Energy transition in Indonesia must be carried out comprehensively, not only limited to the electricity sector but also targeting other sectors.
Read more on Kompas.
Energy transition in Indonesia must be carried out comprehensively, not only limited to the electricity sector but also targeting other sectors.
Read more on Kompas.
Jakarta, December 15, 2023 – The Institute for Essential Services Reform (IESR) assesses that the energy transition is already in full swing in 2023, and it is ready to take off if the government can create the necessary supporting conditions.
IESR comprehensively discusses the development of the energy transition and opportunities to accelerate the energy transition in Indonesia in its main report, Indonesia Energy Transition Outlook (IETO) 2024.
The IETO 2024 report found that fossil energy supply still dominates despite government targets and commitments to energy transition and higher targets for greenhouse gas emissions mitigation; in the power sector, the total capacity of on-grid and captive coal plants is around 44 GW and is projected to increase to 73 GW by 2030. This will increase GHG emissions to around 414 million tons of carbon dioxide equivalent (MtCO2e) by 2030.
Fabby Tumiwa, Executive Director of IESR, said that the government needs to limit the development permit of captive power plants after 2025 and mandate the owners of industrial estates to optimize the usage of renewable energy and reduce emissions from operating power plants. The target is to reach the peak emissions in the electricity sector by 2030 and achieve net-zero emissions by 2060 or earlier.
IETO noted no significant increase in renewable energy capacity and contribution to the renewable energy mix. Renewable energy capacity and contribution to the mix only reached 1 GW in 2023, failing to meet the 3.4 GW target set in the 2021-2030 RUPTL.
Fabby explained that a shared vision among the President and policymakers is crucial for Indonesia’s energy transition to be successful. A shared understanding will determine political commitment and a cost-effective roadmap to sustainability.
Fabby emphasized that the energy transition in Indonesia is progressing slowly due to weak political leadership, insufficient capacity of actors, and the burden of past policies. Therefore, Fabby mentioned the importance of implementing a ‘no-regret policy’ that guarantees overall socio-economic benefits regardless of the changes that may occur, as well as public budget reforms and PLN reforms to accelerate the energy transition process.
“Indonesia needs a coherent roadmap to achieve NZE 2060 or sooner. The electricity sector has made significant strides, but the transportation and industrial sectors are still developing. The government must also involve the public to create a just transition. With Indonesia’s values and history, the energy transition should be done with gotong-royong,” he said.
The government has made a political commitment to transition to renewable energy, resulting in increased funding for renewable energy projects both bilaterally and multilaterally. However, despite these efforts, the renewable energy investment target still needs to be met. One of the reasons for this is that there is a need for more bankable projects, and investors are hesitant to invest due to the quality of policies and regulations that do not meet their needs. Despite this, renewable energy utilization has only reached 1 GW in 2023.
IESR believes that to attract investment, it is necessary to review the renewable energy price policy in Perpres No. 112/2022, taking into account technological developments and funding interest rates. Other reforms are also needed to encourage the development of bankable and profitable renewable energy projects for investors. To entice investors, efforts can be made to improve the tariff structure, ensure a fair risk-reward profile for private power producer partners, and consider power-wheeling schemes.
“In addition, a solid collaboration between PLN, regulators, project developers, and financiers, both private and government, is needed to prepare a robust project pipeline and increase projects that are eligible for funding,” explained His Muhammad Bintang, The Energy Storage Technology and Battery Materials Analyst at IESR, who is also an IETO author.
On the transportation side, the adoption of electric vehicles is increasing. The number of electric motorcycles is expected to increase 2.4 times by September 2023, from 25,782 units in 2022 to 62,815.
“Despite government incentives and assistance to adopt electric vehicles for the public, other issues become barriers to adopting electric vehicles. For example, on the two-wheeled vehicle side, there are mileage and performance limitations compared to fuel-based two-wheeled vehicles. In contrast, on the electric vehicle side, other issues hinder the adoption of electric vehicles,” said Faris Adnan Padhilah, Electricity System Analyst at IESR.
IESR believes that to attract investment, it is necessary to review the highest renewable energy price policy in Perpres No. 112/2022 by technological developments and funding interest rates, followed by other reforms to encourage the development of bankable and profitable renewable energy projects for investors. Efforts to attract investors can be made by improving the tariff structure, ensuring a fair risk-reward profile for private power producer partners, and considering power-wheeling schemes.
“In addition, a solid collaboration between PLN, regulators, project developers, and financiers, both private and government, is needed to prepare a robust project pipeline and increase projects that are eligible for funding,” explained His Muhammad Bintang, the Energy Storage Technology and Battery Materials Analyst IESR, who is also an IETO author.
On the transportation side, the increase in electric vehicle adoption saw a 2.4-fold increase for electric motorcycles by 2023, from 25,782 units in 2022 to 62,815 in September 2023.
