Increase Collaboration and Investment for Renewable Energy Utilization in Central Java

 

Fabby Tumiwa, Direktur Eksekutif IESR dalam acara Forum Akselerasi Energi Terbarukan Jawa Tengah (19/12).
Fabby Tumiwa, Direktur Eksekutif IESR dalam acara Forum Akselerasi Energi Terbarukan Jawa Tengah (19/12)

Semarang, December 19, 2023 – The Central Java Provincial Government is seeking to encourage collaboration and synergy to accelerate the energy transition and achieve the target of a 21.32% renewable energy mix in the region by 2025, as set in its Regional Energy General Plan (RUED). However, the renewable energy mix in the region only reached 15.76% in 2022, according to data from the Central Java Energy and Mineral Resources Agency (ESDM). With only two years left to achieve the target, the Central Java Provincial Government must pursue the remaining 5.56% of the renewable energy mix.

The Institute for Essential Services Reform (IESR) has been collaborating with Central Java since 2019 to speed up the implementation of renewable energy in the region. To accelerate the transition towards renewable energy and attain the RUED target, it is necessary to establish supportive conditions such as regulations, community initiatives, public-private partnerships, and foster investment. IESR believes that the regional funding capability must be enhanced to achieve the RUED target and attract more renewable energy investment.

“Central Java has a vast potential for renewable energy, including 194 GW of solar energy and 3.5 MW of wind energy. To accelerate the utilization of these resources, several measures need to be taken, such as disseminating information and building capacity related to renewable energy development, promoting investment ecosystems that prioritize green funding, and setting up monitoring, reporting, and evaluation platforms to encourage public participation,” said Fabby Tumiwa, Executive Director of IESR at the Central Java Renewable Energy Acceleration Forum (19/12).  

During the same event, IESR announced a partnership with the Central Java Province Investment and One Stop Integrated Service (DPMPTSP) Office to promote green investment, especially in renewable energy in Central Java.

IESR meresmikan kerja sama dengan Dinas Penanaman Modal dan Pelayanan Terpadu Satu Pintu (DPMPTSP) Provinsi Jawa Tengah untuk mendorong investasi hijau dan khususnya energi terbarukan di Jawa Tengah

Sakina Rosellasari, the Head of Investment and One-Stop Integrated Service (DPMPTSP) in Central Java Province, has recently announced that her office has been actively promoting green investment in the region. To achieve this, they have taken several measures, such as compiling a list of investment-ready projects (known as Investment Project Ready to Offer or IPRO) that focus on circular economy projects such as waste treatment, mini-hydro, sustainable product processing, and waste processing into refused derived fuel (RDF). The DPMPTSP has also created promotional videos, met with various stakeholders, and signed cooperation agreements to encourage green investment in Central Java.

“The preparation of IPRO is important to attract potential investors and provide confidence that Central Java Province is the right location to invest. The IPRO in Central Java covers three sectors: infrastructure, agriculture, and tourism. Within the infrastructure sector is the construction of the Banjaran and Logawa mini hydro power plants in Banyumas Regency and the Tegal city B3 medical waste treatment and industrial development,” Sakina said.

The central government has issued Presidential Regulation No.11/2023 through the Ministry of Home Affairs. This regulation empowers local governments to manage and provide biomass, biogas, and new renewable energy. District and city governments have been granted the authority to support renewable energy development through Kepmendagri 900.1.15.5-1317 of 2023. Some examples of the district and city governments’ authority include waste management, provision of road equipment on district/city roads, empowerment of small fishermen in district/city areas, and provision of electrical/lighting installation components in office buildings.

Tavip Rubiyanto, an Associate Expert Policy Analyst for Energy and Mineral Resources Substance at the Directorate SUPD I of the Directorate General of Regional Development for the Ministry of Home Affairs, states that the development of renewable energy by regions is crucial to achieving the national renewable energy mix target of 23% by 2025.

Tavip explained that the rules regarding the discretion of regional authority in the management of new renewable energy will be effective from 2024. He hoped the regions would start budgeting to achieve these targets. Matters related to regional authority will be financed through the APBD.

To achieve the renewable energy targets at the regional level, Boedyo Dharmawan, Head of the Energy and Mineral Resources Office of Central Java Province, emphasized the need for cooperation between sectors. Coordination between the ESDM, environment, transportation, and planning agencies must be strengthened.

Boedyo Dharmawan also shared Central Java’s achievements in renewable energy, exceeding the annual target of 2022. These achievements include PLTS with a total capacity of around 25 MW, 6 MW micro hydropower plants (PLTMH), 31 MW mini hydro power plants (PLTM), and 322 MW hydropower plants (PLTA).

“Not only in terms of regulation, the government is also committed at the implementation level. To succeed in the energy transition towards the renewable energy era, the provincial government is also trying to control greenhouse gas emissions through the battery-based electric motor vehicle program,” said Boedyo.

Community initiatives that adopt renewable energy can significantly contribute to increasing the renewable energy mix in the region. This initiative can play an essential role in advancing the community’s welfare. Yanto, Head of Banyuroto Village, Sawangan District, Magelang Regency, and an Energy Independent Village, recognizes this fact.

Yanto explained that with a population of 930 cows and the assistance of various parties from the government, community, and non-governmental organizations, his village had developed around 34 biogas processing units from 2023 to 2027. This biogas helps to save the kitchen needs of 44 households in his village. Additionally, biogas can be used to fuel lighting lamps (petromak). The solid and liquid waste from cow dung is also helpful for organic fertilizer, which can fertilize agricultural soil.

