Energy transition will have socio-economic impacts, therefore the transition should be well-managed by the government to achieve a just energy transition

IESR Study Report

The energy transition from fossil energy is currently happening and is unavoidable. This phenomenon could expose countries that depend on fossil fuels to social and economic risks. Therefore it is crucial for the government of Indonesia to manage the transition to minimize the negative impacts while taking the opportunities from the positive impacts. “A good energy transition management can bring justice to all as the costs and benefits are distributed evenly in the society and no one will be “left behind” in the process” states Melina Gabriella, the author of the report Ensuring a Just Energy Transition in Indonesia: Lessons Learned from Country Case Studies.

Learning from the experiences of four countries -Germany, Australia, Canada, and South Africa- there are some universal aspects of energy transition that should be highlighted to ensure a just energy transition. Good governance, economic diversification, social dialogue, and social protection, availability of transition funds as well as skills development are important aspects of an equitable energy transition, says Melina as she concludes the presentation on lessons learned from country studies.

The possible impacts of the energy transition are explored further in the Indonesian context. The energy transition will have an impact on the fossil industry, particularly the Indonesian coal industry. If managed properly, the transition could provide opportunities for the Indonesian economy. Conversely, transitions can also harm the economy if the government is not ready to respond to change. 

The study shows that the coal-producing regions are highly dependent on revenues from the coal industry. “The contribution of coal production in national GDP is not significant -only around 2%- compared to the contribution to provincial GDRP in East Kalimantan, South Kalimantan, and South Sumatra,” says Pamela Simamora, the co-author of the report. The energy transition will cause a decrease in the Gross Regional Domestic Product (GRDP) in these provinces (see fig.1). Pamela further states, “As one of the regencies with a very high level of coal dependence, the energy transition will hit Paser Regency hard, because, without coal, Paser will only be left with a third of its current GRDP” (see fig.2)

Fig. 1 Coal contribution to national and provincial GDPs
Fig. 2 Paser’s GRDP with and without coal

Other negative impacts of the energy transition trend include an increase in the current account deficit and an increase in unemployment. In regards to the latter, the report highlights the fact that the Indonesian coal sector employs more than 100,000 workers, even reaching 1.1 million people if it includes indirect and induced jobs. Therefore, the energy transition has the potential to cause mass unemployment.

However, there are benefits of energy transition that can be optimized by Indonesia if the country is prepared for the transition. Quoting a previous study also conducted by IESR in 2019, the report argues that contrary to common perception, high penetration of renewable energy will provide relatively low system costs. “High penetration of renewable energy (43% of the total energy mix) by 2027 will reduce system costs by 5% and by 12% if the weighted average cost of capital can be reduced further to 8% of the total cost of power generation,” says Melina. 

Furthermore, the study highlights that the energy transition has the potential to drive economic diversification in coal-producing regions and throughout Indonesia. The study has identified manufacturing, as well as agriculture, forestry and fisheries can become the alternative sectors in South and East Kalimantan. The coal provinces can also develop a renewable energy industry to replace the coal industry (see table 1)

Table 1 Renewable energy potential and installed capacity in coal-producing regions

Other positive impacts such as growing green jobs, improved air quality, and reduced health costs are also opportunities that the energy transition can bring. The authors noted that these potential impacts should be explored in further studies to strengthen the justification of energy transition. 

As the closing argument, the authors point out that in order to maximize the positive impact while reducing the potential risks posed by the transition into the economy and society, the government must prepare steps to manage the transition. Understanding the entire spectrum of the energy transition and its impacts on the coal economy and industry through various in-depth research and studies, ensuring the implementation of “good governance” in the energy transition process, building economic resilience through economic diversification, industrial development, and the creation of green jobs in coal-producing areas, establishing an active labor market, develop skills and establish social protection policies as well as establishing an energy transition fund are the recommended actions from the study.

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Authors Contact:

Melina Gabriella (

Pamela Simamora (

A call to revisit the existing National Energy Plan (RUEN)


As a national plan, RUEN becomes a reference for other energy-related plans such as RUKN, RUPTL, and Regional Energy Plan (RUED). In addition, RUEN is also used by ministries and local governments to develop their strategic plans. The existing RUEN, however, was developed by using assumptions and parameters from the year of 2015, making the projections made in the plan overestimated. The overestimated economic and industrial growth projections, for instance, have resulted in overestimated primary energy and electricity consumption which later leads to a high estimation of installed capacity. 

