Faster Shift from Coal to Clean Electricity can Save around 180,000 Lives in Indonesia

press release

Jakarta, July 18, 2023 – Cancelling new coal power projects and retiring Indonesia’s coal power plants by 2040 can avoid 180,000 deaths from air pollution and health costs of USD 100 billion over the next decades, based on new research titled Health Benefits of Just Energy Transition and Coal Phase-out in Indonesia from the Centre for Research on Energy and Clean Air (CREA) and the Institute for Essential Services Reform (IESR). 

A 2040 coal phase-out is required to meet Paris Agreement goals, according to the International Energy Agency (IEA). Indonesia is currently targeting a 2050 phase-out, with some exemptions.

Fabby Tumiwa, the Executive Director of IESR, emphasized that the government should urge utilities to reevaluate their  plans for constructing new power plants and take immediate action to transition towards renewable energy generation. This shift would lead to significant economic, social, and health benefits.

“At the summit of the G20 last year, Indonesia signed the Just Energy Transition Partnership (JETP) joint statement, committing to reaching peak power sector emissions by 2030 with an absolute value of 290 million tonnes of CO2e. Achieving this target would entail retiring approximately 9 GW of the coal-fired power plants (CFPPs), within this decade. However, concerning the remaining CFPPs that have not yet reached decommissioning time, it is crucial to ensure that there are mitigation strategies to reduce these negative impacts. The implementation of these strategies should be an integral part of the solution for a just energy transition,” Fabby said.

The CREA and IESR research developed the first health-based coal power retirement pathway for Indonesia, based on detailed atmospheric modelling and plant-by-plant health impact assessments (HIAs). The pathway maximises the health benefits of shifting from coal to clean energy by retiring the most polluting coal power plants first.

Air pollutant emissions from coal power were responsible for 10,500 deaths in Indonesia in 2022, and health costs of USD 7.4 billion, according to the results of the research. This health toll is set to rise with the commissioning of new coal power plants. Power generation from coal will increase over the next decade, unless growth in clean power generation is accelerated to cover growth in demand.

Retiring coal power plants requires upfront investment. The faster retirement of coal by 2040 would result in avoided health costs to USD 130 billion (Rp 1930 trillion), while investment of USD 32 billion (Rp 450 trillion) would be needed to realise the phase-out, making the investment highly profitable for all of society.

“This research provides a list of power plants ranked according to their impact on the health costs per unit of generation, which could actually serve as an additional metric to be considered in making the plants retirement prioritization. This is particularly important input as the JETP secretariat is currently working on the Comprehensive Investment Plan and Policy (CIPP), in which coal retirement being one of the area investments included in the document,” said Raditya Wiranegara, Senior Researcher of IESR, and the contributor for the report.

An important reason for the large public health toll of coal power plants in Indonesia is that essentially all plants lack efficient air pollution emission control devices for pollutants such as sulphur dioxide, nitrogen oxides and mercury, due to lenient national emission standards. Stronger standards, requiring investment in air pollution controls, could avoid up to 8,300 deaths from air pollution per year by 2035, with the avoided health costs far exceeding the expenses associated with the technology.

“Our research shows that cutting emissions from coal power plants is not just good for health and well-being but can benefit Indonesians economically as well. The avoided health costs can more than compensate for investments needed to close down coal plants and to build clean electricity generation as a replacement,” said Lauri Myllyvirta, co-author of the report and Lead Analyst at CREA.

About the research

The analysis was done by (1) developing an unprecedentedly detailed plant-by-plant inventory of emissions from coal power plants in Indonesia; (2) simulating pollution dispersion from CFPPs using detailed atmospheric modelling; (3) quantifying air pollution health impacts resulting from changes in air pollutant concentrations; and (4) valuing health impacts in monetary terms using economic costs per case of different health outcomes compiled from the literature and transferred to Indonesia’s level of income and GDP per capita. Download this research on https://s.id/HealthBenefit-IESR . 

About IESR

The Institute for Essential Service Reform (IESR) is a think tank organization that actively promotes and strives for the fulfilment of Indonesia’s energy needs, upholding the principles of justice in natural resource utilisation and ecological sustainability. IESR engages in activities such as conducting analysis and research, advocating for public policies, launching campaigns on specific topics, and collaborating with diverse organizations and institutions.

About CREA

The Centre for Research on Energy and Clean Air (CREA) is an independent research organization focused on revealing the trends, causes, and health impacts, as well as the solutions, to air pollution. CREA uses scientific data, research, and evidence to support the efforts of governments, companies, and campaigning organisations worldwide in their efforts to move towards clean energy and clean air, believing that effective research and communication are the keys to successful policies, investment decisions, and advocacy efforts. CREA was founded in December 2019 in Helsinki and has staff in several Asian and European countries.

