The use of CCS needs careful consideration

Author : Aditya Perdana Putra Purnomo (Research team intern 2022)
Editor: Pamela Simamora

The use of fossil fuels since the beginning of the industrial revolution has been shown to increase anthropogenic1 carbon dioxide emissions that are responsible for an upsurge in the earth’s surface temperature by 1.07 °C from 1850 to 1990.The increase in temperature harms the environment, causing events such as droughts, forest fires, flooding, and erosion of some coastlines

Besides using renewable energy, Carbon Capture and Storage (CCS) is considered capable of helping in reducing world carbon emissions. CCS is a technology used to capture carbon dioxide from exhaust gasses, then transport and store the carbon dioxide gas in particular storage locations (usually underground) to avoid its negative impact released into the atmosphere.2

 Figure 1. CCS Schematic Diagram (Choudary,2016)

By 2021, there are 31 CCS projects in commercial operation worldwide, and more than 90 other projects are still under development. This figure continues to increase and is the highest for the last 5 (five) years. Beside being caused by ongoing research, the increase in the number of projects is also inseparable from the support from various countries for CCS technology as an option to reduce carbon emissions.

Indonesia, as one of the largest carbon dioxide emitting countries in the world, has also begun to plan the use of CCS, especially in the electricity sector. This strategy is questionable given that CCS prices are and will remain uncompetitive against renewable energy plus storage. If CCS is installed, supercritical CFPP LCOE will double from EUR 40 per MWh to EUR 80 per MWh (USD 92 per MWh) even if transport and storage costs of CO2 remain low at around EUR 10 per tonne. In this case, the avoided CO2-eq cost is more than EUR 55 per tonne (USD 64 per tonne).

 

Figure 2. CCS Schematic Diagram of a Coal-fired Power Plant (Global CCS Institute, 20213 )

One of the CCS projects in the electricity sector, the Petra Nova project in the United States, is predicted to be the trigger for the development of CCS in the electricity sector around the world. Unfortunately, the CCS at this 240 MW power plant experienced a 30% blackout before it was finally discontinued in 2020. Since its inauguration in 2017, from the target of capturing 4.2 million metric tons of carbon dioxide for 3 years of operation, the Petra Nova project has only succeeded capture 3.54 million metric tons of CO2, or 16% of the target.

Analysis from the Institute for Energy Economics and Financial Analysis (IEEFA) shows the poor performance has cost investors more than $23 million over the project’s three-year operation. In addition, during its lifetime, the Petra Nova project also generated more than 1.1 million metric tons of CO2 through the use of gas turbines for CCS power purposes. Learning from this case, Indonesia needs to reconsider the use of CCS in coal-fired power plants.

Another project, the Boundary Dam coal-fired power plant in Canada, also uses CCS to capture GHG generated from the electricity production of this 160 MW power plant. Equal to the Petra Nova project, the Boundary Dam project has also never operated according to its target of capturing 3200 metric tons of carbon dioxide annually. Judging from the achievement of annual carbon capture, the project is only able to capture carbon emissions of around 40 to 60% of the target. Even in the most productive year, the achievement was still far below the target of 3200 metric tons per year. This record was exacerbated by last year’s sluggish performance caused by a 3-month blackout of the CCS unit. The first outages took place from mid-June to July due to routine maintenance. However, shortly thereafter, a compressor failure4 brought the project to a complete shutdown from August to September 2021.

Figure 3. Achievement of Carbon Capture, Boundary Dam Project 2014-2021 (Schissel, 2021) 

In other sectors, such as industry, CCS is considered one of the most effective solutions to reduce GHG emissions. The use of CCS in the industrial sector started in 1971 when the world’s first commercial CCS was operated at Terrell Gas Processing5 in Texas, United States of America. CCS, which is valued at 7.6 million6 is still operating today. The project with a capacity of 0.4 MTPA7 is operated to capture CO2 emissions from the local gas processing industry and use this catch to increase oil well production through the Enhanced Oil Recovery (EOR)8 . Another CCS project in the United States is at a fertilizer plant called Enid Fertilizer, that has been operating for 40 years. This project utilizes CO2 from the manufacture of fertilizer/ammonia to sell to oil and gas production wells in Oklahoma that carry out the EOR process.

From the case study above, several things need to be considered by policy makers in Indonesia to apply CCS in Indonesia. First, the use of CCS in steam power plants, apart from being expensive, also often experiences technical problems, resulting in not achieving the CO2 capture target promised by the developer. Second, the revenue from the sale of CO2 for EOR is the prime driver of CCS projects in the industrial sector in America. Although there is no publicly available data, CO2 prices for EOR are closely related to oil prices. For instance, with an oil price of US$70 per barrel, the CO2 price for EOR is around US$30/tCO2 (Bliss, et al., 2010). Therefore, the implementation of CCS in the industrial sector (and other sectors) requires a high carbon value which can ensure that the carbon values covers the costs of capturing and transporting CO2.*** 

 

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The Aspirations of the Communities for the NERE Bill

Jakarta, 19 May 2022 – Decarbonization of the energy sector as one of the largest emitters in Indonesia needs to be carried out to achieve the net-zero target in 2060 or sooner. Thus, Indonesia should prepare supporting policies for development of renewable energy. However, based on the draft of the New Energy and Renewable Energy Bill (NERE) has entered the harmonization stage in the Indonesian House of Representatives, various organizations representing certain community groups view that the draft NERE bill deviates from its goal of encouraging the sustainable use of renewable energy.

