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Incentives to Boost Electric Vehicle Adoption
5 April 2023 – Electric vehicle subsidies have recently become an interesting topic on social media. Some consider this policy as a mismatch, but others argue that electric vehicles will help the energy transition process. In the Ruang Publik KBR event which was held online on March 20 2023, Ilham R.F. Surya, IESR Environmental Policy Researcher, explained that giving electric vehicle incentives would be useful in stimulating electric vehicle adoption. In addition, the government also needs to implement an Avoid-Shift-Improve (ASI) strategy to reduce emissions in the transportation sector.
According to Ilham, the use of the Avoid-Shift-Improve (ASI) paradigm will help reduce carbon emissions, especially for the transportation sector as one of the biggest emitters.
“If possible, avoid it first, such as reducing unnecessary trips. If not, do the shift by using public transportation. The final option is to improve or use environmentally friendly technology,” Ilham explained.
Furthermore, he explained that electric vehicles are set to meet the needs of environmentally friendly technologies. In terms of emissions and pollutants, electric vehicles are much lower than fuel vehicles, even when the electricity source is not optimal or they still use coal. According to him, using electric vehicles is a small act that can be done individually to reduce carbon emissions, apart from using energy wisely. Moreover, the energy sector is now the largest contributor to emissions in Indonesia, which is around 26%.
Regarding Indonesia’s readiness to adopt electric vehicles, Ilham stated that all parties were still waiting for each other to show readiness before taking further steps in developing electric vehicles. What will have the most impact, however, is the installation of Public Electric Vehicle Charging Stations (SPKLU) or charging units, which will be 3-4 times more effective in increasing electric vehicle adoption due to reduced range anxiety. In addition, electric vehicles have so far provided several innovations in technology, and in terms of safety, they are also following vehicle standards in general.
One of the efforts to increase the adoption of electric vehicles by the government is to provide incentives because there is still a gap between the prices of electric vehicles and fuel vehicles. Regarding the recipients of the incentives themselves, Ilham stated that the purchasing power of Indonesian people is still limited to electric motorcycle consumers, while electric cars are more affordable for 1% of the population. So, to increase adoption, incentives are better suited to be given to electric motorbike consumers.
“Before this incentive was implemented, it would be nice if the requirements for the Domestic Component Level (TKDN) were mandatory for incentives, because, by increasing adoption, it would simultaneously employ domestic workers,” Ilham explained.
Ilham also assessed that electric vehicles can help with accessibility in remote areas. However, the challenge that arises is electricity which often experiences rotating blackouts in the regions. Another challenge to electric vehicle adoption includes the price, not only the price of the vehicle but also the infrastructure. Apart from that, there is also range anxiety because the infrastructure is inadequate.
In the future, Ilham believes that as technology improves, the price of electric vehicles will decrease. The amount of decline per year is around 9%, so by 2030, it is expected to be equivalent to the price of a gasoline car. In addition, with the increasing adoption of electric vehicles, it is expected that Indonesia’s dependence on fuel, which until now has been subsidized, will decrease. By reducing emissions and pollution, coupled with reducing fuel consumption, of course the energy transition will develop more rapidly.
“But of course, the decision to buy an electric vehicle still depends on the buyer. Look at the needs and supporting infrastructure, and don’t depend on the fear of missing out (FOMO). For now, of course, give incentives to those who need it more,” Ilham concluded.
Projections of electric vehicles in 2023 are summarized in the Indonesia Electric Vehicle Outlook 2023.
Electric Vehicles to Support Decarbonization of Transport
Jakarta, 28 March 2023 – The energy transition process requires great efforts from all sectors, including the transportation sector. Transport decarbonization then becomes a practical and affordable way for individuals to cut carbon emissions. One way to do this is by using an electric vehicle. In an interview with Saya Pilih Bumi at IIMS last February 24, Faris Adnan, Researcher for Electricity Systems and Distributed Energy Resources at IESR, explained the progress of the decarbonization of transportation that is currently happening in Indonesia.
“From year to year, the development of electric vehicles in Indonesia continues to increase. In 2022 alone, the increase in the adoption of electric motorbikes can reach 5 times and electric cars 3 times compared to the previous year,” explained Faris.