Encouraging the Growth of Renewable Energy Investments in Central Java

Semarang, July 4, 2023 – Recognizing that renewable energy investments play a crucial role in addressing climate change and achieving the Paris Agreement, the Institute for Essential Services Reform (IESR), in collaboration with the Government of Central Java Province, held the ‘Central Java Renewable Energy Investment Forum 2023’ event. This activity is a platform to promote the potential of renewable energy investments in Central Java to achieve the target of a 21.82% renewable energy mix in Central Java Province by 2025. Exceeding the target with a renewable energy mix of 15.76% in 2022 has encouraged the Government of Central Java Province to proactively open doors for renewable energy investments to achieve the set targets and maintain regional economic competitiveness.

Fabby Tumiwa, Executive Director of IESR, explained that Central Java has abundant potential for renewable energy, particularly solar energy. According to IESR’s study, if 9 million residential buildings install rooftop solar power systems, it could generate 100,000 megawatts (MW). Additionally, if the 35 regent and mayor offices throughout Central Java install rooftop solar power systems, it would generate around 5 megawatts (MW) of solar energy. Fabby emphasized that the renewable energy potential in Central Java, including wind power plants, micro-hydro power plants, biomass power plants, and geothermal power plants outside of Central Java, reaches 198 megawatts (MW).

“The availability of renewable energy is now a key factor in attracting investments. Therefore, if we want to enhance investment competitiveness in Central Java, it is necessary to increase the availability of green energy supply. This becomes a new indicator for investors. The vast potential of renewable energy sources cannot be realized without funding for their development,” explained Fabby Tumiwa.

Vice Governor of Central Java Province, Taj Yasin Maimoen, explained that Central Java has abundant solar energy potential that is yet to be fully utilized. Therefore, the use of solar power plants needs to be accelerated. Since 2019, the Provincial Government of Central Java, through the Department of Energy and Mineral Resources, has installed solar power plants in every regional organization office, including the Central Java Regional Council and several educational institutions. The use of solar power plants is aimed at reducing carbon emissions and has economic benefits, such as reducing electricity expenses by around 30-40%.

“Central Java has competitive potential, including infrastructure support, workforce, and a strong commitment to investment. The renewable energy sector presents a new investment opportunity in Central Java, considering the growing needs of the manufacturing ecosystem, which requires alternative energy sources to meet its production. This potential needs to be managed together,” said Taj Yasin.

Sakina Rosellasari, Head of the Investment and Integrated One-Stop Service Agency (DPMPTSP) of Central Java Province, stated that Central Java has a general investment plan, to promote environmentally conscious investment policies (green investment). According to DPMPTSP records, there are 690 permits for self-supply electricity providers (IUPTLS), and the number of rooftop and steam IUPTLS is approximately 17 as of June 2023.

“There are several projects ready to be offered in the renewable energy sector in Central Java, including the development of mini hydropower plants in Banjaran and Logawa, Banyumas Regency, the construction of floating solar power plants in Wadaslintang Reservoir, the development of geothermal power plants in Candi Umbul Telomoyo and Baturaden, Banyumas Regency. Realizing investments in Central Java is expected to increase community income and provide employment opportunities,” stated Sakina.

Cahyo Purnomo, Director of Promotion for East Asia, South Asia, the Middle East, and Africa at the Ministry of Investment/BKPM, stated that the energy transition process cannot happen overnight; it requires time and commitment. The development of renewable energy is one of the efforts toward a low-carbon economy, and so creating a conducive investment climate is necessary.

“For example, in formulating regulations, predictability is essential for investors. We encourage direct investment based on a long-term perspective, not just for 1-2 years. Therefore, it is important to have a stable investment climate, and the formulation of regulations should involve all stakeholders; there should be no mere spectators,” said Cahyo.

Fairness and Inclusivity Should be the Foundation of Indonesia’s JETP Investment Plan

Jakarta, June 27, 2023 – Following the signing of the Just Energy Transition Partnership (JETP), three countries, namely South Africa, Indonesia, and Vietnam, promptly initiated actions to implement the agreement and prepared various strategic steps to achieve the goals of JETP in each country. The JETP Convening for Exchange and Learning Session facilitated communication and discussions among the three countries to share information and lessons learned in achieving equitable energy transition.

Dadan Kusdiana, the Director General of New Renewable Energy and Energy Conservation at MEMR, mentioned that the JETP Secretariat in Indonesia is currently in the process of drafting a roadmap to phase out coal-fired power plants (CFPP).

“We are currently discussing (within the JETP Secretariat-ed) the prioritization of the Pelabuhan Ratu CFPP in the plan for early retirement of its operations. The Ministry of Energy and Mineral Resources is also reviewing the regulations, particularly concerning asset transfers and the establishment of power purchase agreements (PPAs),” said Dadan.

Fabby Tumiwa, the Director of the Institute for Essential Services Reform (IESR), emphasized the importance of conducting the comprehensive investment plan (CIP) preparation process with transparency, clarity, and easy accessibility, while consistently involving public participation.

