The Role of Solar Energy in Supporting NZE and JETP Target

Jakarta, 10 March 2023 – Clear and earnest support from the government for the development of solar energy needs to be demonstrated, especially in achieving the Net Zero Emission (NZE) target in 2060 or sooner and the renewable energy mix target in the Just Energy Transition Partnership (JETP) of 34 % in 2030. 

“So far, JETP discussions are still focused on the early retirement of the coal-fired power plants (CFPP). There is no element of accelerated renewable energy yet. It needs to be noted, especially to accelerate the development of solar energy, which is projected to become one of the backbones of electricity generation in achieving the NZE, given Indonesia’s great potential, increasingly competitive economy and relatively short construction,” said Daniel Kurniawan, Researcher, Specialist Photovoltaic Technology and Materials, Institute for Essential Services Reform (IESR) in the Solar Energy Talk: Technology, Policy and Solar Energy Challenges in Supporting the Just Energy Transition Partnership (JETP) and Net Zero Emission (NZE) on Thursday (9/3/2023).

According to him, nowadays is the right time for the government to involve community participation by pursuing these various targets with policies that support the acceleration of solar energy and the use of rooftop solar power plants on a commercial & industrial and residential scale. He regretted that the public hearing held by the Ministry of Energy and Mineral Resources (MEMR) regarding the revision of Minister of Energy and Mineral Resources Regulation No. 26/2021, the government wants to cancel the net metering scheme for the residential sector, which will reduce the economy and customer interest in installing rooftop solar PV.

“The government should not remove policy support for the community in adopting rooftop PV mini-grid, especially for the household and the small business sector, at this very early adoption stage. On the other hand, policy support must be increased to encourage adoption to a mature market stage,” he stressed again.

On the same occasion, Widya Adi Nugroho, Sub Coordinator for Supervision of Renewable Energy Businesses, Ministry of Energy and Mineral Resources (MEMR), said that Indonesia has a renewable energy mix target of 23% in 2025. However, until 2022 it has only reached around 12.3 %. He said the utilization of new renewable energy power plants was prioritized according to the planning of the Electricity Supply Business Plan (RUPTL).

“Based on the 2021-2030 RUPTL, solar energy will increase by 4.6 GW in 2030. Solar will be the backbone of Indonesia’s electricity reaching 461 GW in 2060. In addition, the price trend for solar PV is getting lower and more competitive. Likewise, supporting components such as batteries so that development opportunities are increasingly open. However, there are challenges in developing solar PV, one of which is that the room for electricity generation is still full, so it requires community participation as consumers and producers to utilize renewable energy through solar energy. In addition, the system needs to maintain intermittent conditions, both with backup generators that can compensate for solar PV and also related to the local content requirement (LCR),” explained Widya Adi Nugroho.

Anindita Satria Surya, Vice President of Energy Transition and Climate Change, State Electricity Company (PLN) explained, his party continues to implement energy transition initiatives to achieve net zero emission (NZE) in 2060 or sooner. For this reason, it is necessary to increase internal capabilities and technology supported by innovation, policy and finance. Anindita estimates that the investment needed to reach the NZE in 2060 is around USD 700 billion. In addition, Anindita emphasized that the implementation of the de-dieselization program or the conversion of diesel power plants is a strategy to increase the energy mix, especially solar energy in the electricity system.

“There are several PLN strategies for integrating renewable energy, including in the short term achieving RUPTL (2021-2030) with around 4.7 GW or 22% coming from solar PV,” said Anindita.

In his presentation, other renewable energies that will be developed to achieve RUPTL include hydropower (44%) and geothermal (16%). In addition, his party will carry out de-dieselization, early retirement of coal, and co-firing of biomass. Then, in the long term to achieve NZE (2031-2060), steps to be taken include encouraging battery-based electricity storage and interconnection, as well as hydrogen co-firing. On the technology and ecosystem development side, PLN will focus on, among others, solar PV and electric vehicles.

“As an illustration, in the beginning, we built a powerful system, namely the baseload generator, built a strong transmission and coupled with strengthening the use of renewable energy, including solar PV. At the end of the 2035 period, most of the solar PV has entered our system,” he said.

Anindita emphasized that solar PV could be one of the solutions to increase the energy mix but the readiness of the infrastructure, especially batteries, to reduce intermittent nature must also be seen. For example, there are no batteries to support solar PV in Lombok, West Nusa Tenggara (NTB). Not only rooftop solar PV, but PLN is also trying to take advantage of the potential of floating solar PV. As part of supporting the implementation of the Indonesian Presidency’s G20 activities, a 100 kWp floating PLTS has been built in the Muara Reservoir, Nusa Dua, Bali.

Meanwhile, Rosyid Jazuli, a researcher at the Paramadina Public Policy Institute, explained that Indonesia has enormous solar potential. Unfortunately, currently, more than 60% of electricity in Indonesia still comes from coal. This is due to several challenges in implementing solar energy to support the implementation of the Just Energy Transition Partnership (JETP), such as unclear plans, overlapping regulations, and potential funding in the form of loans. Rosyid suggested that there should be coordination between ministries and agencies in supporting the implementation of JETP, considering that this issue is a complex matter.