Policy Breakthroughs Will Accelerate the Takeoff of Indonesia’s Energy Transition

press release

Jakarta, December 15, 2023 – The Institute for Essential Services Reform (IESR) assesses that the energy transition is already in full swing in 2023, and it is ready to take off if the government can create the necessary supporting conditions.

IESR comprehensively discusses the development of the energy transition and opportunities to accelerate the energy transition in Indonesia in its main report, Indonesia Energy Transition Outlook (IETO) 2024. 

The IETO 2024 report found that fossil energy supply still dominates despite government targets and commitments to energy transition and higher targets for greenhouse gas emissions mitigation; in the power sector, the total capacity of on-grid and captive coal plants is around 44 GW and is projected to increase to 73 GW by 2030. This will increase GHG emissions to around 414 million tons of carbon dioxide equivalent (MtCO2e) by 2030.

Fabby Tumiwa, Executive Director of IESR, said that the government needs to limit the development permit of captive power plants after 2025 and mandate the owners of industrial estates to optimize the usage of renewable energy and reduce emissions from operating power plants. The target is to reach the peak emissions in the electricity sector by 2030 and achieve net-zero emissions by 2060 or earlier.  

IETO noted no significant increase in renewable energy capacity and contribution to the renewable energy mix. Renewable energy capacity and contribution to the mix only reached 1 GW in 2023, failing to meet the 3.4 GW target set in the 2021-2030 RUPTL.

Fabby explained that a shared vision among the President and policymakers is crucial for Indonesia’s energy transition to be successful. A shared understanding will determine political commitment and a cost-effective roadmap to sustainability.

 

Fabby emphasized that the energy transition in Indonesia is progressing slowly due to weak political leadership, insufficient capacity of actors, and the burden of past policies. Therefore, Fabby mentioned the importance of implementing a ‘no-regret policy’ that guarantees overall socio-economic benefits regardless of the changes that may occur, as well as public budget reforms and PLN reforms to accelerate the energy transition process.

“Indonesia needs a coherent roadmap to achieve NZE 2060 or sooner. The electricity sector has made significant strides, but the transportation and industrial sectors are still developing. The government must also involve the public to create a just transition. With Indonesia’s values and history, the energy transition should be done with gotong-royong,” he said.

 

The government has made a political commitment to transition to renewable energy, resulting in increased funding for renewable energy projects both bilaterally and multilaterally. However, despite these efforts, the renewable energy investment target still needs to be met. One of the reasons for this is that there is a need for more bankable projects, and investors are hesitant to invest due to the quality of policies and regulations that do not meet their needs. Despite this, renewable energy utilization has only reached 1 GW in 2023.

IESR believes that to attract investment, it is necessary to review the renewable energy price policy in Perpres No. 112/2022, taking into account technological developments and funding interest rates. Other reforms are also needed to encourage the development of bankable and profitable renewable energy projects for investors. To entice investors, efforts can be made to improve the tariff structure, ensure a fair risk-reward profile for private power producer partners, and consider power-wheeling schemes.

 

“In addition, a solid collaboration between PLN, regulators, project developers, and financiers, both private and government, is needed to prepare a robust project pipeline and increase projects that are eligible for funding,” explained His Muhammad Bintang, The Energy Storage Technology and Battery Materials Analyst at IESR, who is also an IETO author.

On the transportation side, the adoption of electric vehicles is increasing. The number of electric motorcycles is expected to increase 2.4 times by September 2023, from 25,782 units in 2022 to 62,815.

“Despite government incentives and assistance to adopt electric vehicles for the public, other issues become barriers to adopting electric vehicles. For example, on the two-wheeled vehicle side, there are mileage and performance limitations compared to fuel-based two-wheeled vehicles. In contrast, on the electric vehicle side, other issues hinder the adoption of electric vehicles,” said Faris Adnan Padhilah, Electricity System Analyst at IESR.

IESR believes that to attract investment, it is necessary to review the highest renewable energy price policy in Perpres No. 112/2022 by technological developments and funding interest rates, followed by other reforms to encourage the development of bankable and profitable renewable energy projects for investors. Efforts to attract investors can be made by improving the tariff structure, ensuring a fair risk-reward profile for private power producer partners, and considering power-wheeling schemes.

“In addition, a solid collaboration between PLN, regulators, project developers, and financiers, both private and government, is needed to prepare a robust project pipeline and increase projects that are eligible for funding,” explained His Muhammad Bintang, the Energy Storage Technology and Battery Materials Analyst IESR, who is also an IETO author.

On the transportation side, the increase in electric vehicle adoption saw a 2.4-fold increase for electric motorcycles by 2023, from 25,782 units in 2022 to 62,815 in September 2023.

“Despite government incentives and assistance to adopt electric vehicles for the public, other issues become obstacles to adopting electric vehicles. For example, on the two-wheeled vehicle side, there are mileage and performance limitations compared to fuel-based two-wheeled vehicles. In contrast, on the four-wheeled vehicle side, there are higher prices for electric cars, limitations on vehicle types, and the lack of SPKLUs,” explained Faris Adnan Padhilah, IESR Electricity System Analyst.

On the other hand, local governments in Indonesia face challenges in finalizing the Regional Energy General Plan (RUED) and implementing it to meet renewable energy targets. The recent regulation Perpres No. 11/2023 expands the authority of local governments in renewable energy development. However, one of the implementation challenges is the limited local government budget, which needs to be balanced with other priorities.

