Indonesia Fosters Investment Mobilization to Achieve Gigawatt Order of Solar

Jakarta, 19 April 2022 – Indonesia’s presidency at the G20 2022 is a momentum to show Indonesia’s seriousness in accelerating the global energy transition and the national energy transition plan to achieve carbon-neutral 2060 or faster. One of the ways to achieve it is by accelerating the utilization of solar PV, which has a potential of up to 3400 Gigawatts in Indonesia. Through the Indonesia Solar Summit 2022 organized by the Ministry of Energy and Mineral Resources (MEMR) in collaboration with the Institute for Essential Services Reform (IESR), it is hoped that the commitment of local governments, electricity consumers, private and state-owned developers, regional owned-enterprises, and the community to encourage the adoption of solar PV and mobilize the required investment.

Representing the Minister of Energy and Mineral Resources (MEMR), Secretary General of the Ministry of Energy and Mineral Resources Ego Syahrial said that Indonesia’s energy transition roadmap to achieve Net Zero Emission (NZE) by 2060, solar energy will play an important role in national electricity supply, of which 587 GW capacity new renewable energy (NRE), of 361 GW or more than 60% will come from solar energy.

“The government has three major programs for utilizing solar energy, namely rooftop solar PV, large-scale ground-mounted solar PV, and floating solar PV. The implementation of these various programs requires contributions from many parties, not only the government, business area holders, and renewable energy developers, but also energy users, such as the commercial and industrial sectors,” explained Ego in his speech as well as opening the Indonesia Solar Summit/ISS 2022 event.

The commitment, continued Ego, to realize the 2.3 GW (accumulated) solar PV project in 2022 and 2023 which was declared by 31 companies and the plan to build a solar PV component factory in Indonesia is to re-energize its solar energy investment in Indonesia.

Ego added that the rooftop solar power plant itself is one of the quick wins in accelerating the use of solar energy through direct contributions from energy users, especially for industry to meet increasingly strong market demands for green products.

“Support from local manufacturers is also very much needed to fulfill local content requirements and provide great benefits for the country, especially in terms of job creation. Besides that, aspects of easy access to cheap financing, incentives, and other financing facilities are very important to provide financial feasibility and increase energy investment. renewable energy such as solar PV,” he said.

Michael R. Bloomberg, Founder of Bloomberg LP and Bloomberg Philanthropies and United Nations Special Envoy for Climate Ambition and Solutions, emphasized the importance of transitioning to renewable energy as one of the right solutions to achieving zero emissions. He continued that speeding up the investment in solar power will accelerate the green resilient economic development.

“Indonesia has the potential to be a global leader in solar power. This summit is an important opportunity to showcase and accelerate the country’s clean energy efforts before G20 leaders arrive in Bali this November. Solar is already cheaper than coal in many countries. The more we do to speed up investment in solar power, the faster we can cut emissions, create new jobs, and build a stronger and more resilient global economy,” Michael explained.

In 2021, IESR identified large-scale PV project pipelines totaling 2.7 GWac, with an investment value of US$3 billion. At the ISS 2022, the number of solar PV project pipelines committed by multiple companies amounts to 2,300 MW, consisting of rooftop PV (largest percentage), ground-mounted solar PV, and floating solar PV. To mobilize this investment potential, an attractive and supportive ecosystem is needed; including sound policies and regulations, comprehensive implementation of existing regulations, and support to drive the development of the solar PV industry supply chain in Indonesia. 

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) stated that to achieve the renewable energy target of 23% by 2025 according to Presidential Regulation 22/2017, as well as the RUPTL target of 10.9 GW, additional renewable energy generating capacity of 4 GW is needed from outside of PLN. This addition can be contributed by solar PV, both rooftop solar and the use of solar PV in other PLN electricity business holders.

“From the declaration of the 2.3 GW solar PV project at ISS 2022, shows the enormous potential of solar energy in Indonesia. Indonesia can become a Solar Powerhouse in Southeast Asia with potential growth of 3-4 GW annually if it is fully supported. It opens up opportunities for green investment to stream, opportunities to grow the integrated solar power industry from upstream to downstream, and employment and become the driving force for post-COVID economic recovery. President Jokowi needs to see this potential and lead the solar energy revolution for the energy transition in Indonesia,” said Fabby Tumiwa.