Institute for Essential Services Reform (IESR), Bersihkan Indonesia, Koalisi Perempuan Indonesia (KPI), Masyarakat Energi Terbarukan Indonesia (METI), Adidaya Initiative, Yayasan Lembaga Konsumen Indonesia (YLKI) dan Indonesian Center for Environmental Law (ICEL)  held discussions and conferences press to convey their aspirations to the NERE bill.

IESR highlights the ambiguity of the NERE bill that mixes fossil, nuclear and renewable energy in one bill. According to IESR, the new energy resource, such as a downstream product of coal and nuclear power plants, will increase the potential for stranded assets and will not significantly reduce greenhouse gas (GHG) emissions.

“This bill is heavily influenced by the interests of the status quo, the coal and nuclear industries, which sneak in using the new energy definition. The implication is making this bill blurred on developing renewable energy that strongly needs political encouragement and regulatory framework to develop it quickly, supporting the goal of the energy transition,” said Fabby Tumiwa, Executive Director of IESR.

Likewise, Ahmad Ashov Birry, Coordinator of Bersihkan Indonesia (BI), encouraged the Indonesian House of Representatives to prepare policies that support renewable energy.

“Instead, the NERE bill that claims to support renewable energy blatantly obscures a possible renewable energy future for Indonesia by making way for fossil and other harmful energy to be associated as renewable energy. This can be an unclear signal for the international community that wants to support Indonesia in solidarity with its transition. There is still an opportunity for change, and the government must take bold steps to change it,” said Ahmad.

The co-founder of the Adidaya Initiative, Aji Said Iqbal Fajri, conveyed three main points of pressure for Commission VII of the DPR RI.

“We request that Commission VII of the House of Representatives of the Republic of Indonesia (DPR-RI) remove all forms of non-renewable energy as a new energy source in the NERE bill. Second, Commission VII of the DPR-RI and related stakeholders regulate incentives for  renewable energy to achieve the new and renewable energy mix target of 23% by 2025 as stated in the General National Energy Plan (RUEN). Third, Commission VII of the DPR-RI and related stakeholders to consider scientific suggestions and aspirations of the community from various groups in preparing the NERE bill as an effort to increase economic growth while increasing decarbonization efforts in the energy sector to achieve economic and environmental justice in Indonesia.”

Questioning incentives for renewable energy users, Chairman of the Yayasan Lembaga Konsumen Indonesia (YLKI) Tulus Abadi said the NERE bill must regulate significant incentives, both fiscal and non-fiscal for renewable energy’s consumers.

Furthermore, the Executive Director of the Masyarakat Energi Terbarukan Indonesia (METI), Paul Butarbutar said that the NERE bill should be the legal basis for maximizing investment in the renewable energy  sector. 

“This bill should focus on renewable energy, therefore, it can be a strong legal basis, which provides legal certainty to maximize investment in renewable energy, as part of the energy transition to achieve net-zero emissions as soon as possible. Thus, all articles related to new energy, terms that are not known internationally, can be abolished,” explained Paul.

Meanwhile, he also added that if the government and the nuclear power plant industry intend to encourage the use of nuclear energy, the government should prioritize the revision of Law 10 of 1997 on Nuclear Energy. If it is related to the energy transition, they can revise Law No. 30 of 2007.

“If the government wants to encourage the use of nuclear power for a generation, the government should prioritize the revision of Law 10 of 1997, so that it can be used as a strong legal basis for nuclear power plant investment. Moreover, the utilization of nuclear power plants based on the government’s roadmap is still long to be realized, so the government has sufficient time to revise Law 10 of 1997. There is no urgency to include nuclear energy in this bill. Regarding the energy transition, it is not proper to include it in this bill. What needs to be done is to revise Law 30 of 2007 to accommodate issues of the energy transition, net-zero emission, NDC, and the Paris Agreement in the energy sector,” explained Paul.

Carrying the aspirations of farmers and fishermen, Harmanto, Head of the Media, Communication and Information Department of the Kelompok Tani Nelayan Andalan (KTNA) said that his party firmly rejects the development of nuclear power plants. According to him, farmers and fishermen around the nuclear power plant will be the disadvantageous group affected by the development of the nuclear power plant, especially if there is an accident at the nuclear power plant.

“NPP requires an exclusive zone that is a huge area. So, it has the potential to take up large areas such as large coastal areas. It can displace farmers’ land and limit fishermen’s access to the sea. It has been seen from some large coal-fired power plant constructions on the north coast of Java, which has displaced farmers’ land and hampered fishermen’s access to the sea, as well as changing fishing areas. In addition, the risk of a nuclear power plant accident is not zero. Reactor accidents can result in radiation leaks that impact the land, water, and sea. In Fukushima, radioactive wastewater from the Fukushima nuclear power plant is dumped into the sea and makes people afraid to eat fish,” explained Harmanto.

On the other hand, the Komisi Perempuan Indonesia (KPI), Mike Verawati Tangka asked the DPR RI to pay more attention to the voice and position of women in energy policy making. The principles of equality and social inclusion must be the perspective of energy governance from upstream to downstream in energy policies that are being prepared by the parliament and government. The article on community participation in the NERE bill must ensure that all elements of society, such as women and other marginalized groups can be fully involved in access to sustainable clean energy by ensuring gender-based representation. This needs to be done because women and other marginalized groups are still positioned as limited energy consumers so that when the energy crisis occurs they face more severe consequences.

