied further considering that Bappenas is currently preparing national development planning documents such as the RPJP and RPJM, one of which is about the energy transition strategy.

“With our commitment to achieve the RUEN, Paris Agreement, and NZE targets, of course we must provide reliable electricity at affordable prices, and gradually fossil power plants will be replaced by renewable energy,” explained Rahmat.

Dewanto, Vice President of Various Energy PLN, said that PLN continues to support the development of renewable energy.

“The Business Plan (RUPTL) is a tangible manifestation of PLN’s support for new and renewable energy. According to the RUPTL, until early 2023 PLN will auction almost 1 GW of renewable projects,” Dewanto said.

The Launching of “Indonesia Sustainable Finance Outlook 2023”

Jakarta, October 17, 2022 – Institute for Essential Services Reform (IESR) launched its latest flagship report titled Indonesia Sustainable Finance Outlook (ISFO) 2023. This report is part of the Indonesia Energy Transition Outlook (IETO) which will be launched in December 2022. ISFO 2023 specifically discusses the development of energy transition financing in Indonesia. In his opening remarks, IESR Executive Director, Fabby Tumiwa stated that Indonesia needs massive and drastic transformation steps to ensure that we are in line with the Paris Agreement target, which is to limit the earth’s temperature to 1.5 degrees.

“In 2030 we have to cut 45% of emissions at 2010 level. For that, massive and drastic transformation efforts must be made. Especially by the G20 countries which are responsible for 85% of the world’s total GHG emissions. Indonesia is ranked 7th as an emitting country originating from the forest and land sector, and energy,” explained Fabby.

A study by IESR and the University of Maryland shows that in order to comply with the 1.5-degree temperature increase limit, the entire capacity of PLTU in Indonesia, totaling 44 GW, must be terminated by 2045. In the period 2022 – 2030, 9.2 GW of PLTU must be retired. The remaining capacity will be phased out until 2045.

IESR estimates the cost to close 9.2 GW of the coal-fired power plant during 2022-2030 at $4.6 billion. Early retirement of all coal-fired power plants in 2045 with an average age of 20 years requires $28 billion, this cost for stranded asset compensation and decommissioning costs.

Farah Vianda, IESR’s Green Economy Program Officer and one of the authors of ISFO 2023 explained that the financing situation for the energy transition in Indonesia is still very low.

“We still lack funding to achieve our renewable energy targets by 2025, to halt coal operations, and to mitigate transition risks,” he said.

Farah added that technically the limited availability of public funding (APBN) and the existence of government policies that support the use of fossil energy sources make financial and investment mobilization for the energy transition quite difficult, in terms of financial institutions themselves there are still few policies that support financial institutions to support transition financing energy.

Ichsan Hafiz Loeksmanto, Lead Author of ISFO 2023, highlighted one of the sustainable financing instruments, namely the carbon tax. According to Ichsan, although he has planned to implement a carbon tax, and a cap & trade mechanism on 92 coal-fired power plants in 2022, the carbon tax revenue is not earmarked. This means that the use of carbon tax revenues has not been devoted to financing climate change mitigation and adaptation efforts.

“The government needs to ensure the allocation of carbon tax revenues for climate mitigation & adaptation, and social safety nets. In addition, there is also a need for public transparency regarding payment of carbon taxes and carbon transactions,” explained Ichsan.

Fransiska Oei, Head of Legal & Regulatory Study Development at Perbanas, said that local financial institutions need at least two supports. First, for financing risk management and capacity building support for risk analysis for renewable energy projects.

“The bank’s ability to analyze the feasibility of the renewable energy project is still lacking, we are trying to work with other organizations (ex: USAID) to understand the risks and their mitigation, besides that maybe we also need regulatory support to ease the prudential banking regulation for this renewable project,” said Fransiska.

Lutfyana Larasati, Senior Analyst of Climate Policy Initiatives, stated that in the future there should be more eligible projects to be included in green bonds or green sukuk. PBI 24 of 2022 has provided greater space for banks and financial institutions to contribute to green financing, especially in projects funded by green bonds and green sukuk.

“We need to synchronize the indicator criteria for the green taxonomy so that there are more (green) projects that are eligible to receive public funding, either through green bonds or green sukuk,” said Lutfyana.

Radian Nurcahyo, Assistant Deputy for Maritime Law and Agreements, Ministry of Maritime Affairs and Investment emphasized that energy is the driving force of the economy. Therefore, the investment for this energy transition must continue to be mobilized.

“The Ministry of Finance has issued blended finance schemes such as the energy transition mechanism and country platform for funding sources for phasing down coal power plants, the SDG Indonesia one platform as green energy development to achieve NZE 2060,” explained Radian.

Youth Voice for Energy Transition

Energy transition is becoming an increasingly popular word in 2022. This is a good sign to spread the issue of energy transition to more and more people. We are currently living in a time that requires fast action to deal with the climate crisis that is already happening right in front of our eyes. The energy transition is a systematic solution to reduce greenhouse gas (GHG) emissions which are the cause of the increase in the earth’s temperature, causing the climate crisis.

Various groups of scientists such as the Intergovernmental Panel on Climate Change (IPCC) have warned that our time to contain the rate of increase in Earth’s temperature is getting shorter. Currently the earth’s temperature has increased by 1.1 degrees Celsius from pre-industrial times, and the whole world is trying to contain the rate of increase in the earth’s temperature no more than 1.5 degrees.