“On the other hand, the potential for green funding, which reaches USD 20 billion should also be optimized, especially since the current world trend is towards sustainable development. Funding is also needed for research and development of solar energy and the potential to attract investment in solar power,” said Rosyid.

Solar Energy Talk is a series of public dissemination events about solar energy which are collectively organized by six institutions; Institute for Essential Services Reform (IESR), Solar Scholars Indonesia (SSI), Persatuan Pelajar Indonesia (PPI) Australia, Asosiasi Peneliti Indonesia Korea (APIK), Institut Energi Surya Generasi Baru (Insygnia), and Solarin.

Solar energy thematic dissemination will be held regularly, every two weeks until June 2023, covering topics; Indonesia’s solar energy landscape, current policies, technology, industry, socio-economic and human resource readiness in support of the Just Energy Transition Partnership (JETP) and the Net Zero Emission (NZE) target.***

Electric Vehicle Incentive Effectiveness Needs Government Support to Reform Other Policies

press release

Jakarta, 8 March 2023 – On 6 March 2023, the government established incentives for Battery-Based Electric Motorized Vehicles (KBLBB) in the form of assistance in purchasing KBLBB of IDR 7 million per unit for 200,000 units of new electric motorbikes and IDR 7 million per unit for conversion to electric motorbikes for 50,000 units petrol motorbike. Meanwhile, the exact amount of incentives for electric cars has not been determined, but the government plans to support purchasing 35,900 units of electric cars, and 138 electric buses. The government has also prepared an incentive mechanism that is only intended for manufacturers who have registered the type of electric vehicle that meets the 40% Local Content Requirement (LCR). This incentive is planned to be implemented from 20 March 2023 to 30 December 2023.

The Institute for Essential Services Reform (IESR) welcomes the provision of this incentive to encourage the adoption of electric vehicles and grow the domestic electric vehicle industry to encourage more sustainable economic growth in Indonesia and reduce the demand rate for fuel. However, to encourage more aggressive adoption of electric vehicles and ensure the effectiveness of incentives, some policy reforms are needed, including reducing fuel subsidies and a policy to phase out fuel-fueled vehicles, starting from passenger cars before 2045, and Internal Combustion Engine (ICE) motorcycles. IESR views that although the policy reform is not a populist policy, it needs to be taken by the government with deep consideration.

The use of electric vehicles is also a strategy to achieve the target of reducing greenhouse gas emissions stipulated in the Nationally Determined Contribution (NDC), with the target of adopting 13 million units of two-wheeled and three-wheeled electric vehicles and 2 million units of four-wheeled electric vehicles by 2030.

“Providing this incentive is a good first step to increase demand for electric vehicles. With the 40% LCR requirement, it can encourage investment in the manufacture and supply chain of electric vehicle components. It is hoped that with it, we can achieve economies of scale for electric vehicle production and encourage competition which can have an impact on reducing the price of electric vehicles to boost the adoption of even more electric vehicles,” said Fabby Tumiwa, Executive Director of IESR.

Fabby added that the conversion incentives to electric motors were expected to build the capacity of conversion technicians and workshops, as well as attract business actors to pursue a larger-scale conversion process.

“IESR found that there will be 6 million units of conventional motors per year that can be converted to electric motors by 2030. For this reason, hundreds of certified conversion workshops and skilled technicians are needed. Supply chain support for batteries, electric motors and other components is necessary so that conversion costs are more affordable for the public,” explained Fabby.

Moreover, to the LCR requirements for electric vehicle manufacturers, IESR suggested that the government could add electric vehicle performance requirements in providing incentives next year.

“The government can add additional requirements related to electric vehicle performance to encourage increased reliability of electric vehicles, as well as, the research and development ecosystem of the electric vehicle industry in Indonesia. These standards include vehicle mileage, minimum battery capacity, and conversion efficiency,” said Faris. Adnan, IESR Researcher.

Furthermore, Faris added that another interesting thing about this electric vehicle incentive is the priority of giving incentives for Micro, Small, and Medium Enterprises (MSMEs), especially recipients of Small Business Credit (KUR) and Micro Business Productive Assistance (BPUM), including 450-900VA electricity customers. However, according to him, motorists who provide online transportation or logistics service providers also need to be set as a priority.

“Online motorbike transportation or logistics drivers need to be prioritized in providing this assistance because they have long distances to travel per day so that the economic benefits for users and the government will be greater. The amount of assistance offered also needs to be pushed higher than the current amount, which is above Rp. 7 million,” explained Faris.

He also highlighted the installed power capacity of priority prospective buyers. The electric motorbike battery charger itself requires up to 400W of power. This means that to charge the electric vehicle battery, there will be a lot of electronic equipment that cannot be used at the same time.

“This can be anticipated by providing additional power increases when priority buyers buy electric vehicles that receive government assistance,” said Faris.