The Indonesia Solar Summit (ISS) 2022 was held on 19 and 20 April 2022, highlighting support from the Coordinating Minister for Economic Affairs, Minister of Energy and Mineral Resources represented by the Secretary-General of the Ministry of Energy and Mineral Resources, Deputy Minister of State-Owned Enterprises, Deputy for Investment Planning at the Ministry of Investment, representatives of the Ministry of Finance, CEOs of national and multinational companies, and 15 speakers on Summit Day 2 workshop. ISS 2022 receives support from Bloomberg Philanthropies, Matahari Power, Utomo SolaRuv, BloombergNEF, International Solar Alliance, the Indonesian Solar Energy Association, and the Clean Affordable and Secure Energy in Southeast Asia (CASE) Project; and was attended by more than 600 participants online and offline.

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.

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.

Women’s Groups and Farmers’ Groups on the NRE Bill “Not New Renewable Energy but Clean Energy”

Jakarta, March 4, 2022- The House of Representatives of the Republic of Indonesia (DPR RI) has submitted the Draft  Bill on New and Renewable Energy (RUU NRE) to the Legislation Agency (Baleg) for harmonization. However, the aspirations and needs of the community such as women’s groups (and also communities in the 3T area-Frontier, Outermost, Disadvantaged) as well as the gender approach have not been reflected in the existing draft of the NRE Bill. Therefore, the Indonesian Women’s Coalition (KPI) in collaboration with the Institute for Essential Services Reform (IESR) held a webinar entitled “The NRE Bill: A Further Look at Gender Perspectives Accommodated in Energy Policy”.

Energy plays an essential part in women’s lives, which are closely related to household activities. The use of this type of energy will affect the productivity and lives of women. The type of energy that is full of emissions and pollution will harm women’s health and the environment, especially in 3T areas in Indonesia. Besides, women have only been positioned as energy consumers, even though there should be opportunities for the general public, including at home, to produce energy and use it themselves.

Addressing women’s need for energy, KPI encourages the DPR RI and the government to see women as energy producers. Moreover, in terms of energy policy, KPI urges to develop clean affordable renewable energy that can be found locally instead of relying on fossil and nuclear energy.

Dian Aryani, National Presidium of the Indonesian Women’s Coalition of  Farmer Families speaks on her concern that women are often not involved and trained in NRE energy development. She also views the NRE terminology as inappropriate. She said instead of developing new energy, it is better to focus on utilizing clean energy that does not contain pollutants and renewable energy. The existence of an article that regulates the protection of community initiatives in building, developing, and utilizing renewable clean energy is crucial, especially for the household scale and non-commercial community scale.

“Furthermore, the government needs to implement gender mainstreaming in policies, planning, implementation,  and evaluation of NRE development,” she added.

Maftuh Muhtadi, Ministry of Women’s Empowerment and Child Protection (KPPPA) in his presentation acknowledged that women are still seen as the main consumers of electrical energy.

“So far, energy management has always been attached to women’s responsibilities regarding their domestic roles. Energy consumption tends to be inefficient and the role of women is important to improve the efficiency of energy use and management,” he explained.

Highlighting that there is still a portion of fossil energy in the NRE Bill in the form of coal downstream, Maftuh cannot one hundred percent refuse fossil energy. He stated that the most important thing is to ensure that the production, distribution, and consumption of energy have few negative effects.

On the other hand, Mohamad Yadi Sofyan Noor, Head of the Mainstay Farmers and Fishermen Contact (KTNA) views that including nuclear energy in the NRE Bill is not a wise action. His party objects to the construction of nuclear power plants because it has the potential to harm the economy of farmers and fishermen.

“The construction of nuclear power plants increases the risk for farmers and fishermen because it absorbs large funds that are possible to be allocated to other programs such as food security. The required land for building nuclear power is large enough to threaten the access and economic activities of farmers and fishermen. The risk of a nuclear power plant accident is borne directly by the farmers and fishermen who are around the nuclear power plant,” he concluded.

