COP 27: Indonesia Needs to Attract International Support for Energy Transition with Ambitious CFPP Retirement Targets and Renewable Energy Development

Jakarta, 8 November 2022- Indonesia delivered its national statement at the Conference of the Parties 27 Summit (COP27) in Sharm El-Sheikh, Egypt, through Vice President Ma’ruf Amin. He mentioned various climate commitments that Indonesia had made, including increasing climate ambition by submitting Enhanced Nationally Determined Contributions (NDCs) documents last September. Moreover, Ma’ruf emphasized that the climate agreement needs to be implemented immediately with clear international support at the national level in climate action funding, creating carbon markets and investing in the energy transition.

The Institute for Essential Services Reform (IESR) views that apart from needing to further increase Indonesia’s climate ambitions, to accelerate the implementation of the energy transition, Indonesia needs to encourage the inclusion of international financing support for climate change mitigation through strengthening renewable energy development plans, energy efficiency, strengthening clean energy systems, and preparation of bankable projects. This needs to be supported by policies and regulations that provide investment certainty with low risk and information transparency for the public and encourage community involvement.

In the Enhanced NDC, Indonesia has increased its GHG emission reduction target from 29% in the Updated NDC document to 31.89% in 2030 with its efforts (unconditional) and from 41% to 43.2% with international assistance (conditional). Although it is a step forward, IESR considers that this target is still not in line with the Paris Agreement, which encourages more ambitious efforts for countries to limit the earth’s temperature below 1.5 degrees Celsius.

One of the factors contributing to the increase in the emission reduction target is the increase in the emission reduction target in the energy sector from 11% in the Updated NDC to 12.5% ​​(unconditional) and from 13.9% to 15.5% (conditional).

“To be aligned with the targets of the Paris Agreement, Indonesia needs to increase its renewable energy mix target to 42% in 2030. Meanwhile, in the 2050 Long Term Low Carbon and Climate Resilience Strategy (LTS-LCCR), which is the basis for this Enhanced NDC, the renewable energy mix is ​​only 43 % in 2050,” said Fabby Tumiwa, Executive Director of IESR.

He said the opportunity to increase the renewable energy mix target is wide open with the implementation of the early retirement commitment of 9.2 GW of coal-fired power plants.

Through Presidential Decree 112/2022, the government opened up the opportunity to accelerate the termination of PLTU operations before 2050. At this COP, this commitment must be echoed, and the need for funding for early retirement for CFPP, which has an average age of 13 years, and financial support from developed countries must be met and delivered straightforwardly, followed by ambitious targets. Currently, the government has not agreed on the certainty of the CFPP early retirement target before 2030, and it still uses PT PLN’s target, which is different from the target of 9 GW set by the Ministry of Energy and Mineral Resources,” said Fabby.

Based on the IESR “Financing Indonesia’s Coal Phase-out” study with the University of Maryland, in 2030, it will cost around USD 4.6 billion to close 9.2 GW PLTU and USD 27.5 billion by 2045 for all CFPPs. Meanwhile, to decarbonize the energy system in Indonesia, at least a total investment of USD 135 billion is required by 2030. Even though the amount looks large, the benefits to be gained from the early retirement of CFPP are far greater in terms of economic, social and environmental aspects.

“The cost of generating electricity from renewable energy such as solar energy is already cheaper than building a new CFPP, and even in the next decade, it will be cheaper than operating an existing CFPP. Economically, the benefits of retiring a CFPP and replacing it with renewable energy can reduce the average electricity generation cost in the long run. In addition, health benefits are available, increasing the availability of green jobs on the social side, as well as on the environment, can avoid air pollution, control retrofit costs, improve air quality, save water and water quality, and reduce GHG emissions,” explained Deon Arinaldo, Manager of the Transformation Program. Energy, IESR.

Investment needs for decarbonizing Indonesia’s electricity system reaching USD 135 billion towards 2030 and increase to USD 455 billion and USD 633 billion in the following decades respectively. This investment is to build renewable energy to meet the growing demand for electricity, storage systems, energy efficiency investments, as well as the development of transmission and distribution networks. Therefore, the focus of public financing as well as international financing support must be directed towards creating a positive investment climate for clean energy systems.

Having Slow Solar PV Development in 2022, Indonesia Needs to Push the Implementation of Supporting Policies

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Fabby Tumiwa delivered his speech at the Shine Bright: Advancing G20 Solar Leadership event

 

Jakarta, 27 October 2022 – To achieve the target of a 23% renewable energy mix by 2025 and the energy system’s decarbonization by 2060 or earlier, Indonesia needs to seriously improve and implement policies that encourage the development of renewable energy, especially solar energy. The utilization of solar energy is believed to be fast and strategic to achieve these targets. Presenting the complete review of the development of solar energy throughout 2022 and providing a projection in 2023, the Institute for Essential Services Reform (IESR) published the flagship report, Indonesia Solar Energy Outlook (ISEO) 2023.

Arifin Tasrif, Minister of Energy and Mineral Resources of Indonesia on the event of Shine Bright: Advancing G20 Solar Leadership organized by IESR, said that based on IRENA data, the cost of electricity (Levelized cost of electricity/LCOE) has decreased significantly by 88% between 2010 and 2021, from USD 41.7/kWh to USD 4.7/kWh.