 

“In addition to the expansion of authority, the provincial government also needs to detail the regional energy plan regulations into various measurable instruments and schemes, for example, the priority of regional financial allocations for renewable energy and specific rules for decarbonization of various sectors (transportation and buildings) in the region. In addition, with the ongoing revision of the national general energy plan (RUEN) document, local governments need to update the provincial RUED in the future to reflect regional ambitions in energy transition better and integrate more ambitious renewable energy targets,” said Martha Jesica, the Social and Economic Analyst, IESR.

Information for the media

Indonesia’s Energy Transition Status in 2023

  • IESR assesses Indonesia’s 2023 energy transition readiness as unchanged from 2022. Of the eight variables measured, the lowest score is political will and commitment, which must still be aligned with the greenhouse gas mitigation needs by the 1.5 C roadmap. 
  • Indonesia’s current energy policy is inadequate to reduce greenhouse gas emissions, will only reduce 20 percent of projected emissions in 2030, and will continue to increase until 2060.
  • Renewable energy development in the electricity sector is slow, characterized by a total additional installed capacity of only 1 GW until 2023, far from the target set in 2021 of 3.4 GW.
  • Coal production is increasing. As of the end of October 2023, coal production has stood at 619 Mt and is expected to surpass 700 Mt in 2023, exceeding the government’s 2023 target of 695 Mt. 
  • Indonesian government policies still favor the fossil industry. The update of the National Electricity General Plan (RUKN) does not include an option for early retirement of coal-fired power plants, even though it is economically feasible and profitable.
  • For low-carbon fuels, green hydrogen development is gaining interest. Thirty-two green hydrogen projects are underway, although most are in the early development stage.
  • In terms of transportation, motorcycles are the largest emitter in 2022, accounting for 36% (54 MtCO2e) of total transportation emissions.
  • Electric vehicle adoption is expected to experience a significant surge in 2023. The number of electric cars adopted increased 2.3 times, from 7,679 units in 2022 to 18,300 units in September 2023. In the same period, the number of electric motors increased 2.4 times, from 25,782 units in 2022 to 62,815 in September 2023.
  • As of the second quarter of 2023, the installed capacity of cumulative rooftop solar PV only reached 100 MW, far below the target of 900 MW by 2023. The slow growth of rooftop solar is mainly due to a decline in solar PV adoption in the residential and business sectors, by 20% and 6%, respectively.
  • By 2023, seven provinces had exceeded the 2025 renewable energy target: North Sumatra, South Sumatra, Bangka Belitung, West Java, Gorontalo, South Sulawesi, and Maluku. Meanwhile, the other 31 provinces are still hampered by fiscal capacity and central policies to achieve the regional renewable energy mix target.
  • Total funding in the new and renewable energy sector reached USD 1.7 billion from the first quarter of 2022 to the third quarter of 2023. These funding commitments generally focus on energy efficiency project preparation and renewable energy development. Perpres 112/2022 has increased funding commitments for renewable energy.
  • Launched in September 2023, the carbon exchange recorded transactions of IDR 29.2 billion. However, after the opening, transactions 
  • Launched in September 2023, the carbon exchange recorded transactions of IDR 29.2 billion. However, after the opening, carbon exchange transactions were quiet. By the end of October 2023, total transactions had only increased by Rp200 million.

 

Opportunities and Projections for Energy Transition in Indonesia in 2024

  • Opportunities for increased government commitment to the energy transition will be seen from the results of the National Energy Policy (KEN) update outlining decarbonization targets in the energy sector, followed by the issuance of the National Energy General Plan (RUEN).
  • The government has issued Government Regulation No. 33/2023 on Energy Conservation. Implementing this PP should be binding and mandatorily controlled to drive significant emission reductions in the building sector.
  • The Ministry of Industry plans to create decarbonization roadmaps in 2023 and 2024 for nine high-energy-emitting industrial sectors and incentives for energy transition. This could be an opportunity to build a greener industry.
  • The low renewable energy achievement in 2023 results from delays in various hydropower and geothermal projects such as Batang Toru Hydropower Plant, Baturaden Geothermal Plant, and Rajabasa Geothermal Plant. The government needs to support these projects’ sustainability by minimizing project preparation risks.
  • Electric vehicle adoption is increasing, but there is still range anxiety. This needs to be addressed by increasing the number of charging infrastructure through incentives.
  • The latest regulation, Perpres No. 11/2023, has given local governments more authority in developing renewable energy. However, the regions may face budget limitations, which could hinder their ability to utilize this additional authority fully. As a result, it will be necessary for the national government to provide additional support to ensure the success of renewable energy development in the regions.

IETO 2024: Indonesia Needs to Build Momentum to Reach Peak Energy Sector Emissions in 2030

Jakarta, December 12, 2023 – Indonesia aims to reach peak greenhouse gas (GHG) emissions by 2035 and gradually move towards net zero emission (NZE) by 2060 or earlier. The energy sector in Indonesia is currently a major source of emissions, with nearly 90.4 percent of the country’s domestic energy supply coming from fossil fuels. Therefore, the transition to renewable energy is crucial in reducing emissions.

Unfortunately, the Institute for Essential Services Reform (IESR) observed that the trend of renewable energy development tends to slow down, reaching only 0.97 GW of the 3.4 GW target in the fourth quarter of 2023. This slow progress will make it difficult for Indonesia to reduce its emissions and meet the decarbonization target in the power sector. Moreover, with rapidly increasing emissions from the demand sector, Indonesia is at risk of not reaching its peak emissions. Therefore, it is crucial to have high emission reduction ambition and strong political commitment to achieve the target.