Rinaldy Dalimi, the Expert Council of the Indonesian Renewable Energy Society (METI) said that the presence of nuclear energy in the NRE Bill would complicate the development and exploitation of renewable energy.

“The NRE Bill, if studied in more depth, will not be passed soon because at least the central government should consider building 5 new institutions, and must provide various incentives and radioactive waste disposal sites,” he added.

Rinaldy believes that in the future there will be a time when everyone can produce their energy, it won’t be a concern to the government.  Energy will become a household matter. Thus, the role of women will be crucial in managing the energy sector.

Sugeng Suparwoto, Chairman of Commission VII DPR RI on the same event informed that the NRE Bill in the next 3 months can already be ratified. He also stated the development of renewable energy is a must. However, he admitted some challenges in developing NRE, such as the big political power still leaning towards fossil energy.

Sugeng explained that in the process of drafting the NRE Bill, the participation of all stakeholders, including the involvement of women, had been carried out. Responding to the nuclear issue in the NRE Bill, although he stated that he was open to any suggestions and input, he repeatedly explained that nuclear is one of the technology options with minimal emissions.

Approved! The New Revised Solar Rooftop Regulation Targets the development of 3.6 GW of Rooftop Solar by 2025

The issue of government policies of the Minister of Energy and Mineral Resources Regulation No. 49/2018 in terms of rooftop solar in Indonesia since 2018 has proven to have increased the adoption of PV mini-grid roofs from initially only 609 customers in 2018 to 4,262 customers in 2021. In 2021, the Minister of Energy and Mineral Resources (MEMR) revised regulation No. 49/2018 to  Regulation No. 26 of 2021.

“The implementation of the MEMR Regulation No. 26 of 2021 is expected to boost the development of the rooftop solar PV market, especially with the stipulation of a target of 3.6 GW of rooftop solar power in the National Strategic Project (PSN),” said Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) in the Indonesia Solar Week 2022 (10/2/2022). He is also the Chairman of the Indonesian Solar Energy Association (AESI).

The MEMR Regulation No. 26 of 2021 is the third revision of MEMR No. 49/2018. The Minister of Energy and Mineral Resources Regulation No. 26 of 2021 has been issued since August 20, 2021. After experiencing a delay in ministerial approval finally, it was agreed to be implemented on January 18, 2022. The following is a comparison of the improvement in the provisions of the three MEMR Regulations:

Revision

Rooftop Solar MEMR Regulation

No. 49/2018No. 16/2019No. 26/ 2021
Electricity export65%As in MEMR Ministerial Regulation No.49/2018100%
Availability of export-import kWh metersMax. 15 business days after SLO (Operation Worthiness Certificate) received by PLNMax. 15 business days after SLO (Operation Worthiness Certificate) received by PLN
Period for setoff of the unused creditMax. 3 months6 months
Timeline for solar rooftop ApplicationMax.15 days5 business days without an adjustment to the Electricity Sale and Purchase Agreement (PJBL) and 12 days with an adjustment to the PJBL
CostumerOnly PLN’s CustomerPLN customers and customers in non-PLN Business Areas (IUPTLU holders).
Industrial CustomerSubject to capacity charge and emergency electricity purchase
with the formula:

Capacity cost = total inverter capacity (kW) x 40
(minimum load limit of electricity in one month) hours x electricity tariff. then multiplied by the electricity tariff.
Subject to capacity charge with
formula :

Capacity cost = total inverter capacity (kW) x 5
(five) hours x electricity tariff.
Subject to capacity charge with
formula :

Capacity cost = total inverter capacity (kW) x 5
(five) hours x electricity tariff.
Online reportingNANAAvailability of submitting the application, reports , and supervision of the solar rooftop program;
Complaint CenterNANAAvailable
Othersthe possibility for trading carbon credits generated from solar PV systems

The government hopes that the improvement of the rooftop solar regulation will encourage the achievement of the target of 3.6 GW of PV mini-grid by 2025. The target of 3.6 GW of rooftop solar is the MEMR proposal that is included in the National Strategic Project as stated in the Coordinating Ministry for Economic Affairs Regulation No. 7 of 2021. The potential positive impacts of the projected growth of 3.6 GW Rooftop PLTS include absorbing 121,500 workers and reducing Greenhouse Gas (GHG) emissions by 4.58 Million Tons of CO2e.