“But based on current practice in the industrial sector, we get offers of up to USD 3/kWh, including USD 4/kWh battery costs,” said Arifin at the Shine Bright: Advancing G20 Solar Leadership event organized by IESR with support from Bloomberg Philanthropies, and in collaboration with the International Solar Alliance, and the Indonesian Solar Energy Association.

Furthermore, he explained that based on the energy transition roadmap in Indonesia, solar energy plays an important role in electricity in Indonesia with 421 GW of 700 GW coming from solar.

“We need support from local producers and industries to fulfil local requirement content (LCR), considering that Indonesia has mineral potential and critical material for solar PV, battery, and electricity network, Besides, the aspect the easy access to cheap financing, incentive, and other financing facilities is very important to provide a financial feasibility study and increase renewable energy investment such as solar energy, “explained Arifin.

Fabby Tumiwa, Executive Director of IESR, said that in general, Indonesia made some progress since 2018, although it is relatively slow in encouraging the development of solar energy. According to him, some reforms are needed in regulations and their implementation, especially before the deadline for realizing the target, which is only three years left.

“Rooftop solar power plants that have the potential of 655 GW for building only, can be built quickly and involve community investment, without overburdening the government. Moreover, to expect additional renewable energy generation capacity from the implementation of PLN’s Business Plan (RUPTL) 2021-2030, rooftop solar power plants can meet a renewable energy mix target of 3 to 4 GW in 2025,” said Fabby.

Fabby added that the government and PLN need to allow permits for rooftop solar power plant installation.

“Availability of soft loan funds from financial institutions can support the adoption of household-scale PV mini-grid. Also, encouraging the adoption of solar PV in industrial areas, and non-PLN business areas needs to be done,” suggested Fabby.

ISEO 2023 stated that the progress of Indonesia’s solar energy can be seen from the decline in the price of solar electricity obtained through a power purchase agreement (PPA) made by PT PLN (Persero) with Independent Power Producers (IPP). Between 2015 and 2022, solar PPA prices declined by 78%, from $0.25/kWh to $0.056/kWh. 

Furthermore, in terms of the project pipeline, there are currently eight projects that have been tendered totalling 585 MWp in capacity. 

“In terms of utility-scale solar power plants, Indonesia has the potential for floating solar power plants. Its future development can make Indonesia a leader, and at the same time realize Indonesia’s leadership in terms of energy transition and use of solar energy in the G20 and ASEAN,” said Fabby.

Dr Ajay Mathur, Director General, of International Solar Alliance said solar energy is a potential energy source to be developed considering the increasingly competitive price of the technology.

“The International Solar Alliance (ISA) is proud to associate with the Institute for Essential Services Reform (IESR) to drive forward our common goal of making solar electricity the energy source of choice across the world. Solar Energy is the world’s most abundant and clean energy source, but also the global energy imperative to drive international climate action due to its fast-decreasing cost,” said Mathur.

At the same time, IESR and ISA signed a memorandum of understanding to accelerate the adoption of solar energy in Indonesia. ISA is an international institution that has various experiences and members from many countries. It has carried out innovations and facilitation to support solar energy development globally. The scope of the collaboration between ISA and IESR includes mapping the domestic solar industry, capacity building, and identifying financing schemes.

ISEO 2023 considers that the establishment of the ceiling price-based pricing in Presidential Regulation No. 112/2022 is expected to provide more space for developers to submit their bids. This regulation has been drafted since 2019 and initially considered feed-in-tariff instruments to encourage the development of renewable energy, especially small scale. 

To encourage the effective implementation of PR 112/2022, a clear and transparent auction mechanism is needed, as a regular and planned auction schedule, as well as providing regulatory certainty and ease of licensing.

ISEO 2023 notes that local content requirements (LCR) are still one of the main obstacles in the auction of solar power plants in Indonesia. Based on Minister of Industry Regulation No. 5/2017, the minimum LCR value of goods for solar module components must reach at least 60% since 1 January 2019. However, the realization of the LCR of solar modules currently only reaches 47.5%. Moreover, the efficiency and price of domestic solar panels still do not meet the requirements of international financing bankability standards. 

“The government needs to review the solar module LCR value provision policy based on industry readiness while preparing a long-term solar module industry policy to decarbonise Indonesia’s energy system,” said Daniel Kurniawan, Researcher, Photovoltaic Technology & Materials Specialist at IESR and Lead Author of ISEO 2023.

On the adoption of solar PV, although the Ministry of Energy and Mineral Resources has issued Ministerial Regulation No. 26/2021, some of its provisions have failed to be implemented, resulting in the slow growth of solar power plants. PLN’s oversupply of electricity is suspected to be the cause of the limitation of rooftop solar power plant (PVP) utilization to 10 to 15 per cent of capacity by PLN in early 2022. If it continues, it will be difficult to realize the solar targets that the government has set, such as the government’s 3.6 GW rooftop solar PSN target by 2025, and the 2.3 GWp solar project pipeline of 31 declarators at the Indonesia Solar Summit 2022.

“The government, in this case, the Ministry of Energy and Mineral Resources and PLN, needs to immediately provide a solution to this issue. Not to hinder adoption at a very early stage of adoption but to nurture the growth of rooftop solar until it reaches self-sufficiency. This can be achieved by providing a stable policy environment for market growth and development of the solar industry,” said Daniel.

The Indonesia Solar Energy Outlook (ISEO) 2023 report was first launched this year. Initially, the progress of solar energy development within the framework of the energy transition was integrated into the Indonesia Energy Transition Outlook (IETO) report.