To achieve this goal, by 2030 we must cut 45% of global GHG emissions. As one of the world’s largest emitter, Indonesia is responsible to reduce emissions, especially in the energy and land use sectors.

From the energy sector, to reduce GHG emissions and in line with the 1.5-degree goal, Indonesia must retire 9.2 GW of coal plants by 2030 and gradually retire all coal capacity by 2045. The decrease in the number of coal capacity must also be accompanied by an increase in renewable energy generation massively as well as improving the quality of transmission and distribution networks.

Fabby Tumiwa, Executive Director of IESR, in the Young Voices forum organized by the Foreign Policy Community of Indonesia (FPCI) stated that if Indonesia continues to develop fossil energy, emissions from the energy sector will continue to increase.

“If we continue to develop fossil energy, our emissions will increase by three times. To avoid this, the coal fleet must be retired, and renewable energy must be added,” explained Fabby.

Kuki Soejachmoen, Co-Founder and Executive Director of the Indonesia Research Institute for Decarbonization (IRID) highlighted the inconsistent energy transition policies at various levels.

“There are some policies that do not support each other. For example, in international forums we are committed to transition, but there are no supporting policies and enabling environment. Thus, the commitment cannot be carried out,” explained Kuki.

Kuki also added that Indonesia is in a period of development which means that the demand for energy is predicted to continue to rise, if energy development is still based on fossil fuels, of course this will make Indonesia’s emissions continue to rise.

Melissa Kowara, activist for Extinction Rebellion Indonesia, assessed that, although the term energy transition has become increasingly popular, the policy is still not visible.

“Although the Indonesian government and countries in the world have made the energy transition a priority issue, in practice they have not realized the energy transition and some even tend to be ‘misguided’, such as the plan to use CCS/CCUS for coal power plants,” said Melissa.

Responding to this, Fabby Tumiwa said that public encouragement is indeed needed for policy reform for the energy transition.

“Currently there are several policy changes, which if implemented properly can help us carry out the energy transition. Here, one of the roles of the public can be to monitor how the government implements these rules and also to remind them when there is negligence,” concluded Fabby.

Presidential Decree No. 112 of 2022 concerning Renewable Energy Must Be Accompanied by Large-Scale Procurement by PLN

“According to him, if the provisions of this Presidential Regulation are implemented with large-scale and periodic procurement by PLN, it is hoped that investors’ interest in investing in ET plants will increase.

“In 2-3 years, renewable energy can grow rapidly, especially if it is accompanied by the termination of the operation of the old PLTU before 2030,” said Fabby Tumiwa.

Read more on Warta Ekonomi.

Learning from the US How to Seize the Climate Opportunity

Jakarta, 13 September 2022 – To combat the climate crisis, our action today will determine the economic, and sustainability of mankind in the long run. The IPCC report has already told us that the remaining time we have to hold the global temperature at 1.5 degree Celsius is limited. Global commitment to address climate change has been pushed through international forums. 

After rejoining the Paris Agreement during the Biden – Harris administration, the United States (US) is actively encouraging global citizens to tackle climate change through policies and strategic planning. Recently, the US just released new regulations i.e Inflation Reduction Act (IRA) to boost the utilization of clean energy technology. The US’s target is to reduce 50-52% of GHG emissions by 2030 and use 100% clean electricity by 2035 before being net-zero emission in 2050. 

Nathan Hultman, director of the Center for Global Sustainability University of Maryland, during a public lecture session in collaboration with the Office of the President of Indonesia, and the Institute for Essential Services Reform said that he believes that we can achieve the 1.5-degree level.

“We are surely making some progress and are still on the 1.5-degree track. But our work is not done. We have more work to do especially through policy,” Nathan said.

Nathan emphasizes the need for a multi-stakeholder approach in addressing climate emergencies through the energy transition. He explained that the national government is an important stakeholder in determining the energy transition. However, in energy transition we cannot rely solely on the national government since the idea of energy transition must be embraced by many actors including the sub-national level government and even the private sectors.

“For example, in the US during the Trump administration there are not so many things (climate policy) happening, but there is some progress at the sub-national level that pushes national policy in the upcoming administration,” he explained.

Realizing that most democratic countries have similar stakeholders, this ‘All in’ approach can be duplicated in other countries. Every country is different, but each of us has the opportunity to do more.

Playing a strategic role as a G20 leader this year, Indonesia has a critical point in achieving global climate goals. By proposing a more ambitious climate pledge, accelerating renewables into the system, and adopting EVs in massive numbers, Indonesia can inspire other countries to show concrete action in addressing the climate crisis.

Every country needs to figure out its strategic way to do the transition but learning from others is a need indeed. Global commitment to support funding for energy transition must be fulfilled to assist developing countries in running the transition smoothly.

Hageng Nugroho, the Executive Staff Office of the President of Indonesia emphasizes the role of global collaboration to achieve the net zero target.

“Indonesia pledge to be net zero on 2060, and in achieving it we encounter several obstacles from technology till funding. There are at least four things that must be done by a country to avoid the harsh effects of the climate crisis. First, comply the NDC target, encourage citizen and potential stakeholder to participate’, strengthen the global partnership, and boosting the green economy development,”

Hageng added that the most important point is ensuring that the commitment is manifested into action rather than staying at policy level only.