IESR views the adoption of electric vehicles as a strategy to reach zero emissions if the charging source comes from renewable energy. Based on the IESR analysis in the 2023 Indonesia Electric Vehicle Outlook (IEVO) report, the emissions emitted by electric motorbikes and electric cars are 18% and 25% lower than by petrol motorbikes and cars. However, if the development of renewable energy only refers to the 2021-2030 PLN Business Plan, then the reduction in emissions from electric motorbikes and electric cars is projected to be insignificant, only around 6% and 8% in 2030.

“With several government commitments and support for energy transitions, such as the Just Energy Transition Partnership (JETP), this momentum can also be used to accelerate the transition to the electricity system by developing renewable energy and stopping coal-fired power plants earlier. The result is a lower network emission factor so that the benefits of electric vehicles for decarbonization are maximized,” explained Deon Arinaldo, Manager of the Energy Transformation Program, IESR.

Deon added that the IESR study even showed that with a combination of transportation electrification and accelerated development of renewable energy, Indonesia’s renewable energy mix could even exceed 34% of the RE mix target announced at JETP. ***

Carbon Trading Implementation Needs to be Followed by Tighter Emission Limits

press release

Jakarta, March 1, 2023 – The Ministry of Energy and Mineral Resources (ESDM) began implementing a carbon trading mechanism in the coal-fired power plant (CFPP) sector on Wednesday, February 22, 2023. The Institute for Essential Services Reform (IESR) stated the implementation of carbon trading as a step forward, noting the need for tightening emission caps in the future. In addition, the results of carbon trading can be a source of Non-Tax State Revenue (PNBP), which, if appropriately allocated, can encourage investment in renewable energy and increase energy efficiency.

Carbon trading is finally implemented after being tested in several coal-fired power plants in 2021. The government has also established Technical Approval for Emission Limits (PTBAE) starting from the non-mine mouth (MM)/MM CFPPs with a capacity of 25 MW to 100 MW of 1,297 tons CO2e/MWh, up to Non-MM CFPP with a significant degree of 400 MW is 0.911 tons CO2e/MWh.

“Even though the carbon trading scheme has been implemented appropriately in Indonesia, the ceiling for carbon emissions set by the government is currently still relatively high, and no effort is required for CFPP owners to fulfill it. As an illustration, the intensity of carbon emissions in power plants in neighboring countries is 20% -40% lower than in Indonesia. This opens up opportunities to tighten emission limits for CFPP in the future,” said Executive Director of IESR, Fabby Tumiwa.

IESR believes that determining quota restrictions for CFPP will increase business actors’ awareness of the emissions produced and regulate CFP operations more efficiently.

Furthermore, this carbon trade regulates the replacement or carbon offsets if the generating unit produces emissions exceeding the Technical Agreement for the Upper Emission Limit of Business Actors (PTBAE-PU). This plant must purchase emissions from the PLTU unit that has emissions under PTBAE-PU and or purchase an Emission Reduction Certificate (SPE GRK).

“To increase the integrity of the offset mechanism and the real impact of reducing emissions by using the SPE instrument, the government must ensure normal emission reduction activities that can be traded on the carbon market. It is recommended that SPEs be prioritized from renewable energy generation to align this instrument with energy transition efforts to reach NZE 2060 or earlier. This SPE instrument can be an incentive for businesses and the public to build renewable energy generators,” explained Fabby.

IESR proposes that SPE be carried out to accelerate the installation of rooftop solar PV by consumers. The electricity generated by the rooftop solar PV and exported to the grid can become SPE and be used for carbon offsets. Revenue from SPE sales can increase consumer interest in installing rooftop solar power plants.

The Minister of Energy and Mineral Resources will give a written warning, and the allocation of PTBAE-PU for the subsequent carbon trading is around 75%. This applies to business actors who should refrain from participating in carbon trading by not submitting a plan for monitoring greenhouse gas emissions and revisions to reporting on greenhouse gas emissions.

“The existence of quota restrictions imposed by the government on business actors who violate the rules is a clear form that the government is committed to trading carbon as an instrument to reduce emissions. However, in practice, it requires strict monitoring,” mentioned Farah Vianda, Coordinator of the Sustainable Financing Project, IESR Green Economy.

The government has set the value of PTBAE-PU to 99 units of coal-fired power plants from 42 companies that will become carbon trading participants, with a total installed capacity of 33,569 MW. The price of carbon traded between CFP units in the country is estimated to be from US$ 2 to US$ 18 per ton.

“Ministry of Finance regulations governing carbon prices can be issued immediately to provide certainty for carbon trading activities. It is hoped that the carbon price applied will not be too far from the global average price,” Farah added.

Public oversight of the implementation of carbon trading also needs to be developed. Efforts to include a carbon trading mechanism in stock trading, which the Indonesia Stock Exchange is currently reviewing, will make carbon prices more competitive and promote transparency to attract investors and mainstream sustainable financing principles.***

IEVO 2023: Building Indonesia’s Electric Vehicle Ecosystem

Jakarta, 21 February 2023 – Decarbonization of the transportation sector is a crucial strategy in climate change mitigation to prevent the earth’s temperature from rising beyond 1.5 degrees Celsius. In Indonesia, besides the use of biofuels, vehicle electrification can cut 23% of greenhouse gas (GHG) emissions from the transportation sector.