ISFO 2023: Non-Public Financing Opportunities for the Energy Transition

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Jakarta, 18 October 2022- Under the Paris Agreement, Indonesia needs significant financing to achieve its zero emissions target by 2050. The Institute for Essential Services Reform (IESR), through its latest report, Indonesia Sustainable Finance 2023, examines that to optimise public financing, the Indonesian government needs to immediately mobilize non-government investment by establishing policies, regulations, and an attractive investment ecosystem.

Fabby Tumiwa, Executive Director of IESR, said that the Indonesian government needs to make a transformative and massive effort to completely decarbonize the energy system by raising around USD 1 .2 trillion by 2050. Based on a study by IESR & the University of Maryland, the cost of ending 9.2 GW of coal-fired power plants (CFPP) in 2022-2030 requires around USD 4.6 billion. Furthermore, early retirement of all CFPPs in 2045 with an average age of 20 years requires USD 28 billion to compensate for stranded assets and the cost of decommissioning coal power plants.

Fabby explained that some efforts to end the CFPP operational period should be accompanied by an increase in the addition of renewable energy plants, strengthening of transmission and distribution networks, and massive energy efficiency.

“We need USD 135 billion for CFPP retirement in the 2022-2023 period, the increase of renewable energy, development of transmission and distribution, energy storage, and energy efficiency,” he said.

On the other hand, the government’s budget portion will only be able to allocate 0.83% of the total financing needed to achieve the target of 23% of the renewable energy mix by 2025 based on ISFO 2023. It refers to the average budget allocation for climate change mitigation of the Directorate General of New Renewable Energy and Energy Conservation of the Ministry of Energy and Mineral Resources in 2018-2020, amounting to USD 67 million per year.

Farah Vianda, one of the authors of ISFO 2023, revealed that the same trend is also taking place at the provincial level. She gave an example of Central Java as one of the provinces that supports the development of renewable energy the most. Still, fiscal constraints make Central Java allocate less than 0.1% of the total available Regional Revenues and Expenditures Budget (APBD).

“This encourages local governments to seek financing outside the Regional Revenues and Expenditures Budget. The Indonesian government also needs to make the same effort by expanding funding sources to attract investment in the renewable energy sector,” she stated.

In addition, she also explained that so far, the Regional Revenues and Expenditures Budget allocation is still dominantly targeting the fossil energy sector, including spending 5% of the Regional Revenues and Expenditures Budget throughout 2021 for fossil energy subsidies and 20.8% subsidies from the Regional Revenues and Expenditures Budget when the projections of the Ministry of Finance are related to the need for energy subsidies. There will be Rp649 trillion in 2022 realized. Not only that, Indonesia’s dependence on coal will be one of the challenges in implementing blended finance instruments (Energy Transition Mechanism).

“Currently, Indonesia is experiencing an excess electricity supply which makes PLN reluctant to build renewable energy plants. While on the other hand, investors in the ETM platform want to encourage renewable energy development,” Farah said. 

Meanwhile, Ichsan Hafiz Loeksmanto, the Lead Author of ISFO 2023, explained that implementing a carbon tax, the cap, and the trade mechanism (limit and business) on 92 coal-fired power plants in 2022, the carbon tax revenue was non-taxable. It was not earmarked. Carbon tax revenues have not been devoted to financing climate change mitigation and adaptation efforts.

“The government needs to ensure the allocation of carbon tax revenues for climate mitigation & adaptation and social safety nets. In addition, public transparency regarding payment of carbon taxes and carbon transactions is also necessary,” said Ichsan.

Talking about international support, based on IESR’s calculation in ISFO 2023, there is a potential for international funding of USD 13.1 billion or 35.4% of the total projected financing needs of USD 36.95 billion in 2025.

“The promises voiced by nine countries to support the energy transition in Indonesia through various financing instruments and technical support are quite a positive signal from the international community regarding the energy transition in Indonesia,” explained Ichsan.

One financing encouraged by the private sector is Indonesian financial institutions, increasing public pressure to shift financing to clean energy. However, until 2021, financial institutions, especially domestic commercial banks in Indonesia, will only finance limited renewable energy projects. ISFO 2023 noted that renewable energy financing only contributed 0.9%-5.5% of the total sustainable portfolio of four domestic and commercial banks with the highest total asset value in 2021, namely Bank Mandiri, BNI, BRI, and BCA.

“To increase the allocation of renewable energy credit from the banking sector, the government must prepare comprehensive guidelines to encourage credit allocation for renewable energy. They also need to increase business credit opportunities from banks (bankability) for renewable energy projects and increase awareness and confidence of domestic investors to invest in renewable energy,” he explained.

In addition to the carbon tax mechanism, support from financial institutions in Indonesia, and international financing, ISFO 2023 also discusses green taxonomy, green bonds, and green sukuk as part of the opportunity to attract funding for the energy transition in Indonesia.

The Indonesia Sustainable Finance 2023 report is IESR’s main report, first launched in 2022. Since 2018, IESR has consistently reported on the development of the energy transition in Indonesia through the Indonesia Clean Energy Outlook report from 2017 to 2019, which was later transformed into the Indonesia Energy Transition Outlook in 2020. The ISFO 2023 report can be downloaded at s.id/ISFO2023.