As part of the implementation of the MEMR Ministerial Regulation No. 26/202, Fabby encouraged the government to immediately establish a solar rooftop Customer Center per article 26 of the MEMR Ministerial Regulation. In addition, Fabby hopes that the solar rooftop application process and permits are clear and concise following the latest provisions. On the other hand, problems that are often faced by potential customers such as the length of time to obtain an Exim meter can also be overcome, thereby increasing the installation of rooftop solar power plants in the future.

Overseeing the Indonesia Government’s Strategy in Energy Transition in 2022

press release

Jakarta, 18 January 2022 Entering 2022, the Ministry of Energy and Mineral Resources shared Indonesia’s energy transition strategy in the “Press Conference on 2021 Performance Achievements and the 2022 Work Plan for Energy and Mineral Resources and the EBTKE Subsector”. The Institute for Essential Services Reform (IESR) views that even though the direction of the energy transition is becoming more evident, it is crucial to speed up the energy transition to reduce GHG emissions and align with Paris Agreement pathways to limit the earth temperature well below 1.5 degree Celsius. Moreover, some overlapping strategies need to develop in a more focused roadmap, such as Dimethyl Ether (DME) utilization, gas grids, and induction cooktops to meet household energy needs.

In the 2021-2030 Energy Transition Roadmap, the government focuses on new and renewable energy power plants’ construction which reach 20.9 GW, while the solar rooftop is targeted at 3.6 GW. The solar rooftop construction will be massive in 2031-2050 with a total amount of 279.2 GW.

Based on the IESR study entitled “Deep Decarbonization of Indonesia’s Energy System”, the construction of renewable energy power plants should be accelerated in the 2021-2030 period to achieve the renewable energy mix target, and reach peak emissions in the electricity sector before 2030. In addition, there is a need for at least a 14-fold increase in the total renewable energy capacity in 2020, with around 117 GW coming from solar rooftops and 23 GW from other renewable energy plants.

The government’s report on the achievement of new and renewable energy power generation capacity until 2021 reaches 11,152 MW. Fabby Tumiwa, Executive Director of IESR, feels that the target for adding renewable energy generating capacity has always been below the government’s target since 2019 and is not on track with the renewable energy mix target of 24 GW by 2025.

“The reasons for the low obtainment of renewable energy plants are structural. For instance, the Minister of Energy and Mineral Resources No. 50/2017 makes renewable energy projects unbankable, PLN does not carry out the regular and on schedule basis of the procurement of renewable energy plants, the lack of competitive domestic financing support, and the delay in project realization due to the pandemic,” said Fabby Tumiwa, Executive Director IESR.

Highlighting the investment target for the new and renewable energy sector in 2022, the government has set an investment entry of USD 3.9 billion, up 2.6 times from the previous investment achievement of USD 1.51 billion in 2021. Deon Arinaldo, Program Manager of Energy Transformation, IESR, thought that although the target has almost tripled, it is a small amount to fund efforts to decarbonize Indonesia’s energy system.

“Based on the study of the Indonesia Energy Transition Outlook 2022, investment in renewable energy for the electricity sector alone requires  11.1 billion USD per year for the next decade. Several renewable energy policies and regulations that should have been released last year, need to be finalized immediately to increase investor confidence and the renewable energy investment climate. Renewable energy investments outside of PLN’s RUPTL (National Electricity Supply Business Plan), such as solar rooftop, also need to be fully supported to attract investment from the beginning of this year, “added Deon.

Furthermore, the government’s strategy to maintain fossil energy subsidies will slow down the pace of energy transition in Indonesia. As well as increasing the burden on the state, it is also an easy trap for Indonesia to get into the fossil energy crisis.

“Reflecting on the coal energy crisis earlier this year, it can be seen that the use of fossil energy such as coal and subsidized support (in the form of DMO) also does not guarantee the country’s energy security, but instead creates distortions in the price of electricity generation. The price of electricity generation from coal-fired power plants looks cheaper than it should be and does not create a level playing field for renewable energy,” said Deon.