The Institute for Essential Services Reform (IESR) views the development of an electric vehicle ecosystem as an absolute to increase public interest in adopting electric vehicles, accelerate infrastructure distribution and develop the domestic electric vehicle industry.

The IESR in the 2023 Indonesia Electric Vehicle Outlook (IEVO) report notes that dependence on imported fuel has triggered inflation at the end of 2022 due to increasing subsidized fuel prices. Fuel consumption increased by an average of 1.2 million kiloliters per year between 2015 and 2020.

“The increase of fuel imports has eroded foreign exchange, weakened the exchange rate and forced the government to adjust fuel prices, which has an impact on inflation. As fuel price adjustments are politically unpopular and have an impact on people’s purchasing power, the government usually makes this a last alternative to cover the difference between the selling price and the cost of procuring fuel. Subsidies provided by the government deteriorate the fiscal capacity of the state budget. These could have been avoided if fuel imports were cut drastically by increasing the use of electric vehicles and substituting Internal Combustion Engine (ICE) vehicles,” said IESR Executive Director, Fabby Tumiwa.

Compared to ICE vehicles, electric vehicles are better at reducing emissions and having lower operating costs. IESR analysis shows that electric vehicles emit 7% less GHG emissions, and their operating cost per km is 14% lower than ICE vehicles. However, due to the limited availability of electric vehicle models, minimal infrastructure, and high initial investment, people are reluctant to switch to electric vehicles. 

“The government needs to look at the supply aspect of the Battery-Based Electric Motorized Vehicle industry and not just the demand. The tax deduction incentive for electric cars and IDR7 million for electric motorbikes is suitable. However, the eligibility of any car/motorcycle brand as the recipient of the incentives must be considered. The provision of this incentive must be linked to the development of the Local Content Requirements (LCR). Only brands with certain LCR may receive this incentive,” said Ilham R F Surya, Environmental Policy Researcher, IESR, who is also one of the authors of IEVO 2023

Furthermore, Ilham also said that electric two-wheelers (E2W) vehicle conversion could be an alternative to electrification at a lower price. Moreover, E2W is also a means of rejuvenating older motorbikes.

The government’s efforts to meet the GHG emission reduction target in the Nationally Determined Contribution (NDC) through a total of 15 million electric vehicles in 2030 can be seen from the availability of fiscal and non-fiscal policies. However, its fiscal policy is still focused on the demand side. Opportunities for the adoption of massive logistics ride-hailing drivers are expected to trigger the development of the electric vehicle industry in Indonesia.

“Currently, the electric vehicle industry from upstream to midstream has not been fully integrated. Some midstream projects, such as the production of new batteries, will run for at least 2025/2026. The government’s focus should be directed to accelerating the progress of the midstream project and convincing investors to carry out the many investment commitments that have been made,” said Pintoko Aji, co-author of IEVO 2023 and Renewable Energy Researcher, IESR.

For electric vehicle infrastructure, IESR assesses that although the installation has increased by 200% compared to 2021, the locations for Electric Vehicle Charging Station have not been spread evenly. 88% of Electric Vehicle Charging stations are still concentrated in Jakarta and Bali. Furthermore, the utilization of the Battery Swapping Station is still not standardized and only applies to certain brands.

“The government needs to facilitate Electric Vehicle Charging Station investment, one of which is changing the obligation to install three different types of ports in each Electric Vehicle Charging Station unit listed in MEMR Regulation No. 13/2020. The obligation to have three ports causes investment costs to swell to Rp 750 million-1.5 billion per Electric Vehicle Charging Station. Even though not all locations require three types of ports at once. If there is no such obligation, then with the same investment value, the number of Electric Vehicle Charging Stations built can be 3-4 times more,” Ilham added.

Ilham added that standardization of Battery Swapping Stations can be started from an electric motor with a battery capacity of 1.2 kWh or 1.44 kWh which is currently 79% of electric motors on the market, so it is not too difficult for manufacturing. Furthermore, the government also needs to standardize the shape and size of the battery to the electrical configuration in it.

Regarding the electrification of maritime and aviation transportation, Pintoko explained that the use of batteries in ships and aircraft has a challenge in the energy density of batteries, which makes them bigger and heavier, thereby reducing the cargo space of ships and aircraft payloads. This makes the electrification of maritime and aviation practical for a small scale with short distances.

IEVO 2023 recommends that the government strengthen upstream and midstream industry policies and regulations to reduce the price of electric vehicles, make rules to anticipate battery waste, increase interest from financial institutions for financing electric vehicles, and promote the use of electric vehicles.

IEVO 2023: Electrification of Transportation to Reduce GHG Emissions

February 19, 2023 – The Institute for Essential Services Reform (IESR) launched Indonesia Electric Vehicles Outlook 2023 for the first time. This report discusses the status of the development of electric vehicles for passengers and the supporting ecosystem for developing electric cars in Indonesia. IESR views that climate change mitigation with a significant reduction in emissions from the transportation sector can be carried out in a participatory way by the community to adopt electric vehicles.