Coal Fired-Power Plants Retirement Needs International and Private Support

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Jakarta, October 11, 2022 – International collaboration and support are needed to encourage Indonesia to make an energy transition towards clean, affordable, and secure energy. In addition to providing funding assistance for the development of renewable energy, the experiences of developed countries and international organizations in carrying out the energy transition can be a valuable lesson for Indonesia in planning an energy transition that involves public participation. This learning process can be accelerated with the right commitment of technical assistance from developed countries to developing countries.

Owen Jenkins, UK Ambassador, at Indonesia Sustainable Energy Week (ISEW) 2022 said that his party supports the acceleration of the energy transition in Indonesia, especially in encouraging financing policies from the private sector.

“In the UK, it has been the private sector which is driving the investment, driving down the cost of new and renewable energy. That’s what we plan to see here,” said Jenkins.

Similarly, Jiro Tominaga, Country Director, ADB Indonesia said that the right policy would be able to attract private interest in boosting renewable energy. In addition, he also highlighted the taxonomic issue in climate financing, which does not include financing for the phasing out of coal-fired power plants, making investors reluctant to invest.

“This needs international efforts to have the taxonomy to incentives private sector financing to come to coal phase-out issues. This is particularly important for a country like Indonesia, where around 60% of its generation comes from coal,” said Tominaga.

The same thing was also expressed by Sylvi J. Gani, Director of Financing and Investment of PT SMI. To get around the taxonomic limitations, his party involved multilateral and philanthropic banks to finance the energy transition.

Meanwhile, Germany as the president of the G7 leadership in 2022 places the issue of the energy transition as an important priority on its agenda.

“We encourage market development in accelerating the shift to clean energy through multilevel partnerships that also involve Indonesia,” added Thomas Graf, Chargé d’Affairs German Embassy to Indonesia. He also said that the issuance of Presidential Decree 112/2022 by setting the highest benchmark price for renewable energy to be purchased by PLN was an important step that should be appreciated.

Executive Vice President of Generation and EBT of PT PLN (Persero), Herry Nugraha said to support the efforts to retire the steam power plant, PLN is preparing to build a transmission and distribution network to accommodate the entry of new and renewable energy sources.

“PLN has conducted many studies to anticipate this. On the distribution side, we conducted a study on smart grids,” said Herry.

ISEW was held in collaboration with the Indonesia Clean Energy Forum (ICEF), the Institute for Essential Services Reform (IESR), and Clean, Affordable, Secure Energy for Southeast Asia (CASE). CASE is a cooperation program between two countries: Indonesia – Germany (Directorate of Electricity, Telecommunications and Information Technology, Ministry of National Development Planning/Bappenas, and funded by the Ministry of Economy and Climate Action of the German Federation Government).

Coal-Fired Power Plants Retirement Commitment Needs to be Followed Up Immediately

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Raditya Wiranegara (right), IESR Senior Researcher, explained the findings of the “Financing Indonesia’s coal phase-out report” at the Indonesia Sustainable Energy Week (ISEW) 2022

Jakarta, 11 October 2022 – The government’s decision in Presidential Regulation (Perpres) 112/2022 to no longer build new coal-fired power plants, and to limit the operation of all coal-fired power plants to 2050 at the latest, needs to be supported by political, financial, and social readiness.

A study by the Institute for Essential Services Reform (IESR) together with the University of Maryland, to comply with the Paris Agreement to limit the increase in average temperature below 1.5 degrees Celsius, Indonesia can immediately retire 4.5 GW of coal-fired power plants within a period 2022-2023.

“The benefits that can be achieved from the early retirement scenario of the coal-fired power plants are about 2-4 times greater than the costs incurred to retire the coal-fired power plants,” said Raditya Wiranegara, Senior Researcher at IESR at Indonesia Sustainable Energy Week (ISEW) 2022.

In addition, he also explained that the accelerated retirement of coal-fired power plants could prevent deaths from reaching 168 thousand people by 2050, and the total health cost savings that could be obtained would be around USD 60 billion by 2050.

Furthermore, Raditya explained that most of the costs needed for coal-fired power plants retirement include the cost of abandoned assets with two-thirds related to the retirement of IPP’s coal-fired power plants.

While waiting for all coal-fired power plants to be fully retired in 2045, Raditya continued, the government can carry out flexible coal-fired power plant operations to make room for renewable energy to enter Indonesia’s energy system.

Koben Calhoun, Principal Carbon Free Electricity, Global South Program, RMI added by citing an IESR study which states that the decarbonization of the energy sector in Indonesia in 2050 will take as much as USD 25 billion/year until 2030 and USD 60 billion/year until 2050 for investment into renewable energy, electrification, and supporting infrastructure.

“Three pillars approach to financing coal transition, recovering capital from the assisting asset and other entities, and refining the existing assets there will be an opportunity to reinvest in clean energy and other tech allowing low carbon power systems and finding support for just energy transition.,” explained Calhoun.

According to him, Indonesia can lead an ambitious energy transition and demonstrate financial mobilization with ambitious government commitments, and leadership towards energy transition platforms and funds has a clear early retirement roadmap preceded by the implementation of pilot projects and has a blended financial structure. finance) to lower capital costs and mobilize finance for the energy transition. Ensuring funding needs as well as the interests and goals of potential investors, who tend to finance renewable energy and no longer want to finance coal projects, are important to be able to open the funding faucet.

Architrandi Priambodo, Senior Energy Specialist at the Asian Development Bank also revealed that early retirement of coal-fired power plants, in addition to significantly reducing greenhouse gas emissions, will also reduce overall generation costs in the long term.