The government’s strategy to accelerate the national energy transition is constrained by the fact that the Minister of Finance has not yet approved the Draft Presidential Decree for the Purchase of Renewable Energy. Deon believes that there needs to be strategic coordination between ministries to support the acceleration of achieving the carbon-neutral target so that regulatory support that is considered critical should be issued immediately and run effectively.

“Apart from issuing regulations, effective implementation is important, but this is the opposite. For example, Ministerial Regulation 26/2021 regarding rooftop solar power plants, which should be able to support the achievement of the 900 MW rooftop solar power plant target in 2022 according to the MEMR target, however, was delayed earlier this year,” said Deon.

Besides the regulatory perspective, IESR sees the synergy of inter-ministerial carbon neutral targets as important. Reviewing the targets and realization of electric vehicles in 2022, the Indonesia Energy Transition Outlook 2022 found two different targets in the two ministries. The Ministry of Industry plans to produce 750,000 units of LCEV (low carbon emission vehicle), consisting of electric cars and 2.45 million units of electric motorcycles by 2030. Meanwhile, the Ministry of Energy and Mineral Resources (ESDM) targets 2 million cars, electric vehicles and 13 million electric motorcycles by 2030. Different targets and roadmaps in the development of electric vehicles will make it difficult to see a coherent and consistent effort by the government to increase the penetration of electric vehicles in the country.

“An integrated and well-designed national electric vehicle roadmap must be created. Alignment between the electric vehicle (EV) roadmap of the Ministry of Industry and the Ministry of Energy and Mineral Resources, for example, will increase the confidence of EV players. It also will maximize economic benefits for Indonesia in the form of an industrial value chain formed from the transition process from internal combustion engine (ICE) vehicles to EVs,” closed Deon.

In 2022, Indonesia Needs to Strive in Pursuing Energy Transition Ecosystem Readiness

press release

Jakarta, 21 December 2021 –  The unfavorable climate for renewable energy investment in Indonesia and inconsistent political commitments can hinder the achievement of the 23% renewable energy mix target by 2025. Until Q3 2021, the renewable energy mix is ​​still at 11.2%. The Institute for Essential Services Reform (IESR) views that the Indonesian government needs to thoughtfully prepare an energy transition ecosystem to accelerate the decarbonization of the energy system in Indonesia to achieve net-zero by 2050.

In 2021, renewable energy development in Indonesia is still running slowly and not on track to the target of 23% of the renewable energy mix in 2025. IESR, in its annual report Indonesia Energy Transition Outlook 2022, found that until September 2021, the total installed capacity of renewable energy only reached 10,827 MW or increased by about 400 MW. Meanwhile, to achieve the KEN and RUEN targets in 2025, renewable energy generating capacity is estimated to reach a minimum of 24,000 MW or around 2-3 GW of additional renewable energy capacity every year. However, to comply with the Paris Agreement, it takes at least 11-13 GW of renewable energy generation to decarbonize the energy system in Indonesia, which includes the power generation, transportation, and industrial sectors by 2050. Besides, solar energy adoption is also relatively insignificant, only increasing by 18 MW, dominated by rooftop solar power plants. It is so slow compared to the need for 10-11 GW of rooftop PV mini-grid each year to encourage zero emissions by 2045 in the electricity sector. IESR views PV mini-grid as an opportunity to maximize the contribution of the community and business entities to invest in the decarbonization process.

Endeavors to decarbonize the transportation system by adopting electric vehicles and biofuels are still far from the target set. Sales of electric vehicles are still below 1% of total vehicle sales. Only about 2,000 electric cars and 5,000 electric motorcycles are registered, while the total number of electric cars and motorcycles needs to reach 1.7 million and 100 million by 2030. Biofuels are still limited to biodiesel development which is still uneconomical and constrained by sustainability issues. The implementation of B40, previously B30, which is planned for 2022 is also considered as a constraint due to the current price of palm oil.

“The government should focus on strengthening its political commitment to decarbonization by revising the National Energy Policy (KEN) and the General National Energy Plan (RUEN) to align with the goals of Net-Zero Emissions (NZE). The government needs to improve the quality of regulations to increase investment attractiveness, reduce licensing barriers, and accelerate the development and utilization of renewable energy outside PLN by maximizing the contribution of the community and business entities to invest in renewable energy generation and energy efficiency. Thus, 23% of the renewable energy mix in 2025 can be achieved,” said IESR Executive Director, Fabby Tumiwa.