Furthermore, Fabby also urged the government to reform policies, among other actions, to achieve the goals of JETP and promote the widespread adoption of renewable energy.

“JETP aims to create an enabling environment for renewable energy. While the allocated 20 billion dollars may not be sufficient to achieve the targets of the Paris Agreement, we must utilize it as a catalyst to increase the share of renewable energy and phase out the use of coal-fired power plants,” explained Fabby.

Mpetjane Lekgoro, the South African Ambassador to Indonesia, also stated during the same occasion that his party prioritizes the principles of justice and inclusivity in managing JETP funding.

“South Africa is committed to utilizing the JETP to promote restorative justice in the energy transition. These investments should not only provide financial support but also uphold sustainability and security, ensuring the inclusion of those most affected,” he added.

Similarly, Dipak Patel, Head of Climate Finance & Innovation for the President’s Climate Commission (PCC) in South Africa, emphasized that a detailed discussion on equity in the energy transition is their primary focus.

“South Africa has identified three areas of equity in the energy transition, encompassing restorative justice by considering the most affected communities, procedural justice that involves all communities in decision-making related to energy and climate transition, and distributional justice that guarantees fair and equitable treatment,” Patel explained.

Examining the JETP funding allocated to South Africa, amounting to USD 8.5 million over a period of 3-5 years, Neil Cole from the JETP-IP Project Management Unit in South Africa emphasized the importance of thoroughly and innovatively integrating the JETP funding into projects at both the national and subnational levels.

“It is crucial to synchronize the top-down and bottom-up approaches in order to identify the shared requirements and collaboratively develop an actionable and inclusive implementation plan,” Cole explained.

Le Viet Anh, Director General of the Department of Science, Education, Natural Resources, and Environment at the Ministry of Planning and Investment in Vietnam, highlighted several key actions to expedite the attainment of JETP targets. These actions encompass establishing a robust, collaborative, and supportive environment among the government, international partners, and the private sector. Additionally, accelerating the institutionalization of enabling legal frameworks such as green taxonomy, green incentives, and green financing mechanisms is essential. Furthermore, facilitating the transfer of clean energy technologies, expertise, and technical know-how to enhance Vietnam’s capabilities is crucial.

“The Vietnamese government has demonstrated a strong commitment to promoting green growth through our national strategy. Vietnam has made significant green commitments at COP26, including targets such as achieving net-zero carbon emissions by 2050 and phasing out coal-fired power plants by the 2040s,” he explained.

The Just Energy Transition Partnership (JETP) Convening was jointly organized by the Ford Foundation in Indonesia, the Institute for Essential Services Reform (IESR), and the African Climate Foundation (ACF), with support from the Global Energy Alliance for People and Planet (GEAPP). The primary objective of the event was to provide a platform for stakeholders to engage in a forum for learning and knowledge exchange.

ASEAN Grid Interconnectivity as the Start of Renewable Energy Security in the Region

press release

Jakarta, 13 June 2023 –  To reach energy security sustainably and to face challenges of global climate change, Indonesia’s chairmanship in 2023 needs to be a strong leader in the decarbonization efforts of the energy sector in Southeast Asia. region. Institute for Essential Services Reform (IESR) views that Indonesia can further its regional cooperation and collaboration on innovation, technology, renewable energy research, and push for clearer and enticing policies to boost investments in the renewable energy sector.

As a region, ASEAN has committed to reach a 23% energy mix target in primary energy and 35% capacity of renewable energy installed by 2025. Furthermore, to expand the regional electricity trade , integrate the region’s power grid, and to strengthen the reliability of the power grid, ASEAN is currently building the ASEAN Power Grid (APG).

The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, explains that the project to interconnect ASEAN’s grid through ASEAN Power Grid (APG) could be a starting point for ASEAN member states to boost renewable energy capacity in the electricity sector and shift their dependency to fossil fuels. Indonesian chairmanship in ASEAN 2023 with one of its main focus being Sustainable Energy Security has to be utilized to push ASEAN member states to focus on efforts to decarbonize their energy systems. 

“Indonesia has the chance to lead ASEAN to transition their energy, amplifying the renewable energy mix, and to reduce fossil energy. Indonesia has given examples for other ASEAN member states to have a more ambitious target that aligns with the Paris Agreement. One of which is to push ASEAN member states to end CFPP operations before 2050 and to push agreements between ASEAN member states to build cell industries, solar modules, and energy storage (battery),” Fabby Tumiwa assessed. 

ASEAN itself has a capacity of 7.645 MW on the existing interconnecting grid in the ASEAN Power Grid project, according to a presentation from the Sub Coordinator of the Electricity Program MEMR, Yeni Gusrini, in the IESR Webinar titled Toward a Decarbonized ASEAN. In the future, the interconnection grid will be added in capacity to around 19.000 – 22.000 MW and covers a wider area.