He explained that this is one of the goals of the Energy Transition Mechanism (ETM) program to accelerate the termination or repurposing of coal-fired power plants, especially parts of the power plant assets that can be utilized further, such as transmission and substations.

“In the ongoing ETM feasibility study, financial analysis and transaction structures are also discussed, which include commercial and legal structures to efficiently terminate the coal-fired power plants assets,” said Architrandi.

Melli Darsa, Senior Partner at PwC Indonesia, on the same occasion said that if political conditions are favourable, early retirement plans for coal-fired power plants need to be followed by implementing regulations related to the technical aspects of early retirement for coal-fired power plants to provide higher legal certainty.

“The government has gone in the right direction, in terms of making it very clear that the international commitment is based on strong high-level regulation being on the president’s regulation, the ministers are supposed to go and do a follow up on this. However there is still reluctance of the board to take risks to decide because it might be the right thing, but if there are no clear roles, instead it is assigned,” explained Melli.

ISEW is held in collaboration with the Indonesia Clean Energy Forum (ICEF), the Institute for Essential Services Reform (IESR), and Clean, Affordable, Secure Energy for Southeast Asia (CASE). CASE is a cooperation program between two countries: Indonesia – Germany (Directorate of Electricity, Telecommunications and Information Technology, Ministry of National Development Planning/Bappenas, and funded by the Ministry of Economy and Climate Action of the German Federation Government). Previously, discourse on energy transition in Indonesia was routinely held at the Indonesia Energy Transition Dialogue (IETD), which this year participated in ISEW 2022. First held in 2022, ISEW will last for 5 days from 10-14 October 2022 with the theme Reaching Indonesia’s Net Zero Energy System: Unite for Action and Strategy. All levels of society can participate in this activity for free on isew. live.

CFPP Early Retirement is a Decisive Factor for Achieving Ambitious NZE

Dialogue at ISEW 2022 with the topic “Indonesian Energy Transition New Ambition Targets To Achieving Indonesia’s NZE Target””

 

Jakarta, October 10, 2022 – Retiring all coal-fired power plants (CFPP) in Indonesia early by 2045 becomes a determining factor for the accomplishment of zero-emission by 2050 according to the Paris Agreement to reduce the average risen temperature under 1.5 degrees Celsius. This was stated by Fabby Tumiwa, the Executive Director of the Institute for Essential Services Reform (IESR) in his welcoming remarks at Indonesia Sustainable Energy Week (ISEW) 2022.

“According to the IESR report, by 2030, Indonesia needs to end the operation of CFPP by 9.2 GW and the operation of all its units by 2045,” he says. He believes that the clause that gives a mandate to the Ministry of Energy and Mineral Resources (MEMR) to prepare a roadmap to accelerate the retirement of the operational period of CFPP in President Regulation No.112/2022 is the best preliminary step.

In line with this statement, Rida Mulyana, the Secretary General of MEMR, on the same occasion, says that President Regulation 112/2022 will attractively draw investments and give incentives for renewable energy. According to Rida, this is the right momentum to encourage the use of renewable energy amidst the high fossil energy prices. In addition, customers’ demand for clean energy rises.

Rida says that the government has made strategies to reduce the operation of CFPP gradually by setting a 30-year maximum contract.

“The capacity (CFPP-ed) will rise to 2030 and afterwards CFPP development will end, and the last CFPP will retire by 2058,” says Rida.

Moreover, he says that to reach net zero emissions by 2060 or earlier according to the government target, super grid development is planned to boost the development of renewable energy and, at the same time, maintain electricity stability. This will open up opportunities to export electricity to other ASEAN countries, and be connected to ASEAN super grid.

 “To support and accelerate renewable energy, Indonesia will need 1 trillion USD by 2060 for the generation and transmission of renewable energy. Financial need will grow in line with Indonesia’s plan to implement early retirement of CFPP for the upcoming years,” Rida says.

 Financial need will decline if renewable energy technology price also decreases. Besides that, the application of President Regulation 112/2022, the implementation of the CFPP retirement program, the uncomplicated permit process for renewable energy, and the accompaniment, and socialization of renewable energy regulation will boost renewable energy development in Indonesia.

 Vivi Yuliawati, the Ad interim Deputy for Maritime Affairs and Natural Resources mentions that to implement the strategy for net zero emissions by 2060, the crucial thing is to formulate technical policy to ease energy transition.

 She hopes that the result of the discussion of ISEW 2022 will be the basis for the preparation of the Medium-Term National Development Plan (RPJMN) 2025-2029 & Long‐Term Development Plan (RPJP) in 2045 by Bappenas related to energy transition to mitigate the impact of transition on the Indonesian socio-economy.

 “Renewable energy technology is not enough, we need a capacity orchestra to build a new capacity in renewable energy,” she says.

 Energy transition narration that involves all levels of the communities is also encouraged during ISEW 2022.

 “ISEW is held to facilitate a more inclusive discussion, includes various stakeholders, including the ones affected by the energy transition. Moreover, it is momentum towards the 20th summit or KTT G20 that will be held by November, which will make energy transition one of its major issues,” says Energy Program Director of Indonesia/ASEAN GIZ Lisa Tinschert.