“Despite government incentives and assistance to adopt electric vehicles for the public, other issues become obstacles to adopting electric vehicles. For example, on the two-wheeled vehicle side, there are mileage and performance limitations compared to fuel-based two-wheeled vehicles. In contrast, on the four-wheeled vehicle side, there are higher prices for electric cars, limitations on vehicle types, and the lack of SPKLUs,” explained Faris Adnan Padhilah, IESR Electricity System Analyst.
On the other hand, local governments in Indonesia face challenges in finalizing the Regional Energy General Plan (RUED) and implementing it to meet renewable energy targets. The recent regulation Perpres No. 11/2023 expands the authority of local governments in renewable energy development. However, one of the implementation challenges is the limited local government budget, which needs to be balanced with other priorities.
“In addition to the expansion of authority, the provincial government also needs to detail the regional energy plan regulations into various measurable instruments and schemes, for example, the priority of regional financial allocations for renewable energy and specific rules for decarbonization of various sectors (transportation and buildings) in the region. In addition, with the ongoing revision of the national general energy plan (RUEN) document, local governments need to update the provincial RUED in the future to reflect regional ambitions in energy transition better and integrate more ambitious renewable energy targets,” said Martha Jesica, the Social and Economic Analyst, IESR.
Information for the media
Indonesia’s Energy Transition Status in 2023
Opportunities and Projections for Energy Transition in Indonesia in 2024
Dozens of young people from different countries and races hold yellow balloons with mobile phone flashlights directed at the end of the balloons. In front of the line, a blackboard with LED lights forms capital letters into the sentence “END THE FOSSIL ERA”.
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Jakarta, December 12, 2023 – Indonesia aims to reach peak greenhouse gas (GHG) emissions by 2035 and gradually move towards net zero emission (NZE) by 2060 or earlier. The energy sector in Indonesia is currently a major source of emissions, with nearly 90.4 percent of the country’s domestic energy supply coming from fossil fuels. Therefore, the transition to renewable energy is crucial in reducing emissions.
Unfortunately, the Institute for Essential Services Reform (IESR) observed that the trend of renewable energy development tends to slow down, reaching only 0.97 GW of the 3.4 GW target in the fourth quarter of 2023. This slow progress will make it difficult for Indonesia to reduce its emissions and meet the decarbonization target in the power sector. Moreover, with rapidly increasing emissions from the demand sector, Indonesia is at risk of not reaching its peak emissions. Therefore, it is crucial to have high emission reduction ambition and strong political commitment to achieve the target.
The discussion of Indonesia’s efforts to reach peak emissions in 2030, which has the potential to be a milestone in the transformation to renewable energy on a large scale or to end hopes of achieving the NZE target sooner, is the main topic in IESR’s flagship report entitled Indonesia Energy Transition Outlook (IETO) 2024.
The Executive Director of IESR, Fabby Tumiwa, stated that this year’s IETO 2024 is more comprehensive in monitoring Indonesia’s energy transition development and projection. Tumiwa mentioned that Indonesia has already released a plan.
The IETO 2024 report states that for Indonesia to meet the emission target of 250 MtCO2e/y by 2030, as agreed upon in the Just Energy Transition Partnership (JETP), it must reduce its coal and diesel power plants by 4.29 GW by 2030. Furthermore, Indonesia needs to increase its renewable energy development by at least 30.5 GW by 2030 to achieve this goal.
Pintoko Aji, Renewable Energy Analyst of IESR, said that the high penetration of variable renewable energy (solar and wind power) will make the concept of baseload plants or plants that operate continuously with high capacity irrelevant.
“To incorporate more variable renewable energy (VRE), Indonesia’s electricity system requires a flexible and responsive infrastructure. This means that the power system must be able to adapt to fluctuating loads and respond to the variability of electricity production from VRE sources. To achieve this, it is necessary to thoroughly review contractual restrictions, such as legal contract modifications from take-or-pay to take-and-pay, and to implement flexibility incentives.,” said Pintoko Aji.
IESR encourages the government to show stronger political will and concrete steps to accelerate renewable energy penetration. In addition, the decarbonization strategy must be implemented across all sectors to support each other. IESR believes that the new president who will be elected in the 2024 election must create momentum for the energy transition from the beginning of his leadership.
All discussions on the status and analysis of the energy sector to accelerate the energy transition are summarized in the Indonesia Energy Transition Outlook (IETO) 2024 and published since 2017 with the Indonesia Clean Energy Outlook (ICEO), which then transformed into IETO in 2019.
“In addition to summarizing the course of Indonesia’s energy transition over the past year, this IETO comprehensively projects sectoral policies in each energy sector and contrasts them with long-term targets. This can be an input for policymakers and stakeholders in the electricity, transportation, industry, and building sectors to improve their sectoral emission mitigation targets and implementation levels,” explained Deon Arinaldo, Program Manager of Energy Transformation, IESR.
IESR will host the Indonesia Energy Transition Outlook 2024 report launch on December 15, 2023. Don’t miss the chance to register and participate in this momentous event. Visit s.id/IETO2024 to secure your spot today.
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