The discussion of Indonesia’s efforts to reach peak emissions in 2030, which has the potential to be a milestone in the transformation to renewable energy on a large scale or to end hopes of achieving the NZE target sooner, is the main topic in IESR’s flagship report entitled Indonesia Energy Transition Outlook (IETO) 2024.

The Executive Director of IESR, Fabby Tumiwa, stated that this year’s IETO 2024 is more comprehensive in monitoring Indonesia’s energy transition development and projection. Tumiwa mentioned that Indonesia has already released a plan.

The IETO 2024 report states that for Indonesia to meet the emission target of 250 MtCO2e/y by 2030, as agreed upon in the Just Energy Transition Partnership (JETP), it must reduce its coal and diesel power plants by 4.29 GW by 2030. Furthermore, Indonesia needs to increase its renewable energy development by at least 30.5 GW by 2030 to achieve this goal.

Pintoko Aji, Renewable Energy Analyst of IESR, said that the high penetration of variable renewable energy (solar and wind power) will make the concept of baseload plants or plants that operate continuously with high capacity irrelevant.

“To incorporate more variable renewable energy (VRE), Indonesia’s electricity system requires a flexible and responsive infrastructure. This means that the power system must be able to adapt to fluctuating loads and respond to the variability of electricity production from VRE sources. To achieve this, it is necessary to thoroughly review contractual restrictions, such as legal contract modifications from take-or-pay to take-and-pay, and to implement flexibility incentives.,” said Pintoko Aji.

IESR encourages the government to show stronger political will and concrete steps to accelerate renewable energy penetration. In addition, the decarbonization strategy must be implemented across all sectors to support each other. IESR believes that the new president who will be elected in the 2024 election must create momentum for the energy transition from the beginning of his leadership.

All discussions on the status and analysis of the energy sector to accelerate the energy transition are summarized in the Indonesia Energy Transition Outlook (IETO) 2024 and published since 2017 with the Indonesia Clean Energy Outlook (ICEO), which then transformed into IETO in 2019.

“In addition to summarizing the course of Indonesia’s energy transition over the past year, this IETO comprehensively projects sectoral policies in each energy sector and contrasts them with long-term targets. This can be an input for policymakers and stakeholders in the electricity, transportation, industry, and building sectors to improve their sectoral emission mitigation targets and implementation levels,” explained Deon Arinaldo, Program Manager of Energy Transformation, IESR.

 

IESR will host the Indonesia Energy Transition Outlook 2024 report launch on December 15, 2023. Don’t miss the chance to register and participate in this momentous event. Visit s.id/IETO2024 to secure your spot today.

Playing Backdoor in Emission Reduction Solutions

Fabby Tumiwa dalam Konferensi Pers Climate Action Tracker

Jakarta, December 6, 2023 – The Climate Action Tracker (CAT) has released its latest report on the climate ambition and action of 42 countries, including the European Union. CAT’s assessment shows that there has been no significant change in global temperature reduction efforts since last year.

CAT modeled four temperature increase scenarios based on current policies and actions, 2030 emission reduction targets, net zero emission (NZE) targets and optimistic scenarios. All four scenarios lead to an increase in global temperature of between 1.8℃ and 2.7℃ by 2100.

Bill Hare, CEO of Climate Analytics said that even based on the global stocktake, the world is already off track to limit global warming to below 1.5℃.

“The emissions should be decreasing now and they should be decreasing quickly, but they’re continuing to increase. The central issue for this COP and the global stocktake is to reach a conclusion about the phasing out of fossil fuels. Unless we do that, I doubt whether we’re going to see an improvement in the temperature outcome,” said Bill Hare at the CAT press conference in Dubai (5/12).

Similarly, Claire Stockwell, Senior Climate Policy Analyst, Climate Analytics argues that countries’ emissions reduction targets for 2030 are very weak

“We assess the 2030 targets for countries that have very weak targets. So for countries that we already are projecting now can very easily meet those targets with current policies, including Indonesia,” Claire said.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) revealed that Indonesia’s downgrade to critically insufficient in terms of climate policy and action was due to an increase in emissions of over 21% compared to last year. Fabby explained that this increase was a result of constructing new coal power plants and resuming operations of previously paused power plants due to Covid-19.

“The Indonesia government actually has made a number of policies, for instance, last year the president issued regulations prohibiting additional new coal plants for utilities but allowing captive coal under specific conditions. We believe these regulations will have an impact, though not immediately, but perhaps in the near future,” Fabby said.

Niklas Höhne, an expert at the New Climate Institute, said that this insignificant emission reduction effort occurs because many countries are proposing backdoors to continue the use of fossil energy. He gave examples of several terms that reflect back door solutions, such as unabated fossil energy, shifting the focus to fossil fuel ‘emissions’, and phasing down fossil energy. Meanwhile, according to him, based on the Paris Agreement, countries have agreed to balance emissions and sources, and this can only happen if all fossil energy operations phase out.

“If we now decide on something more vague, like unabated fossil fuels, phasing out of emissions or something, that will be a step backwards,” he added.

He also highlighted technological solutions aiming to extend the life of fossil energy, like green hydrogen for use in gas boilers or producing ammonia using renewable energy and using it in coal-fired power plants. He considers these technological choices to be incorrect, inefficient, and costly.