Geographically, 70-80% of electric vehicles in Indonesia are still concentrated in Jakarta. In terms of the economic ability of buyers, most of the users are also in the upper middle class. This demographic is following the economic capacity of each region, which considers that the price of electric vehicles is still competitive compared to fuel vehicles.
Faris said charging facilities tend to be built in areas with high electric vehicle users, creating a dilemma for local electric vehicle users and investors. Electric vehicle users are concentrated in Jakarta, so most of the Public Electric Vehicle Charging Stations (SPKLU) are built in Jakarta. Investors will be more reluctant to build in areas where there are no users, while users will also reconsider using electric vehicles due to range anxiety. Thus, government policies and investments are needed to stop these problems.
Regarding the performance of the electric vehicle itself, Faris thinks that the technology is not perfect. The system has limitations which, when removed, can make the range farther or the speed higher. However, doing so will wear the battery more easily. In addition, Faris assessed that if the vehicle’s power is low, its speed will also decrease, in contrast to fuel vehicles.
Every year, fuel consumption increases by around 1.2 million kiloliters, which contributes to a significant increase in carbon emissions. Faris then explained that the comparison of emissions between electric vehicles and fuel depends on their use. Currently, the majority of Indonesia still uses coal as an energy generator, so the use of electric vehicles has not yet become zero emission. But with the same use, the emissions emitted from electric vehicles are certainly lower. If electric vehicles are sourced from renewable energy, the emissions released will be minimal compared to if the electricity is sourced from coal-fired power plants.
“Electric vehicles are important for pursuing decarbonization, but they are not the only solution. If we talk about decarbonization, it is important to use the Avoid-Shift-Improve (ASI) framework. The existence of this electric vehicle can also help to let go of our dependence on fossil fuel, and even better if it is integrated into public transportation,” concluded Faris.
Excess Power Supply, PLN Needs to Evaluate the 35 GW Megaproject
Jakarta, February 8, 2023 – The State Electricity Company (PLN) is currently in the midst of a crisis of oversupply of electricity. Several factors cause this, including the pandemic and global recession. In addition, there is a 35 Gigawatt coal power plant megaproject that has been initiated since 2015 and operated at only 47% in 2022. However, there are also several misconceptions about this crisis. In a news program at the CNBC Energy Corner (6/2/2023), Herman Darnel Ibrahim, a member of the National Energy Council, and Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), discussed some of these misconceptions.
According to Herman, it is common for electricity service providers, including PLN, to set a percentage of reserve margin. Referencing other countries, 40-50% is a normal rate for the reserve margins to anticipate growth and maintenance. In 2022 alone, electricity growth was recorded at 6.15% (including from private power producers) and is expected to continue to increase in the coming years.
“On the island of Java itself, the reserve margin is probably 60%, while in other places there is a shortage of power. So in the next two years, it is estimated that there will be no overcapacity,” explained Herman.
According to Fabby, the growth percentage stated by Fabby does not reflect the actual rate of growth inside PLN, which is less than 5%. He considers that the current oversupply situation is due to a mismatch in demand projections that form the basis for planning and realizing the 35 GW.
“Of the 35 GW that have been planned, 5.4 GW have not been contracted and have not received funding. It would be good if this amount could be canceled or diverted to renewable energy,” explained Fabby.
Herman and Fabby agree that there needs to be an evaluation from PLN in various aspects. First, it must sharpen demand forecasting for electricity use, while taking into account electricity supply from private generators. This can reduce the possibility of excess capacity, which can result in costs to be borne by the government or increased tariffs on customers.
Second, there needs to be an evaluation of electricity purchase and sale contracts with private power producers, especially those using take or pay clauses. 80% of the excess supply of electricity comes from private producers, and each GW costs the state IDR 3 trillion.
Third, it is necessary to evaluate the schedule between projects. The tendency is that project completion is adjusted to government tenure. This does not match the gradual demand growth for electricity, instead there is a sudden increase in power capacity, which causes overcapacity.
“The COD schedule (commercial operation date) should be determined by PLN, not the government’s term of office. Usually, projects are planned year by year so that there is no under capacity or overcapacity,” said Herman.