ISEW was held based on the cooperation among Indonesia Clean Energy Forum (ICEF), Institute for Essential Services Reform (IESR), and Clean, Affordable, Secure Energy for Southeast Asia (CASE). CASE is a cooperation program between two countries: Indonesia – Germany (Directorate of Electricity, Telecommunications and Information Technology, Ministry of National Development Planning/Bappenas, and funded by the Ministry of Economy and Climate Action of the Federal Government of Germany). Before the event, a discourse on energy transition in Indonesia has been held regularly in Indonesia Energy Transition Dialogue (IETD), which this year participated in ISEW 2022. As a premiere in 2022, ISEW will take place for 5 days from October 10 to 14, 2022 with the theme of Reaching Indonesia’s Net Zero Energy System: Unite for Action and Strategy. Everyone can attend the event for free at isew. live.

 

ISEW 2022: Unity of Action and Indonesia’s Energy Transition Strategy

Ambassadors joined the discussion in ISEW 2022 on the topic of International cooperation in advancing energy transition in Indonesia

Jakarta, 09 October 2022 – The government of Indonesia needs a strong commitment to implementing energy transition through strong political and policy support. It supports global efforts to keep the global average temperature rise below 1.5 C, achieve energy security, and focus investment on sustainable development, such as renewable energy development. In addition, the involvement and participation of all Indonesian people are crucial in the energy transition process. Unity of action and strategy in the energy transition is a discussion that will be explored further at Indonesia Sustainable Energy Week (ISEW) 2022.

“This event will create a common understanding, provide understanding, especially regarding the efforts that need to be done in pursuing the Net Zero Emissions (NZE) target by 2060 or sooner,” said Rachmat Mardiana, Director of Electricity, Telecommunications and Informatics, Ministry of National Development Planning/Bappenas in media briefing and virtual launch of ISEW 2022.

Rachmat added that the Indonesian government hopes to escape the middle-income trap and become a developed country before Indonesia’s 100th anniversary in 2045. He emphasized that internalizing energy transition efforts in preparing long-term development plans is more important.

Yusuf Suryanto, Coordinator of Electricity, Directorate of Electricity, Telecommunications and Information, Bappenas, explained that to become a developed country, Indonesia needs to increase economic growth and expand its financial growth center area.

“The point is, Indonesia’s economy is expected to grow more than 6%, and the role of the eastern part of Indonesia needs to be increased to 25% so that economic growth outside Java will dominate,” said Yusuf.

Furthermore, he emphasized that the outer Java region’s economic growth could align with the energy transition process in eastern Indonesia. 

Fabby Tumiwa, Executive Director of the Indonesia Clean Energy Forum (ICEF) & Institute for Essential Services Reform (IESR), said that Indonesia has an opportunity to increase energy consumption and supply while reducing the intensity of greenhouse gas emissions.

“The key in policies and regulations and proper planning to encourage low-carbon technologies to replace energy supplies of which 87%, according to government data, comes from fossil energy,” explained Fabby.

The Government of Indonesia’s commitment to the energy transition is demonstrated by the issuance of Presidential Regulation (Perpres) No 112/2022 concerning the Acceleration of Renewable Energy Development for the Provision of Electricity. This Presidential Regulation regulates the setting of tariffs for renewable energy, which has the potential to revitalize the renewable energy investment climate in Indonesia. Not only that, but this Presidential Decree also provides a mandate for the Ministry of Energy and Mineral Resources to prepare a roadmap for accelerating the termination of the PLTU operational period.

“Regarding the energy transition, the Minister of Energy and Mineral Resources compiled a roadmap to accelerate the termination of the PLTU operational period after coordinating with the Minister of Finance and the Minister of SOEs. Follow-up actions that it will carry out include consolidating and aligning perceptions with PLN and the relevant Ministries contained in this Presidential Regulation,” explained Andriah Feby Misna, Director of Various New Renewable Energy, Ministry of Energy and Mineral Resources.

Fabby added that to achieve Net Zero Emissions by the 2060 Scenario (NZE), new and renewable energy generation will be driven by 786.2 GW, with 60.2 GW coming from battery power.

 

The energy transition to renewable energy will have a social, economic, and environmental impact on the people of Indonesia. Indonesia, as a country that exports 75% of its coal production, the Indonesian economy will contract significantly if there is a decline in demand. We can see the strengthening climate commitment of Indonesia’s coal export destination countries such as China, India, Japan, and South Korea. Economically, constructing renewable energy plants is predicted to be cheaper than building a new PLTU in 2023 and more affordable than operating an existing PLTU in 2030. A production decline will have a negative impact based on an IESR study entitled Redefining Future Jobs. Employment along the coal value chain from production, processing, transportation, and end-use.

Widhyawan Prawiraatmadja, an Indonesia Clean Energy Forum (ICEF) member, emphasized that the energy transition must be carried out fairly. Anticipating the impacts, especially in the affected sectors, such as the coal industry, needs to be done.

“Workers, especially in sectors undergoing adjustment, such as in the coal sector, need to be prepared for their capacity and capability to switch to clean energy,” he explained.

Widhyawan said that energy transition needs to be ensured with the support of incentives from the government. Furthermore, he also encourages public awareness and contribution to energy efficiency, which is still far behind developed countries.

Indonesia’s energy transition process will be discussed at ISEW 2022, especially concerning accelerating the retirement of Indonesian PLTU. ISEW 2022 will discuss various aspects of support, inclusiveness, and mitigation strategies in detail on the implications of the energy transition that Indonesia needs to prepare for the energy transition process.