The transportation sector is a source of pollution and contributes to greenhouse gas (GHG) emissions. There are 600 MtCO2-eq of Indonesia’s GHG emissions in the energy sector in 2021; 23% come from the transportation sector. Land transportation is the most significant contributor to GHG emissions in the transportation sector, with more than 90%. Emissions from the transportation sector are predicted to increase by 53% in 2030 compared to 2015 and almost double between 2030 and 2060. Decarbonization of the transportation system by accelerating the adoption of environmentally friendly and low-emission electric vehicles could be one solution, along with the transition to renewable energy in the power sector

“The government has included the use of electric vehicles as one of the mitigation action plans in the Nationally Determined Contribution (NDC). However, the target set still needs to be aligned with the Paris Agreement to limit the increase in the earth’s temperature below 1.5 degrees Celsius by 2050. According to the IESR study, to achieve zero emission by 2050, the number of electric two-wheelers and four-wheelers vehicles must reach 110 million units by 2030,” said Fabby Tumiwa, Executive Director of IESR.

To achieve the target, Indonesia should accelerate the adoption of electric vehicles by supporting fiscal and non-fiscal policies. Since 2019, the government has been intensively pushing for industrial development and the use of electric cars. However, at the same time, several pro-fossil energy policies are still implemented, making adopting electric vehicles less than optimal. For example, government policies continue to subsidize fuel oil (BBM) and extend fuel sales to Euro II standards. These policies have reduced the attractiveness of consumers to acquire electric vehicles and reduced the benefits of switching to electric cars in the form of reduced fuel cost savings.

“Dependence on fossil fuels in our energy system, especially the transportation sector, makes our energy sector vulnerable to price fluctuations. The government is trying to reduce dependence on fossil fuels in the transportation sector through battery-based electric motorized vehicles (KBLBB). However, it is still difficult to find electric charging infrastructure, expensive purchase prices, and limited performance and models are the main obstacles to consumer adoption of KBLBB. These various obstacles need to be resolved by the government,” explain Faris Adnan, IEVO writer who is also a researcher on Electricity Systems, IESR.

The IESR findings show that by 2022, the adoption of electric motorbikes increased five fold from 5,748 units in 2021 to 25,782 units. In addition, the adoption of electric cars has almost quadrupled from 2,012 units in 2021 to 7,679 units in 2022. The promotion of electric vehicles drove this increase through the G20 event, which made electric cars the official vehicle of the delegation.

“Even though there is an increase, the number is still far from the target set by the government. The population of new electric motorbikes is 0.2% of the total motorbikes in Indonesia. Meanwhile, new electric cars reached 0.4%. Therefore, for KBLBB to be more attractive and affordable to the public, several additional policy instruments that are right on target are needed,” said Faris.

One such policy instrument is a combination of incentives for producers and market creation to accelerate the economies of scale for electric vehicles, especially two-wheelers electric vehicles, which have significant market potential. For this reason, IESR recommends that the government encourage the implementation of the Presidential Instruction for the purchase of electric vehicles by government agencies and state-owned enterprises and encourage adoption by the ride-hailing business and logistics to accelerate the adoption of electric cars by the market in the next 2-3 years.

Furthermore, to get more significant GHG emission reduction and environmental benefits, an increase in the mix of new renewable energy generators in the electricity system is also needed so that the emissions produced by KBLBB are lower than those from internal combustion engines.

“The IESR study shows that it will obtain new emission benefits if the renewable energy mix in the PLN electricity system is above 20%,” continued Faris

IESR will launch and discuss the Indonesia Electric Vehicle Outlook (IEVO) 2023 on February 21, 2023, 09:30 – 12:00: 00 WIB online via Zoom Conference + Livestream Youtube (IESR). This event is an effort to encourage the acceleration of electric vehicles in Indonesia, bring together various relevant stakeholders, and accelerate Indonesia’s steps to make an energy transition. The event will be attended by the Chairperson of the Indonesian Transportation Society’s Environment and Energy Transportation Forum, Indira Darmoyono, Director of Business Development Strategy & Special Projects Grab Indonesia, Rivana Mezaya, and others.

JETP Secretariat Launched, Government Needs to Remove Barriers for Renewable Energy Development

Jakarta, 17 February 2023 – The Government of Indonesia has launched a secretariat for the Just Energy Transition Partnership (JETP) work team, which will work today. Some of the targeted work results planned to achieve within the next 6 (six) months include the availability of a road map for early retirement for coal-fired power plants (CFPP) and the completion of a comprehensive investment plan (CIP) which will also reflect support for communities affected by the energy transition process.

The Institute for Essential Services Reform (IESR) appreciates the progress made by the government and IPG towards implementing the JETP agreement. IESR encourages the JETP work team to compile beyond just a coal-fired power plant early retirement roadmap as targeted by JETP, but also more ambitious by aligning the target with the Paris Agreement.

“JETP is an opportunity to accelerate the energy transition and reduce GHG emissions. Indonesia’s stakes must go even further, such as encouraging green economic growth and strengthening the renewable energy industry. Indonesia should not hesitate to accelerate the energy transition because through it we can grow our economy higher,” said Fabby Tumiwa, Executive Director of IESR.

IESR calculates that to reach peak emissions in the electricity sector in 2030, it is necessary to retire the CFPP and increase the capacity of renewable energy generators at the same time.