“ASEAN Power Grid contributes towards the economic development in ASEAN by helping fulfill energy demand in ASEAN and to develop regional industry player’s growth. On the first phase, the electricity grid in Laos, Thailand, Malaysia, and Singapore has been connected through the Lao PDR, Thailand, Malaysia, Singapore Power Integration Project (LTMS-PIP), which has been the pioneer of the power trade mechanism that has transmitted 100 MW from Laos to Singapore, utilizing the existing interconnection,” Yeni explicated. 

IESR views that the development of an interconnection grid that accommodates the integration of renewable energy in Indonesia needs to be accelerated so that it aligns with the Paris Agreement to net zero emission (NZE) in 2050.

“Interconnection between the islands in Indonesia and between the countries in ASEAN is one of the enabling factors of renewable energy integration. The existence of this interconnection will help solve the problem of intermittency and to maximize renewable energy usage, so that if there’s an oversupply such as solar PV in the daylight built in another location, the electricity can be transmitted to another place. Before that, ASEAN member states have to keep refurbishing their renewable energy investment climate in their respective countries and regionally with a more interesting regulation framework,” explained Deon Arinaldo, Program Manager of Energy Transformation IESR. 

Deon says, Indonesia is a country with the biggest economy and energy consumption rates in ASEAN, and has a massive energy resource. With ASEAN chairmanship this year and a supportive process and regulations for energy transition at the national level such as JETP and New and Renewable Energy Bill, this will make Indonesia an example and trigger the acceleration of ASEAN’s transformation process.

IESR believes that the decarbonization efforts are not limited to the government, but also involves the participation of various stakeholders, including private sectors, civil society, and international agencies. In this spirit of collaboration, Indonesia needs to invite all parties to join in the effort to tackle climate change and create a sustainable future for ASEAN. 

New Study Finds Cancelling Coal Plants as Cost-Effective Way to Cut Global CO2 Emissions

Preventing nine planned Indonesian coal plants would avoid nearly 300 million tons of emissions for less than 80 cents per ton of CO2, per IESR analysis supported by The Rockefeller Foundation

JAKARTA, INDONESIA | May 30, 2023 ― The Institute for Essential Services Reform (IESR), a leading energy and environment think tank based in Jakarta, Indonesia, released a first-of-its-kind analysis, commissioned by The Rockefeller Foundation, which examines what it would take to prevent planned coal plants from being built. Delivering Indonesia’s Power Sector Transition found that nine coal plants in Indonesia could be cancelled with minimal repercussions for supply or grid stability and affordability, while avoiding an estimated 295 million tons of CO2 emissions. The study recommends cancelling planned, permitted, or pre-permitted plants as one of the most cost-effective and environmentally impactful approaches to accelerating just energy transitions in Indonesia.  

 “We developed an entirely new approach to undertake this analysis. We looked individually at each planned coal plant in Indonesia. Based on a multi-criteria scoring system, we identified plants that could be cancelled, and then assessed the legal, financial, system resilience, energy security, and carbon emission implications of this intervention. Our team used satellite images to track plants’ development progress over time, “said Fabby Tumiwa, Executive Director of IESR.  

“There are some 950 coal plants planned or under construction around the world, which if built, would emit an estimated 78 billion tons of CO2 into the atmosphere over their lifetime,” said Dr. Joseph Curtin, Managing Director for Power and Climate at The Rockefeller Foundation. “This first-of-its-kind analysis illustrates that, in many cases, there are better options available to policy makers, utilities, regulators, and systems planners that can accelerate the shift from fossil fuels. This analysis could also be replicated in other countries with a large coal pipeline.”

If constructed, the nine coal plants, which are predominantly at the financing state, would account for nearly 3,000 megawatts (MW) of coal capacity, or about 20% of total planned additions in Indonesia. A power system analysis was undertaken using seven separate models, representing each part of the country’s existing grid, to examine the power system reliability and affordability associated with cancelling. IESR’s analysis found that cancelling the nine plants: 

  • Would avert 295 million tons of CO2 emissions. With USD 238 million already invested to date into the nine, the calculated carbon abatement is less than 80 cents per ton of CO2 emissions avoided.
  • Could be achieved without compromising system stability, and that the power would mostly be replaced by existing power plants operating at greater capacity. This route, however, would likely imply additional costs from power system operation of $2.5 billion per annum in the period to 2050. It also should be noted that IESR’s analysis did not include adding more renewables to the energy mix, which would help reduce the average generation costs even further. 
  • Requires incorporating the legal risks associated with the unilateral cancellation of any project for the Republic of Indonesia and PLN, Indonesia’s government-owned electricity company, which were identified in the study. Independent power producers (IPPs) enjoy long-term power purchase contracts with PLN on favorable terms, and negotiations will be necessary in each case to ensure that cancellations do not amount to a breach of existing agreements. In some cases, offering the project developer the option to replace the power with renewables could be considered.
  • Will not be sufficient to meet Indonesia’s Just Energy Transition Partnership (JETP) target.