ISEW was held in collaboration with the Indonesia Clean Energy Forum (ICEF), the Institute for Essential Services Reform (IESR), and Clean, Affordable, Secure Energy for Southeast Asia (CASE). CASE is a cooperation program between two countries: Indonesia – Germany (Directorate of Electricity, Telecommunications and Information Technology, Ministry of National Development Planning/Bappenas, and funded by the Ministry of Economy and Climate Action of the German Federation Government). Previously, it routinely held discourse on energy transition in Indonesia at the Indonesia Energy Transition Dialogue (IETD), which this year participated in ISEW 2022. First maintained in 2022, ISEW will last five days from 10-14 October 2022 with the theme Reaching Indonesia’s Net Zero Energy System: Unite for Action and Strategy. All levels of society can participate in this activity free at isew.live.***

C20 Urges Utilities Companies in G20 to Implement Energy Transition

press release
From left to right: Vivian Lee (SFOC), Fabby Tumiwa (IESR), Federico Lopez De Alba (CFE), Dennis Volk (BNetza), Philippe Benoit (Columbia University) photo by IESR

Bali, 30 August 2022 – As the main contributor to GHG emissions in the energy sector, Civil of Twenty (C20) Indonesia urges power utility companies to set inevitable targets, and a clear climate mitigation roadmap to reach zero emission by 2050. Civil of Twenty (C20) Indonesia invited energy experts and representatives from G20 power utility companies to discuss and urge the long-term strategy proposed by these power utility companies to accelerate the clean energy transition in their respective countries so as to align with the 1.5C pathway.

Risnawati Utami, the Sous-Sherpa of C20 Indonesia, in her opening remarks emphasized the importance of Indonesia’s leadership to promote and engage all civil societies to influence the commitment and policy of the countries’ members to adopt the human rights principles and international cooperation in mitigating the climate risks.

“The role of international cooperation recognizes the government’s responsibility to work together internationally, to urge implementation plans and strategies to reduce climate risks,” said Utami in the webinar of C20 titled “Role of G20 Power Utilities in Climate Mitigation Efforts”.

The COP27 High-Level Champion, Mahmoud Mohieldin stated about 800 million people in the world are still living without electricity access. He said that solutions to overcome the energy problem and mitigate the climate crisis are the availability of adequate policy, effective implementation, localization and financing.

“The Paris Agreement needs to be aligned and integrated with the SDG framework, otherwise we are going to be suffering from a bad refabrication and partial approach,” said Moheildin.

He expected that in COP27 which will be held in Egypt, more countries will come up with a more holistic approach towards sustainability focusing on the implementation and projectization ideas and initiatives and more of emphasis on the regional dimension, localization, and finance.

Fabby Tumiwa, Co-chair of C20 Indonesia and Executive Director of the Institute for Essential Services Reform (IESR) stated that as Indonesia holds the G20 Presidency, it should take bold action in orchestrating its power utility to implement energy transition. 

“Every country has to find its own way to deal with energy transition. The utility is facing serious challenges, such as climate change impacting the operation of the energy system, customer demands more renewable electricity at an affordable price, the workforce needs to upgrade with the current skill of renewable energy, regulation to limit carbon emissions, new technology is coming up that creates uncertainty in current utility business model,” said Fabby.

Fabby added that utilities need to adapt faster since there is limited time left to combat the climate crisis. Learning and skill shares among G20 members are crucial for utilities able to implement the solution immediately.

Philippe Benoit from Global Energy Policy, Columbia University presented that as State-owned Power Companies (SPCs) play a significant role in reducing GHG emissions, the government needs to reform it by influencing SPCs with policy options and targeted interventions directly and indirectly.

“The government can support SPC low carbon action by making resources available to SPC and advocacy, external pressure. But I would say, the easiest for a government that is committed to climate policy is to exercise the government shareholder power. For example, formal directive through Board resolutions and instructions, senior management appointments and dismissals,” said Benoit.

He added that other reformations of SPC include resourcing SPC low carbon actions with clear, consistent government direction, financing, complimentary or associated infrastructure, administrative support and capacity building for SPCs.

“SPCs need to participate in low carbon transition, as partners, not adversaries, and as enablers, not just producers. Empowering SPC low carbon action is key to achieving national and global climate goals,” he said.

Joojin Kim, Managing Director of Solutions for Our Climate (SFOC) offered a G20 outlook on accommodating more renewables in the power system. 

“We are in a pivotal moment and state utilities in the G20 must show leadership to unite the international community around solutions to the climate crisis. Many G20 nations, especially in Asia, are experiencing significant curtailment of renewables. Amid the present global energy situation, curtailment poses further uncertainty and economic loss. To address such challenges, countries must establish a governance framework that will ensure fair access and compensation for technologies that contribute to grid flexibility in order to reduce fossil fuel expenditure and increase renewable energy in the power mix,” said Joojin.

Evy Haryadi, Director of Corporate Planning of Perusahaan Listrik Negara (PLN), Indonesia, stated that achieving Indonesia’s net-zero target by 2060 by phasing out coal and developing renewable energy needs enormous investment. 

“Indonesia needs around USD 600 billion investment for carbon neutrality by 2060. We need support from international funders. However, for early retirement initiatives, the energy transition financing scheme is not existing in the market but is green financing. Transition financing still needs some regulatory framework, especially in international financing,” said Evy Haryadi. 

This event is organized by the C20 working group of environment, climate justice, and energy transition (ECEWG). C20 is one of the engagement groups under the G20 which represents civil society voices and concerns.

