Preparing Human Capital for The Energy Transition

Jakarta, May 2023 – The world is moving to a low-carbon economy. Consequently, the energy supply for the economy also shifts from fossil fuel to renewable energy. Last year, for the first time, global investment in low-carbon energy technologies (including non-energy production technologies such as electrified transportation, electrified heat, and sustainable materials) surpassed USD 1 trillion and matched the investment level in fossil fuel. The increased investment in low-carbon technologies resulted in rising employment in the field. Globally, employment in renewable energy production has been constantly growing from 7.3 million in 2012 to 12.7 million in 2021.

Although visibly slower than the global pace, Indonesia is no exception to this trend. Particularly over the past year, Indonesia has shown an improved energy transition commitment. The president issued a regulation that put a moratorium on coal-fired power plants (although with some exceptions) and overhaul the unattractive pricing regulation that had been hindering renewables investment since 2017. Two months later, a major landmark in Indonesia’s energy transition journey was announced in the form of the Just Energy Transition Partnership (JETP) during the G20 summit in Bali. The JETP commitment is not sufficient to keep the global temperature rise below 1.5oC, but significantly more ambitious than the NDC. It committed to mobilizing USD 20 billion worth of investment for the next 3-5 years to accelerate the energy transition in Indonesia.

All the investments made for energy transition will translate to human capital requirements. It is especially true for renewable energy investments that generally are more labor-intensive than the fossil industry. IESR estimated that investment for achieving net-zero emission by 2050 will bring about 800,000 new jobs in 2030 in the power sector only (excluding jobs in electric vehicles, sustainable materials, etc.). The employment will increase to 3.2 million jobs in 2050. These numbers are much higher compared to the current employment in the power sector that is around 270,000.

However, Indonesia seems to be rather unprepared for the transition in the workforce. The government has no clear strategy for developing the workforce capacity needed and research on renewable energy has been in a declining trend. The government agencies responsible for workforce planning, such as the Ministry of Manpower, have so far been excluded in the energy transition discussions. This unpreparedness is even more crucial for the hundred of thousands that currently are working in the fossil fuel supply industry. Not all of them have transferable skills that could be used in the renewable energy sectors, for example, the operators of heavy-duty equipment which comprise a large proportion of the employment in the fossil industry. A more comprehensive policy set and better coordination among the policymakers, especially to include the agencies responsible for workforce development, is indispensable. Otherwise, Indonesia might miss the economic (employment) benefits of the energy transition.

Photo by Verhalenhuys on Unsplash

Diligent and participatory planning that takes into account technological developments will be key to transition the Indonesian transport sector

The transportation sector is the largest energy user in Indonesia and contributes significantly to the increase in GHG emissions. The high dependence on oil in the transportation sector has resulted in various problems such as growing oil imports, worsening air pollution, and increasing CO2 emissions.

In line with economic growth, the demand for transportation will continue to increase which later translates into increased energy consumption. As a result, greenhouse gas emissions from the transportation sector are projected to increase by three folds and reach 500 million tonnes of CO2 equivalent by 2050, writes Julius Christian, author of the report A transition towards low carbon transport in Indonesia: a technological perspective. “Most of these emissions are associated with road transport that dominates energy consumption in the Indonesian transport sector,” says Julius.

Projection of energy demand in the transport sector

To achieve low carbon transportation, it is necessary to increase system efficiency through the Avoid, Shift, and Improve approach. However, in order to achieve a net-zero transportation system, alternative technologies are needed. Currently, there are various alternative technology options available to lower emissions in the transportation sector.

“Each technology option has different potentials and limitations, so it is impossible to rely solely on one of them. Vehicle electrification needs to be prioritized because it provides many additional benefits, but not all modes are easy to electrify”.

The report proposes the use of different technologies for each mode of transportation. Cars, motorbikes, and city buses need to be electrified. Trucks can be electrified (low load, short-haul), fueled with biofuels or hydrogen, or switched to rail mode. The railing systems need to be electrified. Aircraft can be fueled with biofuel or synthetic fuels or switched to the fast train mode. Meanwhile, ships should be electrified or fueled with biofuels, hydrogen, or ammonia.

“If a combination of these options is implemented, GHG emissions could be close to zero by 2050 as long as the electricity used is coming from renewable energy sources and alternative fuels (e.g. biofuels) are also produced sustainably,” says Julius, noting that technology advancement will help the transportation sector to decarbonize. 

GHG Emissions from the transport sector in different decarbonization options

The author also emphasizes that diligent and participatory planning that takes into account technological developments will be key in this transition. Planning will help prevent Indonesia from facing stranded asset risk and infrastructure problems in the future. 

“The construction of a biofuel refinery, for instance, needs to anticipate the development of electric vehicles and alternative fuel technologies in the long term so that they do not become stranded assets. The biofuel plant has the potential to become a stranded asset when its development is not planned carefully,” says Julius. 

“The government needs to lead a deliberate process to establish an integrated roadmap to achieve zero emissions in 2050 in the transportation sector in accordance with the Paris Agreement. This roadmap must consider several things: the arrangement must involve all stakeholders, the infrastructure development planning must be aligned with technological developments, socio-economic impacts of the transition, and mitigation plans should be assessed and prepared, research and development of alternative low-carbon transportation technologies should be conducted,” he concludes. 

“In addition, low carbon transport policies must be implemented immediately and the sustainability aspects, both environmental and social, of the existing alternative technology options must also be considered.”

 

Read the full report:

A Transition Towards Low Carbon Transport in Indonesia: A technological perspective

Author contact: Julius Christian Adiatma (IESR Clean Fuel Specialist), julius@iesr.or.id