“Gender mainstreaming is not only limited to mentioning terms in energy policy but must be operationalized within the framework of its implementation. Such as incorporating specific gender goals into the design of energy sector development and empowering and involving women and marginalized groups through consultation, participation, and decision making. Then develop a gender-specific strategy to maximize benefits for women and the poor in overcoming the impacts of new and renewable energy development,” said Mike.

Agreeing with the aspirations conveyed, Sonny Keraf, an academician from Atma Jaya Catholic University, added that the NERE bill is a ‘poco-poco dance’ which is a step forward and a step backward, because they are hijacked and imprisoned by dirty fossil traders to preserve their at the expense of humanity’s common interest in saving the earth’s crisis.

“There are too many negative impacts if we stick with the ‘poco-poco dance’. The credibility of the government’s global diplomacy of climate change negotiations could be eroded. Exports of domestic industrial products can be interfered with by the provisions of emission standards in the entire production chain and supply chain of our products. Our commitment to climate change mitigation has been hampered,” he said.***

Jateng Solar Series – Green Healthcare Forum: Central Java Encourages Solar PV Adoption in Health Facilities

Jakarta, 26 April 2022- The Ministry of Health through The Directorate of Health Service Facilities, Directorate General of Health Services has issued Guidelines for Environmentally Friendly Hospitals (Green Hospitals) in Indonesia in 2018. Central Java has a high potential power output for solar energy. To that end, the development of policies, benefits, and financing schemes for rooftop solar power plants available for health facilities are discussed in the “Rooftop Solar Energy for Health Facilities Sector” Webinar. This activity was held in collaboration with the MEMR of Central Java Province and IESR which took place online.

Opening the discussion, Mustaba Ari Suryoko, Coordinator of Various NRE Services and Business Supervision, Directorate General of EBTKE, Ministry of Energy and Mineral Resources stated that Indonesia has at least 3 targets, namely 23% renewable energy in 2025, emission reduction in 2030, and net zero emission in 2060. According to him, The target for penetration of renewable energy, especially rooftop solar power plants, which is 3.6 GW until 2025 is quite high, but its implementation is still minimal. 

Several efforts have been made by the Ministry of Energy and Mineral Resources to accelerate the use of solar energy, especially in the health sector, including the issuance of the Rooftop pv Regulation to accelerate the penetration of rooftop PV, increased socialization to the health sector, such as the construction of rooftop PV at the Bali Mandara Hospital 2020, with a capacity of 100 kWp. Ari informed that currently, around 15 hospitals in Indonesia have installed rooftop solar panels.

“Low carbon development has become a global agreement, and we are part of it. The health sector has a fairly large energy demand, and there are units that have to operate 24 hours a day. For that, energy efficiency is needed, not only saving, but also producing and using energy effectively and efficiently,” said Sujarwanto Dwiatmoko, Head of MEMR of Central Java Province.

Sujarwanto said that energy audits, replacement of energy-efficient lighting systems, as well as non-stop and stop electrical operation line separation needs to be done in the hospital. To support the green hospital, hospitals can use renewable energy, one of them is rooftop solar power. According to Sujarwanto, to optimize the use of rooftop PV, it is necessary to look at the electricity usage needs, such as what tools operate during the day or night and determine which PV system (offgrid/ongrid) will be used. Supporting the energy transition, MEMR of Central Java Province will issue special awards for energy saving and green building efforts. 

Adding, Romadona, Head of the Health Facilities Facilities Team Referrals from the Directorate of Health Service Facilities said that the principles of environmentally friendly hospitals include safe buildings and guarantee patient safety, paying attention to various patient conditions (such as disabled), adapting to medical science developments, saving energy and being environmentally friendly. Romadona explained that the environmentally friendly criteria themselves are divided into two types, namely design and construction, as well as operational criteria. Unfortunately, the application of the criteria was interrupted during the pandemic. 

On the other hand, Marlistya Citraningrum, Sustainable Energy Access Program Manager, IESR mentioned several advantages of solar energy such as its abundant potential and rooftop PV technology that is easily accessible, does not require land, is easy to maintain, and the size can be adjusted to the size of the house, legally on-grid and off-grid. Marlistya said that the average return on investment for rooftop solar power plants in Indonesia for small scale is 10-12 years. 

“Roof PV can last for 25-30 years, and after that it can still be used but with a slightly decreased power,” he said.

Marlistya explained that there are several rooftop PV financing schemes such as cash purchase, installments/credit, and performance-based renting. Marlistya informed that at the Semarang City Hall, the use of Rooftop Solar Power Plants was able to reduce the bill by almost 50% from Rp 13 million to Rp 6.5 million. On the other hand, for a small house, the savings can reach 60%.

The savings in electricity costs of Rp 810 million/year, as well as very easy and minimal PV maintenance is one of the testimonials for the use of 327.6 kWp rooftop PV at Pertamina Hospital Cilacap. Muhidi, Household Sector, Pertamina Cilacap Hospital, said that the installation of rooftop PV in his hospital is an effort of efficiency and savings as well as a form of support for the government to achieve a 23% energy mix by 2025.

Also supporting the development of PV mini-grid in Indonesia, UNDP is working on the Sustainable Energy Fund (SEF) with a total incentive of rooftop PV of Rp 23 billion.