“In the IESR analysis, to achieve the renewable energy mix target in the electricity system of 34% in 2030 according to the JETP target, instead of the 20.9 GW of renewable energy projects that have been planned in the 2021-2030 RUPTL, an additional minimum of 5.4 GW of renewable energy capacity will be needed. The addition of this renewable energy needs to be planned along with the retirement of up to 8.6 GW of CFPP, therefore, the reliability of the electricity system can be maintained,” explained Deon Arinaldo, IESR Energy Transformation Program Manager.

Reflecting on the achievement of Indonesia’s renewable energy mix in primary energy, which only reaches 12.3%, the government must be able to overcome obstacles to the development of renewable energy, such as by providing support to local producers and industries to meet the Local Content Requirements (LCR), improve procurement procedures or renewable energy auctions and diverting fossil subsidies to the renewable energy sector and eliminating the DMO policy.

“In the last five years, investment in renewable energy has always been below the target, and the installed capacity of renewable energy has only grown 300-500 MW per year. Meanwhile, the need for additional renewable energy generators will reach 26 GW more in the next 8 years or around 3-4 GW per year. The large funding commitment from JETP, which will be outlined in this investment plan, can only be realized if obstacles to renewable energy investment, such as procurement procedures at PLN, LCR regulations for solar PV that are not aligned with industrial developments and coal price subsidies through the DMO price policy can be resolved immediately in this year,” said Fabby.

As the operation of coal-fired power plants is about to end, the government must also start preparing for proper management of electricity infrastructure such as networks and energy storage, planning economic diversification in coal-producing areas, and providing training and incentives to workers and communities affected by the CFPP closure. 

“Energy transition planning needs to provide clear direction in the long term, so that the negative impacts of the energy transition, for instance, on workers in CFPP & coal supply chain, reduction of regional and national revenues from coal, and others, can be identified clearly. From this, strategies can be developed to carry out the social and economic transformation, such as preparing new job opportunities, and relevant skills training for workers,” said Deon.

 

Indonesia Needs to Overhaul Strategy to Pursue 23% Renewable Energy Mix in 2025

Jakarta, 1 February 2023 – The Ministry of Energy and Mineral Resources (MEMR) has announced the performance achievements for 2022 and the 2023 program plans for the MEMR sector, the Electricity Subsector and New Renewable Energy and Energy Conservation. In contrast to coal, whose production increased by 3% from the target of reaching 687 million tons in 2022, the achievement of the renewable energy mix in primary energy and electricity generation increased only by around 0.1% and 0.45%, respectively, from the previous year. Moreover, investment in the renewable energy sector is still far from the target. The Institute for Essential Services Reform (IESR) views this development as a warning signal for the government to immediately overhaul its strategy in achieving the target of a 23% renewable energy mix in 2025 and achieving net zero emission (NZE) in 2060 or sooner.

The renewable energy mix in electricity generation was recorded at 14.5% with an installed renewable energy capacity of 12,542 MW. This installed capacity exceeds the 2022 target but is still far from the minimum target of 24 GW in 2025. The low mix of renewable energy in power generation reflects the achievement of the renewable energy mix in primary energy, which only reaches 12.3% (Ministry of Energy and Mineral Resources temporary data) in 2022.

“The underdevelopment of renewable energy in the electricity sector in the last three years shows that there has been a misstep and a lack of breakthroughs in the strategy for developing renewable energy. Since 2019, renewable energy generation capacity has only grown by 2 GW, only 25% of the capacity needed to reach the target of 23%, according to government regulation No. 79/2014 concerning National Energy Policy. Renewable energy development has been held hostage by the continued construction of coal-fired power plants (CFPP) in the 35 GW program even though the electricity demand growth target was not achieved and PLN’s reluctance to increase the renewable energy mix under the pretext of overcapacity,” said Fabby Tumiwa, Executive Director of IESR.

The massive use of solar energy and cooperation should be a strategic effort for the government to achieve the target of the renewable energy mix. In 2021, the rooftop solar PV became a National Strategic Project (PSN) with a target of 3.6 GW until 2025 but is hampered by PLN’s reluctance to implement MEMR Regulation No. 26/2021. From the target solar energy installed capacity of 893 MW in 2022, only 270 MW was achieved. Instead of being more ambitious, in 2023, the government will reduce the solar energy development target by half from 2022 to 430 MW. The government needs to show the firmness and clarity of the rules that encourage the adoption of solar PV.

“The development of renewable energy, particularly rooftop solar PV, is hindering PLN’s interest in pursuing growth in electricity sales to absorb excess supply. The plan to dieselize the 500 MW diesel power plants by 2024 is also constrained by the PLN auction process and the lack of investor interest. Therefore, the government must look for a breakthrough to accelerate rooftop solar PV. Direct support from President Jokowi is needed to firmly order PLN to accelerate the development of renewable energy with the remaining two years, pursue the 10 GW target in RUPTL and integrate rooftop solar to achieve the PSN target,” continued Fabby.