More than two-thirds of Indonesia’s electricity currently comes from burning coal, and with the PLN predicting an additional 13,822 MW of capacity via new coal plants by 2030, Indonesia has the third largest coal pipeline in the world, following China and India. At the same time, through JETP, Indonesia also aims to achieve peak emissions from the power sector at 295 million metric tons of CO2 per annum by 2030 and net-zero emissions in the power sector by 2050. In order to do so, the Republic of Indonesia and International Partnership Group (IPG) signed a JETP agreement in 2022, and in March 2023, the Indonesian Ministry of Energy and Mineral Resources signed a Memorandum of Understanding with the Global Energy Alliance for People and Planet (GEAPP), which is funded by The Rockefeller Foundation, IKEA Foundation, and Bezos Earth Fund. 

The report also includes a series of further recommendations that outline a systematic approach to reaching net-zero emissions by 2050 or earlier. 

Building Collaboration Between CSOs in ASEAN to Accelerate Energy Transition

press release

Jakarta, May 16, 2023 – As the Chair of ASEAN in 2023, Indonesia can engage civil society in enhancing ASEAN’s relevance in various aspects aligned with global development challenges. These include increasing ambitions for regional climate targets, developing renewable energy, and promoting sustainable development.

The Institute for Essential Services Reform (IESR) believes that following the success of the energy transition agenda at the G20, Indonesia can foster cooperation among ASEAN countries to implement energy transitions in line with the targets of the Paris Agreement. This collaboration can help build joint efforts to strengthen resilience in the face of various threats and impacts of climate change, through sustainable development.

ASEAN already has the ASEAN Working Group on Climate Change (AWGCC) and ASEAN Working Group on Forest and Climate Change (AWGFCC), as well as ASEAN Energy Cooperation. However, achieving climate mitigation targets and advancing renewable energy require additional efforts and collaboration between these working groups, along with civil society organizations and transnational communities, to increase their contribution to the region.

IESR believes that Indonesia, as the Chair of ASEAN, can provide space for civil society at the regional level to be involved in the process of its chairmanship agenda in 2023, particularly regarding energy and climate issues.

“As one of the regional organizations projected to experience 4.7% economic growth in 2023 amidst weakening global demand, ASEAN is a promising region for investment, especially in the renewable energy sector. Leveraging its leadership in ASEAN, Indonesia can encourage and embrace civil society organizations in ASEAN to focus on the energy transition. By initiating concrete collaborations, together we can accelerate the energy transition in the region and tackle climate change,” said Fabby Tumiwa, IESR Executive Director, during the public discussion titled “Making Energy Green and Low Carbon to Support Sustainable Growth: Advancing the Role of Civil Society in Southeast Asia Energy Transition During Indonesia ASEAN Chairmanship 2023,” organized by IESR.

Economic growth in the ASEAN region needs to align with commitments to reduce greenhouse gas emissions following the Paris Agreement. ASEAN has set a target of achieving 23% of the renewable energy mix by 2025. However, according to the IEA, 80% of the primary energy mix in the Southeast Asian region still comes from fossil fuels. Reducing the cost of renewable energy is predicted by the IEA to increase the penetration of renewable energy in ASEAN by up to 70% by 2040. This can be achieved through intensive coordination and collaboration among stakeholders (government, civil society, and business stakeholders) in ASEAN, especially in the regional policy-making process.

Nevertheless, Arief Rosadi, Coordinator of the IESR Climate Diplomacy Project, highlights that ASEAN currently lacks a formal channel for civil society to express aspirations, particularly on climate and energy issues. Therefore, Indonesia needs to lead ASEAN in providing an inclusive and constructive dialogue space for civil society in the decision-making process within the region.

“One immediate step to take is to increase the intensity of communication between civil society in the region, enabling the sharing of information and the latest developments in each country regarding energy and climate issues. This aims to strengthen solidarity and a sense of ownership of ASEAN as a collective region,” said Arief.

According to him, Indonesia can encourage more public discussions that focus on knowledge exchange and provide data-based policy recommendations that support the acceleration of the energy transition through the development of renewable energy at the regional level. Additionally, this approach can offer opportunities for developing human resource capacity in the renewable energy sector.

“Another important action is to strengthen grassroots collaboration and civil society networks at the regional level. This collaboration can contribute to the achievement of the climate agenda and energy transition in the region by sharing good practices and technical knowledge,” Arief added.

Implementation of ASEAN Taxonomy Version 2 Encourages Sustainable Development

press release

Jakarta, May 4, 2023 – The ASEAN Taxonomy Board (ATB) published the second version of the ASEAN Taxonomy for Sustainable Finance (ATSF v2) in March 2023. This taxonomy acts as a guidance to help classify economic activities, particularly those related to green financing. The Institute for Essential Services Reform (IESR) welcomes the publication of the second edition of the green taxonomy as a strategic step to attract global investment to ASEAN in supporting sustainable development.