“The scheme is performance based; install it first before submitting an incentive request,” explained Verania Andria, UNDP’s Senior Advisor for Sustainable Energy.

Verania explained that the requirements for submitting incentives, namely PLN customers who have installed or are currently installing rooftop PV as of December 1, 2021, can only submit one application, does not apply to PV funded by the government through the APBN/APBD, and installation is not done alone because UNDP wants to guarantee quality. installation of installed roof PV mini-grid. In addition, capital applications can be accessed through the application and the online site https://isurya.mtre3.id. Furthermore, she stated that so far, incentives of Rp. 155 million have been distributed.

Ing. Eko Supriyanto, General Chair of the Indonesian Hospital Engineering Association who was present on the same occasion informed that green healthcare consists of various aspects; One of them is energy conservation and emission reduction. He said that digitizing hospitals was important to overcome several issues in hospitals such as building architecture, waste treatment methods, the use of energy that is not environmentally friendly, and the over-use of electrical energy. One example of digitization, explained Eko, is the Smart Integrated Electricity System, a digital system that can monitor planning and energy use in hospitals.

“The hospital is still looking at the economic side of installing rooftop solar panels. Hospitals also have service priorities that prioritize patients and health services, so the decision to use rooftop solar panels requires comprehensive consideration. With the technology and cost of rooftop PV, now is the time for hospitals to start considering installing rooftop PV” said Eko.

Sticks with Biofuel Policy

In recent years, the government has been aggressively encouraging the use of biofuel as one of the main alternatives to fuel oil. However, many constraints and impacts on the economic, social, and environmental side arise in this biofuel use program.

The world’s biggest palm oil producer, and exporter, Indonesia, will push ahead with its ambitious biodiesel program even as prices of tropical oil have soared, which could increase the costs of producing biofuel. The B30 program stipulates fossil fuels must be blended with 30% palm oil. The mandate is aimed at soaking up bulging supplies in the top grower. But palm’s premium over gasoil has ballooned to record levels, driven by Russia’s invasion of Ukraine that has tightened global cooking oil supplies.

“We haven’t discussed the evaluated B30 program because it is still running as planned,” Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) said. However, he said that the government could monitor crude palm oil and petroleum prices closely and will prepare options to anticipate any development without elaborating on those plans.

He continued that the problem arises because there are B40 mandates that have been postponed many times, rumors of the B40 loans, and others are skeptical if it is possible to launch B40 mandates in the current situation. But the biofuel strategy must go on because it’s also part of Indonesia energy’s strategy.

Indonesia’s efforts to increase the palm content in biofuel to 40% by 2021 were put on hold due to cheaper fuel costs and record-high palm prices. In addition, raising the blending rate would require the government to provide a significant incentive through the money it collects from palm oil export levies. As a result, road tests for vehicles powered by 40% palm biofuel may be delayed, but discussions on B40 are ongoing.

“Indonesia has several issues in launching the B40 because of the pandemic era. First, in 2020, the oil demands declined. As a result, CPO is lowered, significantly affecting the financial crisis. In 2021, there was uncertainty about the price, and the government didn’t want to give subsidies. The second problem is infrastructure. For example, part of the strategy for increasing biofuel is a refinery prepared by Pertamina in Balongan Refinery, and it’s still in development. But if these problems are solved, all the essential elements of starting the B40 this year make sense,” Fabby said.

 

The B40 plan was delayed again on high CPO prices, but Indonesia is optimistic about the year 2023 being implemented

Doubts have emerged over Indonesia’s plan to roll out B40-type biofuel this early year as the high price of CPO renders such fuel uneconomical. As a result, the Energy and Mineral Resources Ministry has announced a delay in implementing a mandatory 40 percent palm oil-based biodiesel (B40) policy to “prioritize stability” amid rising CPO prices. 

Based on The Jakarta Post’s1 articles on March 29, 2022, Energy Minister Arifin Tasrif said that the government would continue its B30 policy – of 30% palm oil-based biodiesel – in 2022 and devise solutions to maintain the price gap between CPO and biofuel prices. He said that technically B40 is ready to be implemented and is still reviewing whether they’re prepared to produce more CPO. 

“As we know that the B40 program was slated for implementation in July 2021 following the success of the B30 program in 2019, but it was delayed by a year as high CPO prices had made the fuel uneconomical and because of the pandemic condition, but the government had planned to conduct the B40 trial on this year and we optimistic it will be implemented on 2023,” stated Fabby.

Fabby said the government was still committed to escalating the biofuel policy and developing the development plan. As of 28 March 2022, CPO prices had risen 27.5% Year To Date (YTD). The government hopes that increasing the proportion of processed CPO in biofuel would help limit petroleum imports. Indonesia has long been one of the world’s largest crude oil and gasoline fuel importers.

In 2021, the B30 program reduced greenhouse gas emissions by an estimated 25 million tons, and the government studied the technological, economic, regulatory, and supporting industry aspects of implementing B40. Fabby suggested that the government begin implementing the mandatory B40 policy in 2023.

 

The Future of Biofuel Strategy

The use of biofuel continues to be increased by optimizing the production of domestic biofuels (BBN). With this policy, it is hoped that by 2027 Indonesia will no longer import fuel to save foreign exchange and improve the welfare of oil palm farmers through the mandatory biofuel program.