Furthermore, the government needs to expedite the implementation of Presidential Decree No. 112 of 2022 concerning the Acceleration of the Development of Renewable Energy for the Provision of Electric Power, especially by releasing a roadmap for discontinuing the operation of coal-fired power plants and preparing an investment plan that is embodied in the Just Energy Transition Partnership (JETP).

Fabby Tumiwa added that from the results of the IESR study, there is a potential of 4.5 GW of PLTU capacity that can be retired before 2025, and an additional 3 GW from the list of PLTU projects in the 2021-2030 RUPTL, which have the possibility of being cancelled. Termination of the operation of old and inefficient power plants before 2025 allows for greater integration of renewable energy.

“In contrast to the government’s promise to reduce coal power plants before 2030, coal production is targeted to be 695 million tonnes this year. This increase in production came from an increase in domestic demand/DMO, which rose to 177 million tonnes. One of the factors driving this increase is domestic demand originating from electricity generation, including captive CFPP and CFPP integrated with industrial areas (PPU) outside the PLN system. This increase in demand is a steep road for the government to achieve the electricity sector’s peak emission target of 290 million tons of CO2 in 2030, as agreed at JETP,” explained Deon Arinaldo, IESR Energy Transformation Program Manager.

Likewise, the government plans to implement B35 in February 2023 with an allocation of biodiesel needs of 13 million kl. Meanwhile, to increase the blending ratio of biodiesel by 40%, it is estimated that the production of 15 million kl of biodiesel is required. IESR views that Indonesia can implement B40 at the end of 2023.

“Currently, biodiesel production capacity has reached 17.5 million kl and will continue to increase to close to 19.5 million kl at the end of 2023 in line with the addition of several new factories. So, biodiesel production can be optimized to increase the blend of biodiesel to B35, even up to B40. Especially if world oil prices tend to be as high as they are today. However, we must balance the sustainability of CPO production,” explained Deon.

IESR states that the government has to have more courage in leading the energy transition process and implementing the promises in the Bali Compact, the result of Indonesia’s presidency at the G20 2022, and showing its influence in leadership in ASEAN this year to attract more investment in the renewable energy sector. Renewable energy investment achievements, which are only USD 1.6 billion, are relatively small.

“Political will for the development of renewable energy needs to be increased and supported by consistent regulations (such as regulations for rooftop solar) that provide more support for renewable energy than fossil energy. As an example of political will, this can be reflected in the government’s renewable energy development target, which has fallen this year compared to the previous year. Others, such as the development of the New Energy and Renewable Energy Bill (EBET), which still provides support for fossil energy, so it does not give a clear signal to the market. Investor confidence in investing in renewable energy in Indonesia needs to be built because it is an absolute prerequisite for attracting investment,” added Deon.

Power Wheeling Scheme Needs to be Kept in the New and Renewable Energy Bill

press release

Jakarta, 12 January 2023- Ministry of Energy and Mineral Resource (MEMR) decides to repeal the proposed power wheeling scheme from the issues inventory list (DIM) of the New and Renewable Energy Bill (NERE Bill) that was submitted to the House of Representatives (DPR) in December 2022. Institute for Essential Services Reform (IESR) regrets such decision and implores the government and the House of Representatives to include renewable power wheeling in the RUU EBET review.

The power wheeling scheme is the joint utilization of the electricity network. Through this scheme, independent power producers (IPP)  could sell electricity directly to the public using the transmission and distribution network owned by the State Electricity Company (PLN). IESR views that power wheeling could increase the demand and supply of renewable energy by the public, thus accelerating the growth of renewable energy and reducing PLN’s burden in providing renewable energy.

“The joint utilization of electricity network or power wheeling will provide easier access for consumers to get renewable energy supply with a competitive price. This could then foster the interest to develop existing renewable energy sources, and not depend on PLN as the off-taker. Renewable energy power wheeling could also increase the utilization rate of PLN’s energy network, providing a new source of income for the company,” said Fabby Tumiwa, the Executive Director of the Institute for Essential Services Reform.

Fabby views the power wheeling scheme as a consequence of Indonesia’s electricity system, with PLN monopolizing rights for transmission network control. Through the power wheeling scheme, electricity networks could be used communally and allow renewable energy Independent Power Producers (IPP) to sell directly to the consumers using transmission and distribution networks belonging to PLN. 

Fabby adds that the Ministry of Finance’s assessment of power oversupply as the main reason for repealing power wheeling is inaccurate. The oversupply is mostly dominated by fossil energy, hence hindering the clean energy mix target. Fabby also explained that the oversupply situation is predicted not to last long, and could end as soon as 2025, supported by the gradual increase of power demand post-pandemic.

“EBET Bill, if passed, will be implemented for a long time and could even surpass the current oversupply situation. The government needs to push for renewable energy adoption quickly, especially if they plan to retire coal power plants by 2030. In the future, power wheeling could be one of the revenue sources for PLN, by leasing electric networks,” added Fabby.

Furthermore, Deon Arinaldo, Program Manager of Energy Transformation IESR, explains that it’s too premature to worry about the state and PLN’s loss if power wheeling is implemented. Deon added that if the power wheeling scheme is back in the EBET Bill, the law would still need to be expounded, and the points could then be used to manage the potential risks to PLN and the state.