The decarbonization of the energy system in Indonesia requires the readiness of a supportive ecosystem. The Indonesia Energy Transition Outlook 2022 report assesses that its enabling ecosystem is still low. Using the Energy Transition Readiness Framework, IESR evaluates four indicators, i.e. policy and regulatory support, technology and economy, climate and investment realization, and social.

Ineffective energy policy and regulatory support in boosting the development of renewable energy in Indonesia are reflecting the government’s insufficient political commitment to renewable energy. Although in 2021, the government is committed to increasing the share of the renewable energy mix to 51% in the Electricity Supply Business Plan (RUPTL) and reviewing early retirement at 9.2 GW of coal-fired power plants, these efforts are not ambitious enough to achieve carbon neutrality by mid-century, unaligned with Paris Agreement. Furthermore, this commitment needs to be translated into a clear implementation plan in 2022.

“Indeed, in 2021, there have been several policy documents issued such as LTS and RUPTL, but we evaluate these targets are still far from sufficient to limit the increase in the earth’s temperature to below 1.5 degree Celsius. It is important to improve several regulations such as renewable energy tariffs, scheduled and transparent auction and procurement mechanism from PLN, so that these targets can be achieved,” said Julius Christian, Clean Fuel Researcher & Specialist and Lead Author IETO 2022 report.

Energy policies in Indonesia also have not provided a sense of security for developers to invest in renewable energy. MEMR Regulation No 10/2017 leaves the risk to the developer if there is a change in government policy. ESDM Regulation No. 50/2017 drives renewable energy projects as difficult unbankable projects. More than that, the delay in issuing the Presidential Regulation on new and renewable energy tariffs has caused uncertainty and hampered investment in renewable energy projects in Indonesia.

Unfavorable policies had an insignificant impact on renewable energy investment, only reaching USD 1.17 billion compared to 2020 of USD 1.12 billion. This amount is very small compared to the investment needs for decarbonization of energy systems according to the IESR study, as much as USD 20-25 billion per year by 2030.

From a technical and economic point of view, globally, both renewable energy technology and costs have become increasingly competitive in recent years. The results of the last solar PV auction was electricity cost of USD 0.04/kWh, lower than the average coal power plant, which costs USD 0.05-0.07/kWh. The requirements for subsidies and government regulatory support for coal-fired power plants are allegedly making the cost of coal-fired power plants low. If using the actual market price, with a coal price of USD 150/ton (September 2021), the cost of generating electricity from a coal-fired power plant (CFPP) could reach USD 0.09-0.11/kWh.

Although renewable energy projects have become more economical, renewable energy investment is still considered less attractive.

“The main thing that needs to be highlighted is the unfamiliarity of local banks and investors to the risk of renewable energy projects which are lower than fossil energy projects, considering the price of technology in a declining global trend. The length of the permit process and the complexity of the procurement mechanism are also seen as two things that often make the financing costs of renewable energy projects higher than planned. These drive developers difficulties to determine the exact and definite number of investment needs to be submitted to funding institutions, “said Handriyanti D. Puspitarini, Renewable Energy Senior Researcher, IESR who is also involved in writing IETO 2022.

Meanwhile, from a social perspective, based on the results of a survey conducted by IESR on 1000 respondents, there is an increase in awareness and support for the energy transition to clean energy. A total of 56% of respondents (strongly) agree that Indonesia should stop using coal for power generation. The three highest renewable energy sources that receive the highest public support are solar (68%), water (60%), and wind (39%).

IESR in the IETO 2022 report encourages the Indonesian government to capture positive sentiments from the Indonesian people towards renewable energy through collaboration with the private sector, industry, and provincial governments in Indonesia. Several provinces in Indonesia, such as DKI Jakarta, Bali, Central Java, can serve as references and lessons for other provinces in developing a larger portion of renewable energy.