The Ministry of Energy and Mineral Resources (ESDM) stated that the implementation of biofuel has been successful for 15 years. However, even in biofuel with a blending rate of 30 percent, some time ago, bioavtur was tested on flights from Bandung to Jakarta and vice versa. It turns out that the results are entirely satisfactory, so it can continue to be improved.

Biofuel would act as the main substitute for petroleum fuel, especially in the transportation sector. However, based on IESR’s study, the future potential of biofuel is highly uncertain due to the rapid development of alternative technologies, especially electric vehicles. The government needs to be prudent in developing the long-term plan for biofuel and putting it under the broader energy transition plan. Increasing the biofuel mandate too aggressively could risk the infrastructure becoming stranded assets. 

The energy strategy tried to integrate biofuel planning with electric vehicle adoption and petroleum refinery development. In addition, to reduce the risk of stranded assets, investment in biofuel could be directed to retrofitting existing plants for co-processing or developing biofuel refineries that are more flexible in product portfolio and transformable to other products.

 

Source: 

  1. B40 biodiesel plan delayed again on high CPO prices, 29 March 2022
  2. Critical Review on the Biofuel Development Policy in Indonesia
  3. Energy Intelligent Interview with Fabby Tumiwa 

 

Accelerate Decarbonization for a Sustainable Future

Makassar, 22 March 2022 – Accelerating the use of clean energy is a fundamental point in ensuring the future of the economy and other sectors is maintained in the context of sustainability. This was raised in the Sustainability Forum held by PT Vale Indonesia Tbk on Tuesday (22/03). The activity raised the theme “Decarbonization for a Sustainable Future.”

In this activity, the Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, said that the transition to fossil-based energy is necessary for the ambition of net-zero emission (NZE) can become a necessity, with an estimated realization in 2050. He emphasized that the step, which is often called decarbonization, must be in line with the target of the Paris Agreement, which is to limit the increase in the earth’s temperature to 1.5 degrees Celsius. If there is no planned decarbonization effort, it is projected that the energy sector will become the largest emitter in Indonesia by 2030 and make it difficult to achieve the Paris Agreement targets.

“In 2022, the government and all stakeholders must strive to increase the use of renewable energy and promote energy efficiency in buildings and industry. By 2025, the government must achieve the target of 23% of the renewable energy mix, and after that, it must pursue the energy sector’s emissions to reach their peak before 2030. So indeed, there must be an acceleration of the transition to clean energy with decarbonization. In the long term, this will have a multiplier effect on the competitiveness of our economy so that it is more optimal,” he said.

Fabby views South Sulawesi as one of the regions in the country that is already in an energy transition system with a significant mix of renewable energy. This is indicated by constructing renewable energy-based plants such as wind, water, and solar power. As a result, the clean energy mix is already at around 30% of the installed capacity in South Sulawesi. This achievement is considered inseparable from the collaboration of all elements, which have begun to be relatively aggressive in implementing decarbonization steps in the production process, including PT Vale Indonesia Tbk.

“I think this is excellent. PT Vale itself already has a 33 percent decarbonization roadmap for 2030 and targets net-zero in 2050. But for the 2050 stage, there is still a need for further assessments,” said Fabby.

On the same occasion, the Director-General of New Renewable Energy and Energy Conversion (EBTKE) of the Ministry of Energy and Mineral Resources, Dadan Kusdiana, said that the government had prepared a roadmap for the energy transition to carbon-neutral, which is projected to reach the optimal point in 2060.

“We are targeting energy decarbonization towards Net Zero Emission 2060 or even faster. This is because the new renewable energy mix (EBT) was already fully achieved, reducing 1,562 million tons of CO2 emissions,” he said.

To achieve the target of the EBT mix, Dadan explained, there are several acceleration efforts carried out by the government, starting from the completion of the Draft Presidential Regulation on EBT Prices, the application of the ESDM Regulation of PLTS Roof No. 26 of 2021, then mandatory biofuels to the provision of fiscal and non-fiscal incentives for NRE.

“Then, of course, the ease of licensing for the EBT segment to encourage demand for electrical energy in several primary activities even on a personal scale in the community,” said Dadan.

Meanwhile, President Director of PT Vale Indonesia, Febriany Eddy, explained the company, which operates in the mining sector, has also developed a road map to reduce carbon emissions for scopes 1 and 2 to a third in 2030 and net zero in 2050.

“For the plan for a new smelter in Central Sulawesi, we, with partners from China, have committed to using LNG instead of coal for power generation there,” he said.

The Governor of South Sulawesi, Andi Sudirman, through the Governor’s Expert Staff for Government Affairs, Andi Mappatoba, conveyed that the existence of PT Vale consistently practices sustainability and efforts to reduce the greenhouse effect through decarbonization steps helped the government in realizing low-carbon development.

“PT Vale has tried to contribute to the environmental, social, and economic sustainability of South Sulawesi with all its sustainability measures. In the future, hopefully, we will always be partners with the provincial government in developing the economy and carbon-neutral targets as announced by the government.”

NRE Bill is Ineffective in Supporting Energy Transition in Indonesia

press release

Jakarta, March 21, 2022 Entering the harmonization stage in the Indonesian House of Representatives (DPR RI), the New Renewable Energy Bill (NRE Bill) is seen as deviating from the goal of encouraging the energy transition to achieve carbon neutrality by 2060 or as soon as possible. At the plenary meeting of the harmonization of the RE Bill (17/03/2022), experts from the legislative strengthened the position of new energy by adding new energy sources to the bill, which is now referred to as New and Renewable Energy (NRE). 