“For example, in setting power wheeling tariffs, the government can manage the price based on comprehensive studies so it can balance between renewable energy development targets with the risk of decreasing electricity demand. On the other side, PLN could still also take part in the power wheeling scheme through its sub-holding generation company,” said Deon.***

The Amend of the MEMR Regulation on Rooftop Solar PV Has the Potential to Undermine the Interest of the Residential Market

Jakarta, 6 January 2023 – The Ministry of Energy and Mineral Resources (MEMR) is revising the Minister of Energy and Mineral Resources Regulation No. 26/2021 concerning rooftop solar PV connected to the power supply grid owned by the holders of power supply business licence for the public interest (Izin Usaha Penyediaan Tenaga Listrik untuk Kepentingan Umum) or commonly referred to as IUPTLU. This change is intended to address the difficulties with installing rooftop solar PV that has occurred in the last year since the ministerial regulation was officially issued.

In the public hearing that was held on Friday, January 6 2023, the Ministry of Energy and Mineral Resources presented substance changes, including there is no limit to the maximum capacity of 100% installed capacity of a rooftop solar power plant, but based on system quota, electricity exports are abolished (no longer counted as bill deduction), capacity costs for industrial customers is nullified (no longer 5 hours), and the transition rules for existing customers are enforced within a certain time.

“Since it was promulgated in August 2021, MEMR Reg No. 26/2021 practically does not work because PLN refuses to implement it. As a result, the government’s target of 450 MWp of additional solar PV capacity in 2022 was not achieved. This revision seems to be a meeting point between the government’s interests and PLN and accommodates PLN’s interests in reducing the potential for electricity exports from solar PV users due to net-metering regulations considering the overcapacity conditions. But AESI regrets that this accommodation has the potential to reduce the economy and interest in residential rooftop solar PV, which has the potential to grow,” said Fabby Tumiwa, Chairman of the Indonesian Solar Energy Association (AESI) in Jakarta.

Since January 2022, 10-15% rooftop solar PV capacity restrictions have occurred in various regions in Indonesia for customers, both residential on the kilowatt scale to industrial customers with capacities on the megawatt scale. This capacity limitation discombobulated the provisions of MEMR Reg No. 26/2021 (maximum 100% installed electric power) and reduced potential customers’ interest to adopt rooftop solar.

In the proposed changes to the substance of the Ministerial Regulation, the capacity limit of up to 100% will not be reinstated but will be based on a quota system with first come, first serve. This change directly responds to capacity restrictions occurring in the field. However, the technical determination of system quotas needs to be clarified, especially concerning renewable energy development plans in the regions. In addition, the period for setting quotas per 5 years is too long due to the dynamics of electricity supply technology.

AESI supports the determination of quotas by taking into account the reliability of the IUPTLU electricity network but proposes that capacity quotas be determined every 2 years, with a review conducted every six months.

Eradicating net metering by eliminating the export of electricity to the PLN grid, which applies to all customer categories without exception, will have major impacts on the residential (household) market. The current economic level of rooftop solar PV is still influenced by net metering because the household load profile is mostly at night. The absence of exports will lessen the reduction in household electricity bills and extend the payback period for purchasing a rooftop solar system, making rooftop solar unattractive for household customers.

“A market survey conducted by the Institute for Essential Services Reform (IESR) in 7 provinces in Indonesia in 2019 – 2021 shows that the economy of solar PV is an important and determining factor for residential customers to use rooftop solar. The majority of respondents also want to get savings of at least 50% and clear and fast installation procedures,” added Marlistya Citraningrum, Manager of the IESR Sustainable Energy Access Program.

The National Strategic Project (PSN) for rooftop solar PV with a target of 3.6 GW in 2025 and achieving the 23% renewable energy target requires community participation. With just a 20% market share for R2 and R3 class customers (3,500 VA and above), there is a potential of 400,000 households throughout Indonesia – equivalent to 1.2 GWp of rooftop solar if each instals a minimum of 3 kWp.

The impact on residential rooftop PV will reduce the benefits of creating green jobs through small-scale solar PV installation businesses targeting the household market segment, which has started to grow since 2018. With the potential for adoption spread across various cities in Indonesia, the residential rooftop solar PV market also contributes to the opening of green jobs, for example, technicians and installers, and the growth of MSME rooftop solar PV installers. If the latest revision of the MEMR regulation is passed with the currently proposed clauses, the growth and opportunities of these green businesses will certainly be hampered. AESI and IESR recommend that net metering be implemented for residential customers with export-import calculations which can be discussed later.

In the public hearing, there were many questions raised by solar energy developers (developers), installers (EPC companies), local governments, and rooftop PV users.

AESI assesses that instead of supporting the renewable energy transition, the revision of this regulation will hinder the addition of rooftop PV. For this reason, AESI proposes that the export of electricity from residential customers is still permitted on condition that the installed capacity is 100% of the customer’s power. This provision is reviewed within 5 years or after the residential rooftop PV reaches a cumulative 5% of the total installed capacity of generators in the system. 

The Ministry of Energy and Mineral Resources has opened a channel for submitting input for this process until January 13, 2023.