Smelters are not the Ultimate Objective of Downstream Activities

Jakarta, January 26, 2024– Downstreaming has recently become a hot topic of discussion. This topic is strengthened along with the the presidential and vice-presidential candidates’ emphasis on the downstream agenda. According to the Big Indonesian Dictionary (KBBI), downstreaming refers to the process of converting raw materials into finished goods.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) in “Katadata Forum – After the 4th Presidential Election Debate 2024 “Mining Downstream Dilemma: Restricted or Expanded?” (25/1/2024) revealed that various forms of natural processing must remain rooted in three adhere to three crucial points: clarity and law enforcement, maximizing economic benefits, and long-term planning for post-extraction and depletion of reserves.

” Regardless of the incoming president, the focus should be on discussing long-term plans for the utilization of natural resources. We cannot allow resources to be extracted, only to result in environmental damage and the absence of a new economy, potentially leading to an increase in poverty rates. This mitigation strategy must be incorporated into our National Medium-Term Development Plan (RPJMN),” said Fabby.

Discussing mining downstream, Fabby highlighted nickel is a critical mineral in renewable energy technology. He explained that nickel is classified into two processed categories: first-class nickel for electric vehicle battery raw materials and second-class nickel for stainless steel products. Fabby observed that since the enactment of Law Number 4 of 2009 concerning Mineral and Coal Mining, which mandates domestic mineral processing, downstreaming has been encouraged, leading to the growth of planning on smelter projects or processing facilities for mining products. By 2024, there are plans to build 48 critical mineral smelters

“The more smelters, the more extraction. Merely stopping at the smelter is not the goal of the downstream process. Instead, there is a need to actively seek optimal benefits and promote sustainable job creation by establishing a battery industry for electric vehicles and various other renewable energy sectors in Indonesia,” he added.

IESR also delved into the development of the battery industry supply chain in Indonesia, which can be read in the Indonesia Energy Transition Outlook 2024 report.

Lack of Encouragement for Energy Transition Acceleration from the Three Candidates during the Vice Presidential Debate

Jakarta, January 23, 2024 – The second vice presidential candidate debate, on Sunday (21/1/2024), raised the issue of sustainable development, natural resources, environment, energy, food, agriculture, indigenous peoples, and villages, drawing public attention. Various attack games and mutual insinuations marred the debate.

The Executive Director of the Institute for Essential Services Reform (IESR) and panelist of the second vice presidential debate, Fabby Tumiwa, assessed that the fourth debate of the 2024 Presidential Election (Pilpres) had not prioritized content primarily related to the energy transition. This makes several vital issues related to the economy and the environment far from serious discussion.

“In my opinion, many candidates did not understand the panelists’ questions that the moderator read out. They did not seem to respond to the questions appropriately, and during the question and answer session, the vice president seemed to give insubstantial questions. Thus, I see that the three vice presidential candidates have not debated (debate ideas-ed), “said Fabby Tumiwa in the Kompas TV Special Report program on Tuesday (23/1/2024).

 

Fabby stated that the hot debate between the vice presidential candidates at the Jakarta Convention Center had also yet to discuss essential issues. This cannot be separated from the discussion format, which does not support exploring ideas effectively enough.

Vice Presidential Statement on Debate

The three vice presidential candidates in the second debate had similar views on the transition to green energy. Muhaimin Iskandar, the first Vice Presidential candidate, assesses that the current government’s commitment is not serious in carrying out the energy transition, as shown by the reduction in the target of new renewable energy (NRE) and the delay in carbon tax. For this reason, Muhaimin is committed to accelerating the carbon tax implementation while carrying out the NRE transition.

Vice Presidential candidate number 2, Gibran Rakabuming Raka, said that an equitable low-carbon development policy must stop dependence on fossil energy.

On the other hand, the third Vice Presidential candidate, Mahfud MD, only addressed the issue of resolving natural resources and energy, emphasizing the need for a thorough resolution from upstream to downstream

To find out the facts behind the statements of the three vice presidential candidates at the debate, IESR has held a Live Fact Check of the Vice Presidential Debate via Twitter, which can be accessed on IESR Twitter.