The Institute for Essential Services Reform (IESR) views the NRE concept in one law as ineffective and ambiguous. Moreover, the inclusion of coal derivative products such as coal gasification, coal liquefaction, coal bed methane as a new energy source will potentially hamper the efforts to reduce greenhouse gasses (GHG).

GHG emissions resulting from the coal gasification process in new energy are much higher than renewable energy. The total emission from the conversion process of 1 kg of coal into Dimethyl Ether (DME) is around 3.2 Kg CO2eq or about 400 grams of CO2 eq/kWh (IRENA, 2021). It does not include the emissions caused when burning DME, which is equivalent to burning diesel oil that can reach 631 grams of CO2/kWh (assuming 40% DME stove efficiency). Therefore, the total emissions produced to get the same amount of energy reaches 1031 grams CO2/kWh. Meanwhile, the life cycle emissions generated from the use of renewable energy, such as solar power plants are only around 40 grams of CO2 eq/kWh (NREL, 2012).

“The NRE Bill draft shows the DPR RI’s lack of understanding of the need for energy development in the context of the energy transition. The DPR RI also accommodates the interests of the coal industry, which wants to continue to gain market share when the coal market for electricity generation declines. The entry of new energy technologies such as coal downstream will make Indonesia trapped with fossil energy infrastructure. Meanwhile, the inclusion of nuclear power plants will hinder the acceleration of the energy transition that requires the development of renewable energy on a large and fast scale,” said Fabby Tumiwa, Executive Director of IESR.

The utilization of technology that reduces carbon emissions in non-renewable energy (fossil energy) plants will expand the mechanism for using non-renewable energy, such as clean coal technology (ultra-supercritical power plant), carbon capture, and storage (CCS) technology, and biomass co-firing. IESR believes that maintaining coal-fired power plants with CCS technology is a relatively expensive option compared to developing renewable energy.

“The support for fossil energy or non-renewable energy in the NRE Bill will give a signal to maintain the steam power plant in the energy system for longer, instead of retiring the steam power plant earlier as has been discussed in recent months,” added Deon Arinaldo, Manager of Energy Transformation Program, IESR.

Deon added that the DPR RI should have reviewed the effective and economical use of energy in formulating the NRE Bill.

“To achieve carbon neutrality, the most cost-effective greenhouse gas mitigation should be considered, which according to our analysis is renewable energy. With regulatory support, renewable energy can be built and renewable energy funds can be used effectively to encourage the preparation of massive renewable energy projects,” he explained.

The latest draft also authorizes the central government to set prices for new and renewable energy if no agreement is reached between the parties/business entities (in this case PLN and the developer). In this case, of course, it will be related to the provision of incentive funds and compensation for new energy or renewable energy due to price-fixing by the central government. 

“The government should establish incentives and a scheduled renewable energy auction mechanism to provide certainty to business actors. Pricing should be done for technologies that are not yet commercial and are applied in remote areas to ensure access to clean energy for the community,” said Fabby Tumiwa.

Financier’s Club: Financing Solar Energy in Indonesia – Discusses Solar Energy Financing Issues in Energy Transition

Jakarta, 18 March 2022– The financing of energy transition in Indonesia, especially in the Solar PV Power Plant, needs to be mobilized immediately. The technical potential of solar energy in Indonesia is enormous. Based on a study from the Institute for Essential Services Reform (IESR), the potential of solar energy in Indonesia is up to 20,000 GWp waiting to be harvested so that it can achieve a carbon-neutral target in 2060 or sooner, according to the government’s commitment. Financial institutions can capture various Solar PV Power Plant financing opportunities by identifying investments and risks. Identification of investments and stakes in Solar PV Power Plant financing, the obstacles financial institutions face in providing Solar PV Power Plant financing schemes, and innovative financing practices are discussed in the Financier’s Club: Financing Solar Energy in Indonesia. This activity was held in collaboration with the Ministry of Energy and Mineral Resources with IESR as a pre-event for the Indonesia Solar Summit (ISS) held in Jakarta.  

Opening the discussion, Sahid Djunaidi, Secretary-General of the Directorate General of Renewable Energy and Energy Conservation (DG EBTKE), emphasized that the emission reduction target can only be achieved if the country makes an energy transition as a fundamental step. The vast potential and short construction period make solar energy a mainstay in providing renewable energy in Indonesia. Several banks have provided financing schemes for rooftop solar power plants, but financing innovation is still needed to encourage more massive rooftop solar power plants. Currently, the Ministry of Energy and Mineral Resources (MEMR), in collaboration with UNDP, is conducting an incentive grant program for rooftop solar PV to support the development of rooftop solar PV in Indonesia.

“The challenge in developing solar power plants is in the financial sector because of the high risk, not many markets, and the lack of financing guarantees,” he said.

Coordination in policymaking and cooperation between parties is essential to achieving sustainable finance and climate targets. This was stated by Agus Edy Siregar, Deputy Commissioner for Financial System Stability of the Financial Services Authority (OJK). 

“The climate change mitigation agenda requires large funds and cannot be met only from the state budget, but also requires financing from the financial sector,” he added.

Edy said that OJK had compiled several documents on investment in several sustainable sectors, including a green taxonomy, carbon market preparation, and banking reporting related to the financed sector. It is hoped that there will be incentives and disincentive mechanisms in the finance and financing sector.