The focus in 2022 can be on policies and regulations that increase the transparency of the renewable energy auction process, identify clear risk allocation through standardization of Project-Based Learning (PJBL), and improve the bankability of renewable energy projects with derisking instruments. A more efficient and punctual licensing process and lower interest rates for project loans are also important factors for reducing initial funding costs and improving the investment climate. 

Indonesia Energy Transition Outlook 2022 report can be downloaded at: s.id/IESR_IETO2022

Clean Energy Acceleration to achieve NZE in the Energy Sector 2050

press release

Jakarta, 20 December 2021 – The Institute for Essential Services Reform (IESR) launched the Indonesia Energy Transition Outlook (IETO) 2022 report. IETO 2022 is an annual report that reviews the development of the energy transition in Indonesia and outlooks the challenges and opportunities of the energy sector in reducing greenhouse gas emissions for the following year. In the 5th year of the launch of the IETO report, IESR highlighted the government’s commitment to decarbonizing the energy sector, policy, and regulatory innovation to attract renewable energy investment and emphasize the role of the private sector and local governments in accelerating the energy transition in Indonesia.

IESR views that deep decarbonization of the energy sector is critical to be in line with the Paris Agreement target of limiting the increase in the earth’s temperature to 1.5 degrees Celsius. Generating as much as 34% of total emissions in 2019 makes the energy sector the second-largest emitter after Forest and Land Use (FOLU) in Indonesia. 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 even 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. In 2025, the government must achieve the target of 23% of the renewable energy mix. Likewise, it must pursue the energy sector emissions to reach their peak before 2030. These two milestones are an indication of whether we can achieve decarbonization in the middle of this century,” said IESR Executive Director, Fabby Tumiwa.

The Indonesian government has set its commitment to making an energy transition by retaining a larger portion of renewable energy generation capacity, 51 percent or as much as 20,923 MW in 2030 in PLN’s RUPTL 2021-2030. However, to align with the 1.5℃ decarbonization target, based on the IESR study, at least 140 GW of renewable energy is needed, which is dominated by PLTS by 2030.

IESR believes that achieving this big target requires a serious evaluation of the quality of the current policies and regulations. In the last five years, since PP No. 79/2014 on KEN was passed, the growth rate of renewable energy tends to be slow. Data from IETO 2022 shows that in the last five years, renewable energy has only increased on average by 400 MW.

Meanwhile, the Indonesian government also puts coal in transition scenarios such as the CCS/CCUS program for coal-fired power plants, coal gasification, and even coal co-firing. IESR stated that using CCS/CCUS technology in steam power plants will result in higher electricity prices and an increased risk of potentially stranded assets due to non-competitive costs. Furthermore, the application of co-firing and clean coal technology such as coal-fired power plants (CFPP) Ultra-supercritical results in insignificant emission reductions, thus making the effectiveness of these technologies questionable.

“The cost of generating electricity from using CCS in CFPP will compete with renewable energy technology plus storage. So far in the world, CFPPs with CCS  still have problems in operating and achieving emission reductions. Even one of the CFPP projects with CCS, such as Petra Nova in Texas, was closed after only operating for approximately 4 years. So, the readiness of today’s technology, as well as the projected price of technology in the coming decades should be the main consideration. The priority must have been given to the technology with the most competitive costs, which are renewable energy,” explained Deon Arinaldo, Manager of Energy Transformation Program, IESR.

One of the authors of the IETO 2022, Handriyanti Diah Puspitarini said that although it had not yet reached the set target, the installed capacity of renewable energy, especially from solar PV, rose to 17.9 MWp, and electric vehicles such as electric motorcycles experienced a slight increase of 5,486 units and electric cars as much as 2,012 units. It needs more to be developed in 2022.

“The Indonesian government needs to encourage the development of locally produced technology to capture bigger opportunities such as decreasing the CAPEX of renewable energy projects. Therefore, it is easier for developers to get technology with high quality and low prices without imports. Thus, there will be a lot of investment not only in renewable energy projects themselves but into the industrial sector in Indonesia in general,” said Handriyanti Diah Puspitarini, Senior Researcher in Renewable Energy, IESR.