Through the study of National Energy General Plan (RUEN): Existing Plan, Current Policies Implication, and Energy Transition Scenario, IESR attempts to develop three alternative scenarios that not only use updated assumptions and techno-economic parameters but also integrate the latest government policies on energy and higher shares of renewables. 

The primary energy consumption in the first scenario (realization scenario) is lower than the existing RUEN with an annual energy consumption growth rate at 4% (compared to 4.7% in the existing RUEN). The other finding from the study also shows that the 45.2 GW renewable energy target in 2025 will not be achieved. The realization scenario exhibits that renewable energy will only increase to 22.62 GW in 2025, writes Agus Tampubolon, author of the report.

“In the current policies scenario (CPS), the share of renewable energy in the 2025 primary energy mix will not reach 23% as mandated in the existing RUEN. However, the share of renewables in the primary energy mix will rise to 40.3% by 2050, higher than targets in the existing RUEN and realization scenario. This is mainly due to the biodiesel program (B50 from 2021 and B100 in 2030).” 

“In addition, the demand for electricity in the CPS is also higher than the realization scenario due to higher electric vehicle penetration in the CPS.  This leads to higher power plant capacity in the CPS”, says Agus.

Meanwhile, in the energy transition scenario, the moratorium of coal-fired power plants (CFPP) and the closure of older than 30 years CFPP will significantly increase the renewable energy share in the primary energy mix. “To meet the energy transition scenario, renewables installed capacity should reach 23.74 GW by 2025 and 408 GW by 2050.”

“What this study shows is that there is an urgency to revisit RUEN and to update parameters and assumptions of economic growth, energy demand, and renewable energy prices used in this national plan. With the updates, Indonesia should see that a high share of renewable energy is not only possible but also viable”, he concludes.

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Author contact: Agus Tampubolon (Project Manager CASE),

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.”


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Author contact: Julius Christian Adiatma (IESR Clean Fuel Specialist),

Global energy transition will threaten Indonesia’s coal industry. It’s time to prepare for the coal transition


Plummeting costs of renewable energy, increasing coal-related health risks, and raising concern about climate change will likely push coal out of the global energy sector. As the world’s largest steam coal exporter and one of the countries with massive coal-fired power plant expansion, Indonesia would likely hit hard by the global energy transition. 

The main export destinations of Indonesian coal, such as China, India, Japan, South Korea, and East and Southeast Asian countries, have established energy policies directed towards developing renewable energy and clean technologies. With the policies, demands for Indonesian coal from these countries will likely decline in the near future. IESR’s study titled  Energy Transition in the Power Sector and Its Implication for the Coal Industry showcases three different scenarios for Indonesia’s coal demand projection. All scenarios project a decline in coal demand by up to 86% in 2050 compared to 2018 production.

Projected coal demand in three different scenarios for Indonesia

The author of the study, Deon Arinaldo, stresses that the government’s plan to prolonge coal use in the country by installing clean coal technology and setting up the downstream coal industry (coal upgrading, gasification, and liquefaction) will only put the country at risk. “The viability of the downstream industry will highly depend on different factors such as feedstock prices since outputs from this industry will directly compete with similar products sourced from oil and gas. The investment cost is also a barrier. A coal liquefaction plant with a production capacity of 50 thousand barrels per day, for instance, will require an investment cost of USD 3.5 – 6.3 billion. The number is still not taking into account the investment costs for pollution and emission control in coal mining activities.” 

“Moreover, in terms of CO2 emissions, clean coal technology cannot beat renewable energy that is available at lower costs”, says Deon.

Full lifecycle of GHG emission for different power plant technologies. Source: Bruckner et al. (2014)

A failure to plan coal transition will likely result in a range of problems such as stranded assets, unemployment, revenue loss, and economic contraction in coal-producing regions. The UK case study shows that the coal transition is a long and complex process that requires careful planning. “Learning from this experience, Indonesia should prepare coal-producing regions such as East Kalimantan, that have high reliance on the coal industry to generate revenues, to go through the transition process. In preparing coal exit plans for these regions, the government should set clear goals and involve stakeholders in every step in the transition process”, he concludes.

Total GDP and GDP growth from coal & lignite mining in East Kalimantan


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Author contact: Deon Arinaldo (IESR Energy Information Specialist),