In addition, Enrico Hariantoro, Head of the OJK Integrated Financial Services Sector Policy Group, said that OJK has been supporting banking instrumentation for a long time to support sustainability financing (POJK 51/2017 POJK 60/2017). According to him, there are several risk aspects that banks are very concerned about, including technical understanding, how to guard the ecosystem, and the payback period. Furthermore, he argues that financing schemes for Solar PV Power Plant could be more varied and innovative, for example, combining elements from facilities, philanthropy, technical, and becoming one with KPR so that it is included in customers’ comfort level bankability of financial providers. OJK always encourages the acceleration of Solar PV Power Plant financing through regulation, of course, by considering the feasibility study (FS).

On the other hand, Adi Budiarso, Head of the Financial Sector Policy Center (PKSK) Fiscal Policy Agency (BKF), said that there is an Energy Transition Mechanism (ETM) to answer the challenges of the energy transition with the primary goal of shortening the economic life of the PLTU Clean Energy Facility (CEF), get additional greenhouse gas emission reductions by building a renewable energy Carbon Recycling Fund (CRF) to achieve Nationally Determined Contribution (NDC), and gain access to cheaper funding. 

BKF has implemented tax incentives for investments such as tax holidays, tax allowances, PPh DTP, VAT exemptions, import duty exemptions, tax and customs facilities, and exemptions from collecting PPh 22. According to Adi, the Indonesian financial system is ready to implement sustainable finance, supported by green taxonomy. In addition, BKF has conducted mapping with nine universities, associations, and stakeholders. Adi said that Regional Banks had the opportunity to help accelerate the Solar PV Power Plant development. Renewable energy has the potential to create electricity supply independently. The existence of BPR, the regional company, can be one of the doors for the entry of Solar PV Power Plant financing.

Edwin Syahruzad, President Director of PT Sarana Multi Infrastruktur (SMI), who was present on the same occasion, informed the participants that PT SMI has taken strategic steps in financing Solar PV Power Plant. In addition, PT SMI has provided financing for all types of renewable energy, such as hydroelectric power, geothermal power plants, wind power plants, solar PV power plant, and biomass. However, he said that PT SMI’s commitment to the Solar PV Power Plant project depends on the pipeline project. 

“The Solar PV Power Plant pipeline is more derived from rooftop Solar PV, and I think this is a potential that must be worked on. However, the approach is slightly different from on-grid  Solar PV Power Plants because rooftop  Solar PV comes from contracts with building owners where Solar PV Power Plants are installed. The building owners can come from outside of the electricity sector. The revenue model is also quite different. It is the domain of banks with building owner customers who can expand their business opportunities using rooftop solar PV,” said Edwin.

IPP Track: Support Private Sector Usage of Solar Power Plants to Achieve Paris Agreement Targets

Jakarta, 15 March 2022 – Indonesia has potential natural resources that can be allocated to develop solar power plants. Besides, solar power plants as renewable energy are feasible to create and reasonably competitive in price; hence solar might support the achievement of Indonesia’s renewable energy mix and emission reduction targets.   

Ahead of the Indonesia Solar Summit (2022), the Institute for Essential Services Reform (IESR), together with the Ministry of Energy and Mineral Resources (KESDM), held four pre-events, one of them was IPP Track, which was held on 15 March.

Executive Director of IESR Fabby Tumiwa said ISS was aimed to discuss more the contribution of renewable energy acceleration, especially solar, for green jobs and the means to achieve the 20-gigawatt target through pipeline projects that will have a positive impact on green economic recovery post-pandemic.

Ida Nuryatin Finahari, Directorate of Electricity Business Development KESDM, said that the government would commit to the Paris Agreement targets. One of the strategies to implement is by enacting the National Electricity Supply Business Plan (RUPTL) 2021-2030.

“The inclination toward lower price and faster duration of its establishment, solar power plant target in RUPTL were added approximately 4,7 gigawatt,” said Ida.

Furthermore, Ida said the target of 51,6% renewable energy plant capacity in 2030 in RUPTL is higher than the National Electricity General Plan (RUKN).

In parallel, the Ministry of Maritime and Investment Affairs representative, Ridha Yasser, said that the renewable energy transition would be a global trend in the next few years. The government has prepared an Energy Transition Mechanism (ETM) to encourage a green technology-based economy and established green industry areas in North Kalimantan. These are the government’s response to market demand to exert sustainable energy in all productions.

“However, amid the trend of high demand for solar panels, solar panel fabrication in Indonesia is still experiencing problems. On the one hand, it must also compete with solar manufacturers abroad,” he said.

The IPP Track event also invited several independent electricity developers (IPP), holders of Business Licenses for Electric Power Providers for the Public Interest (IUPTLU), as well as industrial estate managers, both private and State-Owned Enterprises (BUMN), to the discussion, such as PT PLN, Akuo Energy, PT Cikarang Listrindo, PT Tunas Energi, PT Energi Prima Nusantara, PT Bitung Inti Cemerlang, etc.

In general, the privates stated that they had supported the use of renewable energy for their operationalization. However, the private sector still finds obstacles such as licensing, unpreparedness to use rooftop solar PV, the possibility of waste problems due to the usage of battery storage energy systems, and the unaffordable price of solar power plants in frontier, outermost, and least developed regions (3T).