IESR realizes that decarbonization of the energy sector requires a large number of funds, around USD 20-25 billion per year, according to the IESR study on Deep Decarbonization of Indonesia’s energy system (IESR, 2021). IETO 2022 reviews some funding opportunities available from private or public entities for climate change mitigation and adaptation, which can be used to finance the energy transition. These funding opportunities include government incentives (fiscal and non-fiscal), international financing assistance, and more unconventional financing mechanisms such as green bonds/Sukuk, regional bonds, Islamic finance, and blended finance.

“Renewable energy financing should not be seen as a burden despite being an opportunity and strategy to shift investment from fossils to renewable energy. There are many sources of funding that can be a source of renewable energy investment. The government can use its APBN to attract investment from these funding sources, for instance by mapping renewable energy resources, conducting technological research, and pilot projects for new renewable energy projects that have not been developed such as marine energy, as well as providing de-risking instruments to attract investment,” closed Fabby.

The complete development of the energy transition will be discussed at IETO 2022.

Indonesia’s Triumph in the Next 30 Years Against the Climate Crisis, Decided Now

Jakarta, 4 December 2021-“Everyone has used solar panels, and there are electric motors too. The air feels so fresh!” said Kiara in Kiara’s Dream which describes the environment of Indonesia in 2050. This dream should be the general dream of the Indonesian people, notably the policymakers whose decision will determine the journey of the Indonesian.

The success of Indonesia in 2050 as Kiara’s description depends  on the Indonesian government’s strategy in preparing and providing a better planet for future generations. The step to reach it must start from now by making an energy transition, switching from fossil energy to renewable energy.

President Jokowi in his briefing to the Commissioners and Directors of Pertamina and PLN, even emphasized that the energy transition could not be delayed any longer. Jokowi firmly asked his staff to immediately prepare a concrete, compact, detailed grand design of energy transition. Jokowi said that welcoming the energy transition era, all sectors need to change by developing renewable energy instead of fossil fuels. This is part of the global movement to tackle the climate crisis.

The climate crisis has been a common enemy for years. The struggle against it has been set in the Paris Agreement in 2015 agreed by 197 countries. Each country tries to keep its emissions as low as possible to keep the earth’s temperature well below 1.5 degrees Celsius after pre-industrial times.

Until COP 26 in Glasgow ended on November 13, 2021, as many as 137 countries already had a carbon neutral target of 2050-2070. Indonesia is targeting carbon neutrality by 2060 or sooner with international support. However, these efforts were considered insufficient to limit the earth’s temperature. The results from the Climate Action Tracker state that even with the country’s commitment to achieving carbon neutrality in the 2050-2070 timeframe, the earth will still be heated at 2.5-2.7 degrees Celsius in 2100.

Regrettably, as one of the largest emission contributors in the world, particularly in the forestry & land sector and the energy sector, Indonesia has not yet set ambitious steps in combating climate change. Although taking a positive commitment to the early retirement of 9.2 GW of coal-fired power plants, according to the Institute for Essential Services Reform (IESR), at least a total of 10.5 GW of coal-fired power plants must be retired before 2030 to be in line with the Paris Agreement.

To urge the Indonesian government to be bolder in its efforts to mitigate the climate crisis demands the role of Indonesian people, including young people. IESR through the Clean, Affordable, and Secure Energy for Southeast Asia (CASE) project in collaboration with AIESEC UI at the Global Impact Conference, which was attended by youth across countries underlined the important and impactful things that youth can do, including by sharing information about the energy sector as the second-largest greenhouse gas emission contributor after forestry and land.

“Awareness of the damaging impact of fossil energy to the earth will encourage people to have responsible behavior towards energy consumption, for instance by saving energy,” said Agus Tampubolon (blue tshirt), CASE Project Manager, IESR.

Furthermore, every Indonesian citizen has a significant part in resolving the quality of life for their children and grandchildren by choosing leaders who have a vision and mission to realize low emission development and massive use of renewable energy, both at regional and national levels.

Agus added that to accelerate the energy transition process systematically, local governments play its key in setting a high target for achieving renewable energy in the Regional Energy General Plan (RUED). Local governments must have a detailed mapping of the technical potential of renewable energy in their area, build networks, and prepare relevant regulations to attract more investment in renewable energy in their area. Thus, Kiara’s Dream, our dream, and the dreams of future generations can come true.