One of the new things and, for the first time, considered in the second version of the ASEAN Taxonomy is the gradual termination of coal-fired power plant operations as an effort to significantly reduce greenhouse gas emissions to achieve the target of the Paris Agreement. The discontinuation of coal-fired power plants (CFPP) procedures will facilitate the diversity of understanding of ASEAN member countries regarding an equitable energy transition. The ATSF v2 also includes technical screening criteria (TSC) for energy transition financing, including the termination of coal-fired power plants, into the Green and Yellow categories. TSC is a quantitative or qualitative criterion that forms the basis for assessing the classification of whether an activity is included in Green activities (Green, contributes very important to environmental goals); Amber (Yellow, does not meet the criteria for Green but shows progressive steps to achieve sustainable ASEAN development) or Red (Red, not by environmental goals).

Fabby Tumiwa, Executive Director of IESR, said that IESR welcomed the presence of ATSF v. 2 as a common ASEAN standard for green financing. He mentioned that the influx of funding for the early termination of the CFPP indicates that the region’s government is supporting the achievement of net-zero emissions in the middle of this century.

“More than half of the electricity in ASEAN comes from coal-fired power plants. Meanwhile, to achieve the target of the Paris Agreement, all CFPPs should be retired by 2040. The fact that more than 50% of CFPPs operating in the Southeast Asia region are less than ten years old has the consequence that the early termination of CFPP requires a sizable source of financing, which is combined with financing for the construction of renewable energy generators to ensure the security of energy supply in areas with fast-growing economies. In this context, ATSF v.2 can accelerate the termination of CFPP operations in ASEAN through green funding,” said Executive Director of IESR Fabby Tumiwa in a written statement from Media Luncheon: Getting to Know Green Taxonomy and Development of Energy Transition in ASEAN.

IESR considers that implementing this ASEAN taxonomy needs to be optimized in line with Indonesia’s chairmanship in ASEAN 2023. Indonesia can strengthen cooperation among ASEAN countries in overcoming energy transition challenges, including low investment in the renewable energy sector and the termination of coal-fired power plants. Indonesia has had several international funding opportunities for the development of renewable energy and the termination of coal-fired power plants through the Just Energy Transition Partnership (JETP), Energy Transition Mechanism (ETM), and Clean Investment Fund-Accelerated Coal Transition (CIF-ACT) with a total of USD 24, 05 billion. However, IESR assesses that at least USD 135 billion is needed by 2030 for energy transition costs in Indonesia, including the termination of CFPPs operations.

“Including financing for the termination of CFPP operations into the yellow and green categories will increase the opportunity to conduct funding related to the energy transition or transition finance. There needs to be clear communication from the regulator to business actors and financial institutions to allow financing for these activities. This is because several financial institutions have committed to no longer supporting coal-related funding. However, of course, this activity category is different,” explained Farah Vianda, Project Coordinator for Sustainable Financing, Green Economy, IESR.

Based on IESR analysis, over the last five years, the average investment in renewable energy has only reached USD 1.6 billion per year or 20 percent of the total investment needed to achieve the renewable energy mix target of 23% in 2025. Meanwhile, highlighting international support, based on IESR calculations, there is potential international funding of USD 13.1 billion or 35.4% of the total projected financing needs of USD 36.95 billion in 2025 to achieve the 23% renewable energy mix target.

“It is important to accelerate the energy transition to attract investment, increase industrial competitiveness, and ensure sustainable economic growth. Therefore it needs to be accelerated by building an ecosystem to develop clean emission technologies such as renewable energy. The green taxonomy is the first step. Furthermore, the government can formulate long-term policies that provide certainty for investment in renewable energy and create a regulatory framework that is at least equal between renewable energy and fossil energy,” said Deon Arinaldo, Energy Transformation Program Manager, IESR.

Deon explained that these two factors are essential to reduce investment risk in renewable energy and attract funding for renewable energy projects. On the other hand, incentives for the clean energy technology industry must be built so that Indonesia and other ASEAN countries can benefit from more optimal economic growth from the energy transition.

The Government Needs to Provide a Level of Playing Field for Renewable Energy Development

Jakarta, 24 March 2023 – Achieving Indonesia Net Zero Emission (NZE) target in 2060 or sooner needs to be escorted by a shift from fossil energy to renewable energy. Unfortunately, renewable energy development in Indonesia is still hindered by uneven competition with subsidized fossil energy. Meanwhile, in various countries, the decline in the price of renewable energy generation has encouraged significant renewable energy adoption.