National and Regional Low-Emission Transportation Policy Roadmap

press release

Jakarta, December 5, 2023 – A significant reduction in emissions from the transportation sector is a strategy to achieve zero emission by 2050 per the Paris Agreement, or net zero emission (NZE) by 2060, as the Government of Indonesia targets. To turn this commitment into an actionable strategy, developing a comprehensive roadmap for decarbonizing the transport sector is essential.

The Institute for Essential Services Reform (IESR) has developed a roadmap for transport sector decarbonization policy at the national and regional (Jabodetabek) levels. Based on IESR data, the transportation sector, particularly land transportation, is responsible for increasing greenhouse gas emissions in Indonesia. Land transportation passenger movement accounts for 73% or 110 mtCO2e of total transportation emissions in 2022.

“Indonesia has updated its emission reduction target in the Enhanced Nationally Determined Contribution (ENDC). However, emission reduction is not only based on percentage; it must be aligned with the Paris Agreement. To achieve this, IESR has conducted roadmap modeling of transportation sector decarbonization opportunities with national and Jabodetabek regional model structures. This modeling aims to find the optimal steps that can be taken to increase Indonesia’s climate change mitigation actions,” said IESR Executive Director Fabby Tumiwa. 

 

Rahmi Puspita Sari, IESR Sustainable Mobility Analyst, explained that the number of registered vehicles in 2021 has grown faster than the population rate across the country. Motorcycles make up the majority of registered vehicles, accounting for around 84.54% of the total number of cars in the country. This trend is also observed in the Jabodetabek region, where 75.8% of transportation modes used in 2019 were motorcycles, according to the Jabodetabek Urban Transportation Policy Integration (JUTPI) report. The reason for this dominance is the growth of the Indonesian economy, increased purchasing power, and the relatively low cost of motorcycles.

“Currently, we do not have public transportation that can compete with motorcycles in terms of price and time. This is concerning as motorcycles emit more pollutants than cars due to incomplete combustion. Additionally, two mobility phenomena contribute to the traffic in Jakarta. The first is commuter mobility, where people travel between zones from outside Jakarta to Jakarta for work or education, accounting for about 10% of trips in Jakarta. The second is circular mobility, where semi-permanent residents in the city return to their hometowns or travel for holidays on an annual basis,” Rahmi explained. 

IESR examined vehicle and passenger movement policies in the transportation decarbonization roadmap modeling. Nationally, based on the principles of avoid (avoid and reduce travel), shift (switch to low-carbon vehicles), and improve (increase energy efficiency), five policies were tested to reduce emissions in the transportation sector. The five policies are working from home, concentrating travel on public transportation, using biofuels, setting a minimum amount of motor fuel efficiency (fuel economy standard), and providing incentives for electric motor vehicles and cars.

Fauzan Ahmad, Tasrif Modeling Team, who was also involved in creating the transportation decarbonization roadmap, said that the results of the policy testing indicate that transportation emissions can be reduced by 15% to 75% until 2060. This can be achieved through work-from-home policies, electric vehicles, biofuel use, public transportation use, and fuel efficiency. However, it is important to note that these reductions are mainly driven by passenger vehicle policies and not yet freight vehicles and road logistics.

 

“Electric vehicle policies have the potential to reduce national emissions significantly. However, two key factors must be addressed to achieve this goal to have an impact at the national level, namely an increase in the sales share of electric vehicles (EV sales share) and policy support that encourages a reduction in the number of fuel vehicles (ICE) that are not eligible to operate (discard rate). In addition, shifting modes towards public transportation has a more sustainable impact on fuel and resource use but requires considerable investment,” Fauzan explained.

While in the Jabodetabek region, using the principles of avoid, shift and improve, there are seven policies tested on the transportation decarbonization road map, namely development planning around public transportation (Transit Oriented Development, TOD), work from home (WFH), imposing restrictions on high-emission vehicles (Low, Emission Zone, LEZ), concentrating on public transportation, using biofuels, setting a minimum amount of motorized fuel efficiency (fuel economy standard) and providing incentives for electric motor vehicles and cars.

Arij Ashari Nur Iman, Tasrif Modeling Team, mentioned that the results of policy testing at the regional level showed a decrease in transportation emissions of around 7%-43% annually from the baseline scenario in the 2010-2060 timeframe through a combination of WFH, LEZ, TOD, electric vehicles, biofuels, use of public transportation, and fuel efficiency policies.

   

“Establishing low-carbon policies can reduce emissions by up to 45%. The most significant policy is establishing a minimum motorized fuel efficiency, using biofuels, prioritizing public transportation, and promoting electric vehicles,” Arij explained.

Indonesia’s Emission Reduction Ambition Needs to Increase

press release

Jakarta, December 4, 2023 – The Institute for Essential Services Reform (IESR) hopes the United Nations Climate Summit (Conference of the Parties, COP-28) will strengthen the commitment of all countries, including Indonesia, to reducing greenhouse gas emissions by 2030. According to the results of the Global Stocktake, the promise and realization of emission reductions are still far from achieving the Paris Agreement target. Therefore, after COP-28, all countries must review their Nationally Determined Contribution (NDC) and set more ambitious targets for mitigating the climate crisis.