“The remaining 5.4 GW is important to monitor. The project is mostly funded by China, while since a few years ago, China has not financed coal plant projects anymore, so if it is certain that there will be no funding, it is better to cancel or divert to renewable energy. Evaluation is then important to provide stability of supply and affordable electricity prices,” concluded Fabby.
Nationwide Synergy and Investment for Indonesia’s Renewable Energy
Jakarta, 6 February 2023 – Indonesia’s journey to net zero emission is still a long and winding road. One of the government’s actions in realizing this target is to make regulations to encourage the implementation of renewable energy. In reality, targets, regulations and implementation are often unaligned.
Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), in the Market Review segment on the IDX channel (24/01/2023), stated that in 2022, Indonesia’s target for renewable energy development of 1000 MW has not been fully realized.
“There are several factors why this target was not fully realized, the first is the economic weakening which has caused unoptimized growth of electricity demand. Another factor is the pandemic, which caused delays on several renewable energy projects,” explained Fabby.
Furthermore, Fabby explained that Government Regulation no. 79/2014, which was more thoroughly mandated in Presidential Decree 22/2017, has set a target of a national renewable energy mix of 23% by 2025. To achieve this target, Fabby estimates that there needs to be a renewable energy growth of 3-4 Gigawatts per year. In fact, since the Government Regulation in 2014 was enacted, the average renewable energy increase rate is only 15% from 3-4 GW, which is around 400-500 MW.
This problem is also rooted in the country’s energy infrastructure itself. Indonesia’s energy source still depends on fossil energy, which accounts for 86%. To change this structure, it is also important to consider the growth in energy demand in Indonesia. Indonesia must then strive to use renewable energy to tackle this increasing energy demand. According to IESR calculations, energy transition efforts in Indonesia require around 1.4 billion dollars in funding. This fund covers renewable energy and energy infrastructure upgrades.
Regarding people’s economic perceptions, Fabby assesses that fossil energy is still seen as more economic because currently coal is still subsidized by the government. The Domestic Market Obligation Act in 2017 capped coal prices at $70/ton even if global prices are higher. This kind of incentive should also be given to the development of renewable energy. However, the incentive was also hampered by the Domestic Component Policy Level (TKDN).
“Solar PV has become the most efficient source of renewable energy, but in Indonesia it has become expensive. Compared to 10 years ago, the price of solar PV has decreased by 90%. The TKDN policy is actually a disincentive that can prevent investors from investing and make solar PV more affordable,” concluded Fabby.
Indonesia Energy Transition Homeworks
(Jakarta, 12 January 2023) – By definition, the energy transition is an effort to change the energy supply from previously a coal-dependent source to cleaner energy. This is the effort that the Indonesian government continues to pursue to achieve national energy security and autonomy. However, there are still many tasks that must be fulfilled by the Indonesian government.
Handriyanti Diah Puspitarini, Research Manager of the Institute for Essential Services Reform (IESR) in the Ruang Publik KBR talk show: Energy Transition in Indonesia, How Far We’ve Come organized by Berita KBR (10/01) explained that the IESR report on energy transition monitors public readiness through surveys and government readiness through research.
“Bottom-up side has supported the procurement of cleaner energy, but based on the transition readiness framework studied in the Indonesia Energy Transition Outlook 2023, the government (top-down) still has many things to improve, especially in terms of commitment and regulation,” Handriyanti said.
Meanwhile, on the same occasion, Raden Raditya Yudha Wiranegara, IESR Senior Researcher stated that from the fossil fuel side, the government has not yet paid attention to carbon emissions produced by mining, oil and gas industries.
“The government only monitors carbon dioxide (CO2) emissions, which only has a fraction of methane’s heat-trapping ability, around 29-30 times less. If there is a reduction in methane gas by only 30%, it will help abate the temperature rise by 0.5°C,” said Raditya.
Handriyanti and Raditya then discussed the upward trend of buying electric vehicles. The high price then led to the government’s proposal for subsidizing these vehicles, which is expected to stimulate public demand and lower the price of electric vehicles eventually.
However, according to them, there are several points of public resistance regarding the energy transition and the use of electric vehicles. The first is the view that fossil fuels are cheaper than renewable energy.These prices are the result of government intervention in the form of price capping, subsidies and compensation. This will surely burden the state budget when global oil prices rise. Second, there is range anxiety, which means the fear of electric vehicles inability to travel long distances.