The Institute for Essential Services Reform (IESR) launched a report entitled Making Energy Transition Succeed: A 2023’s Update on The Levelized Cost of Electricity and Levelized Cost of Storage in Indonesia and a web-based simulation tool accessible to the public to estimate energy generation costs for any energy generation and storage technology. This levelized cost of electricity (LCOE) and levelized cost of storage (LCOS) calculation can help policymakers, renewable energy developers, investors, and the general public in planning for renewable energy development and determining energy technology options that are cheaper, with low GHG emissions.

In Indonesia, the development of renewable energy capacity in the last five years has been below the planned target. Between 2015 and 2021, renewable energy capacity increased by an average of 400 MW or less than one-fifth of the growth required to achieve the target of 23 % of the renewable energy mix in 2025. In 2022, renewable energy generating capacity will increase by 1 GW, yet still, be far from the expected growth.

“The development of renewable energy is less significant because there is no level of playing field. So far, renewable energy development has been neglected by coal-fired power plants. There is a wrong view that coal is the cheapest energy source. What is happening is that coal-fired power plant (CFPP) electricity is cheap because it is supported by the Domestic Market Obligation (DMO) policy and other subsidies starting in 2018. Meanwhile, renewable energy does not receive support,  instead, the price is always demanded to compete with electricity from CFPP and gas power plant electricity which receive state subsidies, “said the Executive Director of IESR, Fabby Tumiwa.

IESR analysis shows the LCOE of renewable energy is decreasing and competitive. Medium-scale hydropower plants have the lowest average  LCOE which is 4.1 cents/kWh. In the second and third lowest positions respectively were mini/micro hydropower plants and solar power plants worth 4.9 cents/kWh and 5.8 cents/kWh. However, this generation cost calculation does not include land use costs and project preparation costs, so there will be a possibility of an increase in LCOE of at least 6% for medium-scale hydropower plants, and 18% for utility-scale solar power plants.

“Currently, the investment climate for renewable energy development is not yet conducive. One reason is caused by some regulations that increase high costs. For example, for the development of utility-scale solar PV, there is local content requirement regulation requiring the domestic components whose product prices are still more expensive, and inferior in terms of quality to imported components. The price of more expensive components causes the required investment costs to increase. Meanwhile, the lack of quality assurance and compliance with standards also makes project funding more expensive, especially from abroad, becoming difficult,” said His Muhammad Bintang, IESR Researcher who is also the main author of this report.

Nonetheless, the downward trend in technology prices is expected to make renewable energy generation more competitive. Solar PV, for example, the projected LCOE of new utility-scale solar PV in 2050 will reach 3 cents/kWh or lower, much cheaper than the operating costs of existing CFPPs. In the 2030s, the combination of Solar PV and BESS will be more affordable and competitive compared to electricity from CFPP. Moreover, the government has started implementing emission reduction regulations, for example through carbon pricing mechanisms and limiting exhaust gases which can increase the LCOE of PLTU.

“The competitive price of energy storage systems certainly helps the development of renewable energy. One of the challenges for renewable energy generators such as solar PV and wind turbine is the interval that requires an integrator to maintain the stability of the existing system. This energy storage system is the most popular integrator because of its varied functions,” explained Bintang.

Examining the carbon capture storage (CCS) in coal-fired power plants to reduce GHG emissions, Deon Arinaldo, Energy Transformation Manager, IESR, stated that this would increase the LCOE of coal-fired power plants.

“The initiative to use CCS in coal-fired power plants should no longer be an option for two reasons. First, there has been no implementation of CCS in a coal-fired power plant that has successfully achieved its emission reduction target. Second, the LCOE of coal-fired power plants with CCS will increase to at least double or be greater than 10 cents per kWh. This is equivalent to imposing a carbon tax of around 50 dollars per tonne of CO2e on all coal-fired power plant emissions. All renewable energies are far more competitive and proven to produce electricity without GHG emissions,” explained Deon Arinaldo.

For renewable energy to compete fairly with CFPP, IESR recommends the government and utility companies such as PLN accelerate the coal-fired power plants phase out, as well as, provide incentives for renewable energy and energy storage technologies and gradually abolish the coal DMO provision in 2025. The development of renewable energy will create various economic opportunities that have the potential to increase economic growth in Indonesia.

“Renewable energy manufacturing industries such as solar and battery have the opportunity to create a new economic base, create green jobs, and drive LCOE and LCOS of renewable energy and Energy Storage Systems (ESS) even cheaper in Indonesia for the long run. Therefore, there is a need for an integration strategy for renewable energy and ESS electricity development with the development of the local manufacturing industry. For example, for solar energy, it is necessary to allocate a large renewable energy market in Indonesia to help the growth of the local industry and also to incentivize the local industry to build a complete supply chain and produce tier 1 modules of export quality,” continued Deon.

Furthermore, IESR encourages PLN as the electricity system operator to actively implement solutions to overcome renewable energy interruptions, for instance, by adjusting its operating system and increasing system flexibility. In addition, the utilization of energy storage systems needs to be prepared when the massive penetration of renewable energy in the energy system in Indonesia.