Significant Roles of Subnational Governments to Lead the Decentralization of Energy Transition

press release

Bali, 30 August 2022–The post-pandemic economic recovery by staying focused on making ambitious climate mitigation efforts through low-carbon development is a step that needs to be taken by local governments. The success of low-carbon development is also inseparable from planning for a just energy transition. The commitment of various parties, including local governments and communities to promoting the energy transition, is crucial considering that decentralization of the energy transition will have multiple impacts.

The Governor of Central Java, Ganjar Pranowo, said that through the Central Java Energy and Mineral Resources Office, he was actively pushing for energy transition efforts in his region. Energy transition policy instruments such as governor’s circular letters, regional secretaries, and various initiatives such as the declaration of Central Java to become a solar province in 2019, are ways to attract the private sector and the public to utilize renewable energy through the adoption of rooftop solar. Until Q2 2022, the total installed PLTS capacity in Central Java Province reached 22 MWp. The Central Java Provincial Government also supports the use of other renewable energy that is abundantly available, such as livestock manure biogas and micro hydro power plant(MHP), with government programs or encouraging community collaboration.

“Asymmetric decentralization by inclusion with (treatment-red) specifically in every location. With collective awareness, the potential for renewable energy in the area is checked and stimulated,” said Ganjar. This, according to Ganjar, will encourage a faster transformation.

Central Java’s climate commitment is also shown by starting to use electric vehicles as provincial government official vehicles.

Togap Simangunsong, Expert Staff of the Minister of Home Affairs for Social Affairs and Inter-Institutional Relations, Ministry of Home Affairs appreciated the good practices carried out by the Central Java Provincial government. He said that his party and the Ministry of Energy and Mineral Resources are currently drafting a Presidential Regulation that strengthens the authority of regional/provincial governments in the administration of government affairs in the field of energy, mineral resources, and sub-sector of new and renewable energy.

“Through this, it is hoped that local governments can provide support in efforts to achieve the target of the new renewable energy mix as an effort to reduce greenhouse gas emissions so that local government commitments are made to accelerate energy justice following their authority,” said Togap representing the Minister of Home Affairs, Tito Karnavian in a webinar entitled “Energy Transitional Decentralization: Increasing the role of communities and local government” organized by the Institute for Essential Services Reform (IESR) and the Central Java Provincial Government.

In addition, Chrisnawan Anditya, Head of the Planning Bureau, Ministry of Energy and Mineral Resources said that the utilization of renewable energy potential will open up opportunities in building a green national economy and as an effort to recover the economy after the pandemic under the G20 Presidency’s theme, “Recover Together, Recover Stronger”.

“Each region has a special new renewable energy potential that can be used to improve the welfare of local communities. The difference in the potential for new and renewable energy between regions is a technical challenge, as well as a great opportunity for our energy system. This condition allows the sharing of energy based on new and renewable energy when the area experiences energy abundance or scarcity. For this to happen, an integrated electric power system (smart grid and super grid) is needed,” explained Chrisnawan on the same occasion.

Furthermore, strong leadership at the regional level will be able to mobilize the community to make the cooperation of energy transition. This was stated by Fabby Tumiwa, Executive Director of IESR. He said the initiative and leadership of the local government will be able to answer the problem of access and security of energy supply by utilizing the abundant renewable energy potential in the area.

“Indonesia’s energy transition requires the construction of hundreds or even thousands of gigawatts, renewable energy generation, transmission and distribution infrastructure and energy storage systems. But by starting to divide it into small units, the big problems can be more easily solved and carried out by more parties,” said Fabby.

He added, based on the IESR study, that the decarbonization of the energy system in Indonesia will cost USD 1.3 trillion by 2050, with an average investment requirement of USD 30-50 billion per year. This amount is 150%-200% of the current total investment in the entire energy sector.

“This investment need is costly and cannot be borne solely by the government and SOEs. But this large investment can be met if we take into account the potential of the contribution and innovation power of the community as well as the capabilities of local governments. Citizens’ contributions and innovations can mobilize funding from the government, local government and village governments, as well as funding from the private sector and non-governmental institutions,” he added.

Bali is the first province in Indonesia to have a special governor regulation for clean energy and electric vehicles. In the Governor’s Regulation on Bali Clean Energy, the Governor of Bali encourages the use of renewable energy for various sectors, especially rooftop solar power plants. This effort is carried out to realize the vision of low carbon development in Bali and concrete steps for sustainable tourism.

“Due to the pandemic, Bali’s tourism has stumbled, after the pandemic, Bali has started to rise. Several tips have been implemented, such as the governor’s regulations and circulars regarding the adoption of rooftop solar power plants. Actually, the main target is tourism, but first, do a pilot in the government,” said Ida Ayu, Expert Staff to the Governor of Bali.

The plans and steps for achieving renewable energy targets in the Regional Energy General Plan (RUED) are also carried out by the Jambi Provincial government. The Governor of Jambi, Al Haris, through the Deputy Governor of Jambi, Abdullah Sani, emphasized his commitment to work together with the central and private parties to develop regional energy transitions because the resources they have are very sufficient, only to use and transform natural resources into energy that can be enjoyed by the Jambi community in particular.

The Jambi Provincial Government through the Department of Energy and Mineral Resources has also collaborated with IESR for the implementation of RUED and energy conservation efforts within the local government. Currently, the Governor of Jambi is in the process of issuing a governor regulation for the use of PV mini-grid as a substitute for energy subsidies.