“The government then has to work around this by increasing the number of charging stations at rest areas in-between journeys,” said Raditya.
Handriyanti and Raditya discuss the government’s progress and tasks in the matter of energy transition from a techno-economic, regulatory and funding perspective. They said that the price of renewable energy technology is becoming more affordable every year, for example, the price of solar modules is 70% cheaper than 7-10 years ago and is predicted to decrease even more. Supporting Regulations such as Presidential Regulation No. 112/2021 which stipulate ministers to make a roadmap for retiring coal-fired power plants (CFPP) needs to be supported. However, the implementation of this regulation still needs to be monitored and improved, especially considering that coal and fossil funding is currently still 10 times larger than renewable energy funding.
“The presence of international forums such as the G20 has encouraged Indonesia to make commitments towards energy transition and attract financing for those efforts. It is hoped that this financing can help Indonesia achieve its target of a renewable energy mix of 23% by 2025,” they concluded.
Government and Industrial Sector Support for Energy Transition in Central Java
Semarang, December 8, 2022 – Indonesia is setting a target to achieve a renewable energy mix of 23% in 2025. In order to encourage the energy transition in Central Java, the Institute for Essential Services Reform (IESR) and the Central Java Provincial Government are holding the Central Java Stakeholder Gathering 2022 with the theme ‘Energy Transition for Development of Low Carbon Areas’ which takes place annually via hybrid.
Achmad Husein, The Regent of Banyumas, stated that he had closed the two most giant landfills in Banyumas to reduce carbon. Garbage will be sorted into useful, non-organic and organic waste.
“In managing waste, Banyumas uses technological solutions divided into two types, first downstream (community), by using a waste bank. Second, an app initiative to reduce plastic waste upstream, by buying all plastic from the community (various types of plastic). Then, there is also an application for people to sort organic waste and get paid. Each kilogram of organic waste is paid Rp. 100, “explained Achmad Husein.
Tavip Rubiyanto, Head of Sub-Division of Energy and Mineral Resources, Directorate of Synchronization of Regional Government Affairs I, Directorate General of Regional Development, Ministry of Home Affairs, explained the importance of regional development, which can make a significant contribution to national development. However, several cities still need to prepare a Regional Energy General Plan (RUED), so assistance from the Central Government is required in its design. The problem is that regions can only contribute as much as the authority they hold.
“Regional authority for energy transition is relatively small, so its contribution is also relatively small. For this reason, the Ministry of Home Affairs will draft a Presidential Decree for Strengthening Regional Roles. Consequently, the regions need to revise the RUED according to the new authority/budget to support the energy transition target,” Tavip explained.
In line with Tavip, Djoko Siswanto, Secretary General of the National Energy Council (DEN) hopes that there will be better coordination and cooperation between local governments in Indonesia to achieve renewable energy goals. For example, the Central Government can instruct local governments to use electric vehicles in implementing RUED. Even so, there are still obstacles in increasing energy utilization in accordance with regional potential, most importantly funding.
“On the other hand, we need international support to face the funding challenges in the energy transition. For this reason, regional regulations can become a basis for investors in developing renewable energy in the region. It could be with the cooperation of region-owned business entities, the private sector, and international parties,” said Djoko.
To support the acceleration of the energy transition in the region, Muhammad Firdaus, Deputy Head of Bank Indonesia Representative for Central Java Province, explained that green financing (green economy) in Central Java is significant o support a sustainable economy. The green economy is projected to deliver benefits such as job creation, and help ease export barriers. Thus the reduction in production costs is only a maximum of 10%, making it less attractive for companies to implement a circular economy.
“Bank Indonesia is trying to encourage banks to extend credit to the green economy sector. One of the projects that has been carried out is Green Loan to Value Ratio (LTV) 0% (without down payment) and allows buying green bonds to meet the Macroprudential Inclusive Financing Ratio (RPIM),” he said.