“PLN as the main operator of the electricity system in Indonesia, needs to initiate several pilot projects of energy storage systems with various types of technology to find good practices in technology selection and operating procedures. However, the implementation of energy storage systems is still limited to off-grid systems, even though energy storage can have many functions in large-scale systems, apart from the integration of renewable energy generators. With so many project initiatives and clear regulations, investors, technology producers and developers can increase their confidence to develop supply chains for energy storage systems in Indonesia that will further reduce costs,” concluded Bintang. ***

Mitigating the Risk of DME Project Failure by Encouraging the Adoption of Induction Electric Stoves

Jakarta, 17 March 2023 – The decision by Air Products and Chemicals Inc (APC), a company from the United States, to withdraw from the coal gasification project consortium in Indonesia will affect the plan to substitute Liquefied Petroleum Gas (LPG) with 1.4 million metric tons/year of Dimethyl Ether (DME) results from coal gasification or equivalent to 1 million tons of LPG. The Institute for Essential Services Reform (IESR) believes that it is a good decision for APC to withdraw from the DME project. Meanwhile, for the government, the mitigation effort to overcome the failure of the DME project, reduce LPG imports, and reduce greenhouse gas emissions is to encourage the conversion of gas stoves to induction electric stoves nationally, followed by an increase in the renewable energy mix.

“APC’s decision to withdraw from the DME project in South Sumatra and the ethanol project with PT Kaltim Prima Coal (KPC) in East Kalimantan is the right decision. These projects do not economically align with rising coal prices and increasing investment costs by incorporating Carbon Capture and Storage (CCS) technology to capture carbon. APC’s withdrawal from this project can save state finances in the future because it does not have to subsidize DME products whose production costs are more expensive than imported LPG,” said IESR Executive Director, Fabby Tumiwa.

Fabby explained, even so, the government still had to try to suppress LPG imports which had reached 80% of supply in Indonesia. The scheme is to encourage the use of induction electric stoves. Last year, the public criticized this program plan until it was finally canceled due to problems with poor public communication. However, the induction cooker program must be discussed again and supported for its implementation.

The use of induction electric stoves will also cut LPG imports which are a burden on the state budget. Citing data from the Ministry of Energy and Mineral Resources, the majority of LPG is consumed by the household sector as much as 96%, the commercial sector 2.5%, and the industry 1.5%. According to the Coordinating Ministry for Maritime Affairs and Fisheries, Indonesia has imported LPG worth IDR 80 trillion out of a total requirement of IDR 100 trillion. Meanwhile, the LPG subsidy provided by the government reaches IDR 70 trillion. LPG consumption in 2021 will reach 7.95 million tonnes, with 6.4 million tonnes coming from imports.

“LPG subsidy savings can reach 1-2 million per year per household that switches to electric stoves, this range depends on how often the household cooks, of course. The government can launch a gradual transition program for hundreds of thousands of households and increase it every year by providing incentives to purchase electric stoves and increase household electricity,” said Deon Arinaldo, Energy Transformation Program Manager, IESR.

Implementation of the electric stove program will bring economic and environmental benefits to the community. Moreover, besides its less pollution, the costs incurred by the community when using an induction stove can be 10-30% lower than using a gas stove.

“If LPG is without subsidies, electric stove operating costs are more efficient by up to 47% per year as compared to gas stove operating costs,” explained Faris Adnan, IESR Researcher.

In terms of emissions, the electrification of cooking equipment will reduce greenhouse gas emissions if the renewable energy mix in Indonesia’s energy system is more than 50% in 2030. Every one million households using an electric stove can increase electricity demand by ~1 TWh. For this reason, this additional electricity demand must be supplied by renewable energy.

“For electric stoves to have at least the same emissions as gas stoves, the mix of renewable energy in power plants in 2030 needs to reach 54% and the coal mix down to 29%, so that electricity generation emissions become 0.415 kgCO2/kWh from 0.781 kgCO2/kWh. For this reason, the government also needs to ambitiously increase the mix of renewable energy in power plants and reduce the portion of coal in power plants,” said Faris.

However, he added, when compared to using DME, emissions from electric stoves will be lower by 34% in 2025 and 46% in 2030. This calculation assumes that DME production facilities from coal are not equipped with carbon capture and storage technology, resulting in high emissions. If the 1.4 million metric tons/year of DME used for cooking is replaced by electricity, then in 2025 it is predicted to save emissions of 2.92 million tons of CO2 and 3.94 million tons of CO2 in 2030. In addition, transition 1, This 4 million metric tons of DME to electricity can increase electricity demand by 7.2 TWh per year.

The IESR views that the use of electric stoves to substitute LPG, coupled with accelerating the increase in the renewable energy mix, can be one of Indonesia’s GHG mitigation actions, and can be included in the GHG emission reduction plan in the 2nd Nationally Determined Contribution (NDC), which will be published in 2025 future. ***