President Joko Widodo (Jokowi), in his remarks at COP-28, said that Indonesia is committed to achieving net zero emission (NZE) in 2060 or earlier. Jokowi hopes that COP-28 will foster inclusive cooperation and collaboration to support the achievement of Net Zero Emissions (NZE). He explained that Indonesia is accelerating the energy transition by developing renewable energy and reducing the use of coal-fired power plants. Achieving the 2060 NZE target requires more than USD 1 trillion in financing. He invited more collaboration and investment to support low-interest energy transition financing. He believes solving the energy transition financing problem is a way to solve the world’s problems.

The Institute for Essential Services Reform (IESR) believes having supportive policies to facilitate large investments in energy transition is crucial. As per the Paris Agreement, Indonesia needs to implement more ambitious policies and commitments as time is running out to limit the earth’s temperature rise below 1.5 degrees Celsius. 

Based on the UNFCCC Global Stocktake discussion report for 2023, the responsibilities of countries listed in their NDCs are not aligned with the Paris Agreement. This misalignment will make it difficult to achieve the goal of reducing global greenhouse gas emissions by 43 percent by 2030 from 2010 levels, 60 percent by 2035, and zero emissions by 2050. Moreover, the NDC target submitted at COP27 indicates that the earth’s temperature in 2050 will likely exceed the Paris Agreement target.

“Indonesia needs to submit a more ambitious target for reducing emissions and increasing its resilience to climate change in the Second NDC (SNDC), which is scheduled to be introduced in 2025. To align with the 1.5°C target, the maximum emission level for all sectors in 2030 should be 850 million tons. In the electricity sector, the energy transition is characterized by a target of 44% renewable energy mix in 2030. However, even if the renewable energy mix target is achieved, it will not be sufficient to bring electricity sector emissions below 200 million tons of CO2 by the 1.5°C pathway. Therefore, in addition to increasing the use of renewable energy, there is still a need to strengthen the power sector’s capacity,” said Fabby Tumiwa, the Executive Director of IESR. 

By 2025, Indonesia needs to increase its ambition in the Enhanced NDC, which currently only aims for an emission reduction target of 31.89% with its efforts (unconditional) and 43.2% with international assistance (conditional) by 2030. This target is made by comparing business as usual (BAU) 2010 projections. Meanwhile, IESR, using points from 2020 emissions data, found that Indonesia could set an unconditional NDC target of 26% by 2030. This increase is higher than the current target. It aims to keep the Indonesian government setting a more relevant climate ambition target in line with the Paris Agreement’s target of no more than 1.5°C of global warming.

 

“There are many opportunities for Indonesia to improve its renewable energy mix target by the Paris Agreement. For example, by aligning the preparation of the SNDC with the NDC principles in Article 4 Line 13 of the Paris Agreement, namely promoting environmental integrity, transparency, accuracy, wholeness, comparability, consistency, and ensuring avoidance of double counting, using feasible methods to achieve decarbonization efforts, and accelerating decarbonization out of fossil fuel use,” said Wira A Swadana, Green Economy Program Manager, IESR.

Wira added that Indonesia needs to attract international support, collaborate on technology and knowledge, and encourage renewable energy development to implement the key findings of the Technical Dialogue of the first GST, particularly in climate mitigation. Notably, at COP-28, there is a call to triple the renewable energy target to 11 TW by 2030.

He mentioned that Indonesia has the opportunity to enhance collaboration and strengthen cooperation with the United Arab Emirates (UAE). Masdar, a company from the UAE, has played a significant role in constructing the Cirata floating solar power plant and has invested in the geothermal energy sector. Additionally, Masdar is a strategic investor in the initial public offering (IPO) of PT Pertamina Geothermal Tbk (PGEO) in February 2023.

“Cooperation between Indonesia and other countries, including the UAE, can help Indonesia’s decarbonization efforts to mitigate the adverse effects of climate change. Indonesia has established climate cooperation through mechanisms like JETP and various bilateral agreements. However, gaps still need to be addressed to encourage more ambitious climate mitigation and adaptation efforts. Specifically, there is a need for increased funding and capacity building,” Wira explained.

A Glimpse of Global Stocktake can be found here

Encourage Just Energy Transition in Coal-Producing Regions

Jakarta, November 21, 2023 – The Institute for Essential Services Reform (IESR) believes that mitigating the impact of energy transition in coal-producing areas needs to be a concern of the central and regional governments. The involvement of affected communities by prioritizing justice in the energy transition process is crucial to moving from a fossil-intensive economic system to a sustainable economy.

IESR has conducted a study entitled Just Transition in Indonesia’s Coal Producing Regions, Case Studies Paser and Muara Enim, with research locations in Paser Regency, East Kalimantan Province, and Muara Enim Regency, South Sumatra Province. The study found that coal-producing regions can contribute to the economic transition to clean energy. Some factors that can potentially aid in this transition are the emergence of awareness to not solely rely on one source of regional income, such as the coal sector, a company’s initiative to diversify its business beyond coal, and the implementation of corporate social responsibility (CSR) which can act as a source of funding for community empowerment. However, several obstacles hinder the optimization of this potential, such as the limited authority of local government, lack of financial capacity, and inadequate health and education infrastructure.

“The government needs to pay attention to the energy transition phenomenon in coal-producing regions to mitigate its impact. Indonesia still has time to prepare for the energy transition process, but the time is insufficient. We cannot let the coal industry end abruptly, as the regions are not yet ready to transform. The central government needs to properly understand the context of energy transition in these regions so that it can make active interventions in coal-producing regions,” said Fabby Tumiwa, Executive Director of IESR at the media dialogue entitled “Equitable Transition in Coal Producing Regions in Indonesia: Case Study of Muara Enim Regency and Paser Regency.”