Meanwhile, Ignasius Iswanto, General Manager Engineering, PT Djarum OASIS Kretek Factory stated that Djarum had made efforts towards sustainability. For example, Djarum already has a carbon footprint report, water resources management, energy saving, and composting. Furthermore, PT Djarum uses a biomass boiler with wood chip fuel on boilers. Emissions reduced from planting rain trees (trembesi) in the Djarum Bakti Lingkungan Program amount to 4,457,400 million tonnes of CO2e. He also explained that through his efforts to make Djarum an environmentally friendly company, he discovered another energy producing source using wastewater, namely plasma energy.
“Plasma energy should also be considered as a source of renewable energy, where liquid waste can be broken down by plasma into electricity and clean water. However, its use is more suitable for industrial complexes,” said Ignasius.
Central Java Strategy for Realizing Low Carbon Development
Semarang, December 8, 2022 – The energy transition has become urgent as the world responds to the challenge of building a more resilient energy system. Thus, there needs to be synergy between the government and the private sector. The Institute for Essential Services Reform (IESR) and the Central Java Provincial Government held the Central Java Stakeholder Gathering 2022 with the theme’ energy transition for low-carbon regional development’ to encourage the energy transition in Central Java.
Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) explained, Central Java has an important role as a beacon of energy transition in Indonesia. Fabby said that the rapid development of the energy transition in Central Java could be a lesson for other regions that leadership, regional innovation and collaboration are the keys to the success of the energy transition’s success toward low-carbon development.
“Overcoming the threat of the climate crisis is very relevant to what is happening in Central Java. Various practices of using renewable energy in Central Java have occurred and illustrate how the community is able to encourage the energy transition with their own efforts supported by the government to make innovations. This is what we call the Gotong Royong Energy Transition,” said Fabby Tumiwa.
Moreover, the Deputy Governor of Central Java, Taj Yasin Maimoen, stated that Central Java had made a Regional Energy General Plan (RUED) as a guideline for energy development. It has been implemented through Regional Regulation (Perda) Number 12/2018, stipulated on December 19, 2018. This regulation regulates energy conservation, conservation of energy sources, and energy diversification. The government is also pushing for energy autonomy in the villages and utilizing the energy potential in each town.
“In one village in Magelang, we saw a huge potential for renewable energy. It is impossible for the provincial government to work without the paradigm of its people. In their case, the farm has been centralized, owned by the community and made into one place. There are hundreds of goats whose feces need to be processed. Not only as fertilizer but can also be made as renewable energy,” said Taj Yasin.
Sujarwanto Dwiatmoko, Head of the ESDM Office for Central Java Province, explained that Central Java has made innovations related to renewable energy through projects such as Central Java Solar Province. This program is expected to help Central Java achieve an energy mix level of 23.32% in 2025.
“The most notable impact of Central Java Solar Province is the increase of capacity in rooftop solar power plants in Central Java from 0,1 MWp in 2019 to 22 MWp in 2022,” said Sujarwanto.
On the other hand, Widi Hartanto, Head of the Central Java Province Environment and Forestry Service (DLHK), his party is currently studying the reusability of wastewater and waste into new, renewable energy.
“This program aims to survey the characteristics of wastewater and garbage and hold focus group discussions related to waste management into renewable energy in cities such as Pati, Sukoharjo, Boyolali, Kab. Semarang, Karanganyar, Grobogan, Kab. Magelang, Magelang City, Temanggung, Klaten, Semarang City, Kab. Semarang, Kab. Karanganyar, Boyolali, Salatiga, and Kudus,” explains Widi.
To realize low-carbon development, M Arif Sambodo, head of the Department of Industry and Commerce in Central Java, emphasized that the industrial sector is the most significant contributor to carbon emissions. Thus, his party plans to strengthen partnerships with the local steel industry to supply solar panel production to reduce greenhouse gas (GHG) emissions.
“Currently, there are demands from consumers for the industry to start using new and renewable energy (NRE) so that it demands the industry to use NRE in its production process,” said Arif.
Meanwhile, Muhammad Iqbal, President Director of Jateng Petro Energi (JPEN) explained three strategies to support the energy transition: strengthening ecosystem institutions, solarpreneurship (creation of green jobs), and capacity building.
“JPEN is committed to encouraging a more massive energy transition, such as floating Solar PV, rooftop Solar PV, Solar PV training, carbon trading, and the construction of public electric vehicle charging stations (SPKLU) which are important parts of the electric vehicle ecosystem,” explained Iqbal.