“Things that need to be emphasized are the consistency of existing regulations and procurement…from the implementation side; there needs to be transparency. For the TKDN itself, we as a private group support it, but TKDN also needs to fact-check the field’s condition so that its requirement will not cause obstacles to the development solar power plants in Indonesia. Once the market is established, the domestic industry will emerge by itself,” said Komang from Akuo Energy.

As a group that will use a lot of energy in its operationalization, the industries need support from the government, especially in using renewable energy, from upstream to downstream. This also required achieving renewable energy targets as the government had planned.

Lessons Learned from Fukushima, Nuclear Power Plant Development Has Entered Its Sunset Years

press release

Jakarta, March 11, 2022 – Amid energy decarbonization efforts to achieve carbon neutrality as soon as mid-century or in 2060, the Indonesian government is considering developing a Nuclear Power Plant (NPP). However, several nuclear power plant accidents in the world, such as Three Mile Island (1979), Chernobyl (1986), and Fukushima (2011), indicate that nuclear power plants are full of security risks and adverse economic impacts. Commemorating 11 years after the Fukushima nuclear power plant accident, the Institute for Essential Services Reform (IESR) and the Earth Rekso Society (Marem) held a Webinar “Dynamics of the Development of Nuclear Power Plants after the Fukushima Accident”.

Even though it has been regulated in PP No. 79 of 2014 concerning nuclear as a last choice, the government and PLN are still discussing nuclear power plants, such as small modular reactor technology, as one of the solutions on the net-zero roadmaps that is being prepared. However, Fabby Tumiwa, Executive Director of IESR, views that in energy policy the government should prioritize technology that is reliable and can be built quickly so that it can overcome the urgent climate crisis.

“If the government relies on unreliable technology, it will only waste resources that should be used to encourage the development of other energy sources that are safer, more reliable, and effective in dealing with climate change,” said Fabby.

Learning from Japan’s experience, Tatsujiro Suzuki, Professor at the Research Center for Nuclear Weapons Abolition at Nagasaki University, who also served as the Japan Atomic Energy Commission (JAEC) (2010-2014) stated that the Fukushima nuclear power plant accident has changed the energy sector and public perception of Japan. Before the Fukushima tragedy, there were 54 units of nuclear power plants operating, but this number was reduced to 10 units by 2021. The Japanese public perception changed drastically from 87 percent (2010) who thought nuclear power plants were a necessary power plant, to only 24 percent in 2013. As a result of the accident, investment in nuclear power plant safety and accident costs increased so that the cost of nuclear power plants was no longer the cheapest in Japan. Based on data from the Japanese Ministry of Economy, Trade, and Industry (METI), the average cost of generating nuclear power plants in 2021 will be around 11 yen/kWh, higher than solar and wind energy, which costs 8-9 yen/kWh.

Furthermore, Suzuki explained that the Fukushima accident cost around USD 322 billion up to USD 719 billion according to data from the Japan Center for Economic Research. The government’s calculation is lower, namely USD 74.3 billion up to USD 223.1 billion because it does not include the disposal costs of the remaining radioactive fuel of nuclear power plants. Moreover, radioactive waste from the Fukushima nuclear power plant contaminates water, soil, and food. Meanwhile, out of 35,000 refugees (as of April 2021), only 2.5 percent of people returned to affected cities such as Okuma City and 9.2 percent to Tomioka City.

“The impact of the accident is not only from the engineering section, we have to consider social economics, political, and ethical points of view. In addition, the government needs to involve independent scientific institutions in the policy making process and finally be able to increase public trust, because policy without science is a gamble,” said Suzuki.

He also added that nuclear power plants are like medicine which has a strong effect. It should not be taken if not needed.  

In line with Suzuki, MV Ramana, Professor, and Director of the Liu Institute for Global Issues from the University of British Columbia emphasized that the golden era of nuclear power plants has passed, about 3 decades ago. According to him, many factors have contributed to the decline in nuclear power plant development, including the cost of making reactors too expensive compared to the declining prices of solar and wind power. Ramana explained that the innovation of the Small Modular Reactor (a nuclear reactor designed in a size of less than 300 MW and consisting of modules/parts that can be built separately) is also not able to solve all of the problems in one design.

“Even if we assume the learning (about the nuclear industry) ends up with a positive rate, you still have to manufacture hundreds, if not thousands of small reactors before it can be as cheap as large reactors. While the large one is not economically competitive against solar or wind,” said Ramana.

Ramana views that instead of building a nuclear power plant with all the risks, it is better to use the investment for other sustainable solutions.

 

“On solar and wind power, 20 years ago people used to say more than 20% Variable Renewable Energy (VRE) in the grid will make it unstable. Now, the planners say you could go as high as 80%, maybe 90% on just VRE with the rest being storage or base load plants,” he explained.

Herman Darnel Ibrahim, a member of the National Energy Council on the same occasion said that without nuclear power, Indonesia can achieve carbon neutrality in 2060 by maximizing renewable energy; hydropower, geothermal, and biomass, and developing massive solar energy with a capacity of hundreds of GW.

“The conditions needed to be able to fulfill are the successful discovery of technology for penetration of up to 75% of the electricity grid, the successful development of cheaper energy storage that allows the development of Variable Renewable Energy (VRE) with storage capacity, as well as Levelized Cost of Electricity ( LCOE) solar and wind energy with storage is cheaper than a nuclear energy LCOE,” he concluded.