The study also found insufficient economic diversification and industrial development in coal-producing regions. Most of the coal produced in Paser and Muara Enim is exported to other regions, which has not led to any significant industrial development. Industrial development is also slow in both regions, particularly in Paser, where the manufacturing industry’s gross regional domestic product (GRDP) is still lower than agriculture. In Muara Enim, the lack of viable economic opportunities is also due to limited agricultural land, especially rubber plantations, due to land use change from plantations to mining concession areas.

“Therefore, we encourage the central and regional governments to focus on economic transformation by developing sectors of excellence in each coal-producing region. For instance, in Paser Regency, East Kalimantan, the education and financial services sectors have shown promising growth. Similarly, Muara Enim Regency, South Sumatra, has performed better in the accommodation and food services sector than its neighboring regions. Therefore, we suggest that the authorities prioritize these sectors of excellence to boost economic development in these areas,” explained Martha Jesica, Social and Economic Analyst at IESR. 

Rusdian Noor, Secretary of the Regional Development Planning Agency (Bappeda) of Paser Regency, East Kalimantan, hopes that the acceleration of energy transition in coal-producing areas will be accompanied by support from the central government for investment and technological innovation.

“The Gross Regional Domestic Product (GRDP) of Paser Regency in 2022 is expected to fund around 75% of the regional development, and the primary contributor to this is the mining sector. To ensure sustainable development, the energy transition process must focus on diversifying the economic sector and generating at least 75% of the PDR. This will help the region maintain its power and progress towards sustainable development,” said Rusdian. 

Similarly, Mat Kasrun, Head of Bappeda Muara Enim Regency, expressed that his party should be involved in all policy-making related to energy transition and has the authority to develop new and renewable energy. He also hopes for support from the central government in granting discretion in authority or licensing for developing new economic sectors in the regions.

Cirata Floating Solar PV Plant Ready to Operate: Important Milestone for Accelerating Solar Energy Development to Decarbonize Electricity in Indonesia

Jakarta, November 9, 2023 – Cirata floating photovoltaic (PV) power plant located in Cirata Reservoir, West Java, with a capacity of 145 MW(ac) or 195 MW(p), has been inaugurated today. This event marks an important milestone for Indonesia as it is now home to the largest floating solar power plant in Southeast Asia, surpassing the Tengeh floating solar power plant in Singapore.

The Institute for Essential Services Reform (IESR) considers the operation of the Cirata floating PV power plant as a significant achievement in accelerating the development of large-scale solar power plants in Indonesia. The country’s solar power development has been almost non-existent since 2020. However, the decreasing investment cost of solar PV has made it the cheapest renewable energy source. Therefore, Indonesia must optimize the technical potential of PLTS, which reaches 3.7 TWp to 20 TWp, to support its goal of achieving the electricity sector’s peak emission target by 2030 at the lowest possible cost.

IESR also encourages the government and PLN to take advantage of the technical potential of floating PV power plants, which reach 28.4 GW from 783 water body locations in Indonesia, to accelerate the utilization of solar power plants. Based on the data from the Ministry of Energy and Mineral Resources shows that there is potential for large-scale floating solar power plants that can be developed in at least 27 locations of water bodies that have hydropower plants (PLTA), with a total potential of 4.8 GW and an investment equivalent to USD 3.84 billion (IDR 55.15 trillion). Utilizing the potential of this floating solar power plant will accelerate the achievement of the renewable energy mix target and achieve the net zero emission (NZE) target sooner than 2060.

The government and State Electricity Company (PLN) must optimize the potential of floating solar power plants by creating a regulatory framework that attracts businesses to invest in these plants. One way to achieve this is by offering an attractive rate of return on investment that matches the risk profile but is attractive and reduces additional burdens.

One area of concern for the government is PLN’s assignment scheme to its subsidiaries, which has been a priority option for developing floating solar power plants. Through this scheme, the subsidiary seeks equity investors for minority ownership but must be willing to bear a larger portion of equity through shareholder loans.  

“This scheme benefits PLN but cuts the return on investment for investors and risks the bankability of the project and the interest of lenders. This scheme can also create unfair business competition among business players, as only those with large equity can partner with PLN, and most investors are foreign. This could impact overall investment interest,” said Executive Director of IESR, Fabby Tumiwa.  

The solution, according to Fabby, requires government support by strengthening the capital of PLN and its subsidiaries through special state capital participation (PMN) for renewable energy development and providing concession loans to PLN through PT SMI, which can then be converted into share ownership in floating PV power plants project. 

Indonesia can reap the potential for investment and low-emission electricity from floating solar power plants with the support of definitive and binding regulations from the government. In July 2023, the government issued Minister of Public Works and Public Housing Regulation Number 7 of 2023 on the Second Amendment to the Regulation of the Minister of Public Works and Public Housing Number 27/PRT/M/2015 on Dams, which no longer limits the area of water bodies in reservoirs that can be utilized for floating solar power plants at 5%. The regulation opens up opportunities for the development of floating solar power plants on a larger scale, provided that when using more than 20% of the water body area, it is necessary to obtain a recommendation from the Dam Safety Commission.

Marlistya Citraningrum, Program Manager for Sustainable Energy Access, IESR, sees this as an opportunity to overcome land issues in developing solar PV.

“Land availability is often an obstacle in the development of solar PV, especially in areas already dense with high land prices, as well as land cover that may not be suitable for solar PV, for example, too steep or productive agricultural land. Indonesia also has several dams, whether hydropower or not, that could be used as potential sites. The Hijaunesia 2023 project, for example, has offered the development of floating solar power plants in Gajah Mungkur, Kedung Ombo, and Jatigede with a capacity of 100 MW each,” Marlistya mentioned.

However, according to Marlistya, the overall planning, tendering, and construction of floating solar power plants in Indonesia still needs to be improved. Despite being a flagship project and a form of intergovernmental cooperation (G2G), the timeline for completion of the Cirata floating solar power plant is quite long – starting with a memorandum of understanding between Indonesia and the United Arab Emirates in 2017 and the formation of a joint venture between PJB Investasi and Masdar in the same year, the signing of the new PPA took place in 2020 and financial closing in 2021. This lengthy process reduces the attractiveness of floating solar power plant investment in Indonesia.

The development of supply chains for solar PV and floating PV components in Indonesia is also wide open, including for solar cells and modules. Not only for the domestic market, which has yet to reach 1 GW, solar cells and modules with tier 1 criteria produced in Indonesia are also intended for foreign markets. Chinese tier 1 solar cell and module manufacturer Trina Solar has collaborated with Sinarmas to build an integrated solar cell and module factory in Kendal Industrial Estate, Central Java, with a production capacity of 1 GW/year.

Draft CIPP Targets 44 Percent Renewable Energy Mix by 2030

Jakarta, November 2, 2023 – The government has released the draft of the Comprehensive Investment and Policy Plan (CIPP) in the Just Energy Transition Partnership (JETP) for public consultation on Wednesday (1/11/2023). 

The Institute for Essential Services Reform (IESR) has acknowledged some changes in the CIPP document, particularly the significant increase in the renewable energy mix target to around 44% by 2030, up from 34% in the JETP joint statement last year. However, the CIPP includes establishing a net zero emissions (NZE) target in the electricity sector by 2050. This does not align with the Paris Agreement, which calls for phasing out fossil generation by 2040.

Furthermore, the emission reduction target was focused solely on power plant emissions within the PLN grid, rather than addressing emissions from the overall power sector, to 250 million tons of carbon dioxide equivalent in 2030. This figure does not include the emission reduction target from captive power. If combined, the total peak emission target is much higher than projected during the JETP negotiation last year. Furthermore, the previous draft had a plan to end the operation of coal-fired power plants with a total capacity of 5 GW, but it was removed due to unclear funding sources from the IPG.

IESR assesses that eliminating the plan of early retirement of coal power plants will make it difficult for Indonesia to achieve its net-zero target in 2050 and increase the renewable energy mix after 2030. In the current JETP scenario, emission reductions are achieved by reducing the utilization of coal power plants. Therefore, to achieve the new target of 44% renewable energy mix in 2030, there should be an increase in the flexibility of PLN’s coal power plant operations, and a review of private coal power plant contracts, as well as regulatory support for accelerating the development of renewable energy in Indonesia. The renewable energy development plan, which gives a large portion to geothermal power plant (PLTP) and hydropower (PLTA) and adjusts PLN’s priorities, can pose a risk in achieving this target, considering the development period of geothermal power plant (PLTP) projects, which takes 8 to 12 years and hydropower, which can take 6 to 10 years.

“The elimination of the plan to early retire the operation of 5 GW of coal-fired power plants before 2030 due to the lack of funding support is regrettable. This makes Indonesia’s JETP even further away from the Paris Agreement target. Based on the results of the IESR study, to achieve the previous peak emission target of 290 million tons of carbon dioxide, it is necessary to end 8.6 GW of coal-fired power plants in PLN’s electricity network by 2030. For this reason, it is necessary to conduct further dialog with IPG to explore blended finance with a matching fund scheme where funding for early retirement of CFPP comes from additional funds above IPG’s commitment and is equalized with funds from State Budget and other sources,” explained Executive Director of IESR, Fabby Tumiwa.

IESR also highlighted the CIPP document that has not considered the termination of captive CFPP operations operated by utility companies outside PLN.

“The challenges of captive power plants vary depending on the industry they supply. However, there is already a basis for Presidential Regulation 112/2022, which requires a 35% reduction in emissions and an end of operations by 2050. Therefore, emission reduction strategies and early termination of operations for captive power plants and other business areas need to be reviewed immediately,” said Deon Arinaldo, Program Manager of Energy Transformation, IESR.

Policy reforms and increased commitment from policymakers and stakeholders are crucial in implementing CIPP, which aims for a 44% renewable energy mix by 2030. Indonesia’s renewable energy capacity of 12.6 GW needs to be increased by 62 GW to reach around 75 GW of renewable energy capacity in 2030.

“The procurement process of existing renewable energy plants is still constrained in several ways. Often, this is due to project preparation, including grid connectivity studies, land acquisition, and the completion of relevant permits before the auction process. In Indonesia, this is still a burden on developers, making renewable investment prospects accessible only to certain ‘players’. Policy reforms that emphasize efficiency and ease in the renewable energy plant procurement process are necessary if the capacity expansion target is to be achieved,” said Raditya Wiranegara, Senior Analyst IESR.

Emission reduction efforts listed in this CIPP document also need to emphasize justice aspects by including community participation. Based on IESR’s various studies on mitigating the impact of energy transition in coal-producing areas, the government needs to increase the capacity of national and local government institutions in implementing energy transition and diversifying the economy to a more sustainable economy.