Reaching the Target of 23% Renewable Energy Mix by 2025

Jakarta, January 16, 2024 – The Ministry of Energy and Mineral Resources (ESDM) reported that the realization of the new and renewable energy mix (NRE) was around 13.1% in 2023, up only 0.8% from the realization in 2022 of around 12.30%. The slow growth of NRE in Indonesia is in line with the ongoing fossil subsidies. Based on a World Bank report entitled Detox Development, Repurposing Environmentally Harmful Subsidies (June 2023), Indonesia is the largest fossil energy subsidizer in ASEAN, as well as the 8th largest on a global scale in 2021.

The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, explained that there are systemic problems in achieving the renewable energy mix target in 2025. This is reflected in the development of renewable energy which is not so significant every year. One of these systemic problems, said Fabby, is fossil energy subsidies. 

 

“This fossil energy subsidy provides an incentive for PT Perusahaan Listrik Negara (PLN) to maintain the operation of the coal fired power plant (CFPP) therefore the cost of electricity becomes cheap. The existence of fossil energy subsidies makes the price of PLTU electricity not reflect the real price. On the other hand, the price of NRE is getting more competitive, but it cannot enter the PLN system because there are still many subsidized coal fired power plant (CFPP) fuels,” said Fabby Tumiwa at CNBC Indonesia’s Energy Corner event program entitled “Fossil Energy is Still Subsidized, 23% NRE Mix in 2025 is Difficult to Achieve?” on Tuesday (16/1/2024).

In addition, Fabby emphasized that the thing that affects the development of renewable energy is the procurement of renewable energy plants at PLN. Fabby assessed that PLN has never been by what has been planned based on the Electricity Supply Business Plan (RUPTL). According to Fabby, corrections regarding this matter have also never been made. 

“The existence of power plant auctions that are late or not carried out, makes renewable energy plants unprepared at this time. Several factors affect the auction such as regulations, where we have changes from Permen ESDM No 50 of 2017, which then revised for quite a long time, which resulted in Perpres No 112 of 2022. Then, there is an overcapacity condition in the Java-Bali electricity system. There is also the factor of PLN’s internal capacity that affects this,” said Fabby Tumiwa.

Exploring Ocean Energy: An Alternative to Net Zero Emission

Jakarta, December 21, 2023 – The Center for Marine Geological Survey and Mapping (BBSPGL) of the Geological Agency of the Ministry of Energy and Mineral Resources has conducted a survey and mapping of potential marine energy that can be utilized as electrical energy. As per their findings, 17 water points in Indonesia have been identified as having the potential for marine energy. These locations’ total electricity generation capacity is estimated to be around 60 GW (gigawatts).

The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, explained that Ocean energy refers to the potential energy generated from the kinetic and potential energy of the sea. Furthermore, Fabby estimates that the potential of 60 GW is too low because the sea surrounds Indonesia, so the potential should be more than 60 GW. For this reason, the mapping should be done as a whole, not just 17 points. 

“The ocean energy potential in Indonesia is estimated to be around 60 GW, much higher than the geothermal resources of approximately 29 GW. According to the Ministry of Energy and Mineral Resources, this makes ocean energy a promising alternative to achieve net zero emissions (NZE) targets in the electricity sector by 2050 and the entire energy sector by 2060, as per the long-term plan for energy system development in Indonesia,” Fabby said on iNews’ Market Review program on Thursday (21/12). 

Fabby mentioned that ocean energy has distinct characteristics similar to geothermal and hydropower, considered predictable energy sources. Using ocean energy as a source of electricity can address the concerns of many stakeholders about integrating renewable energy into the electricity system. Moreover, Fabby has evaluated that tidal and wave energy have the highest potential for generating marine energy in Indonesian waters. This assessment is based on Indonesia’s technological readiness, economics, and conditions.

“Why these two types of ocean energy? Because of technological readiness, some technologies have entered the commercial market, so it’s easy. If it has entered the commercial market, it is easier to apply because it has been proven. Secondly, Indonesia’s conditions where we see the plant is suitable for providing electricity in coastal areas. For example, to provide electricity on remote islands. Third, both technologies are relatively low in price, making them attractive to develop,” Fabby explained. 

On the other hand, Fabby discussed some of the challenges Indonesia faces in developing renewable energy. First, the viability of renewable energy projects depends on the quality of policies and regulations. Second, there are limitations in the electricity market structure as renewable energy can only be sold to PLN, which also depends on the readiness of the network and electricity demand. PLN has claimed to be in a state of overcapacity for the past three years. Third, renewable energy investment is not encouraging due to its high capital expenditures (CAPEX) and low operating expenses (OPEX). This type of investment is also associated with the type of funding available.

Strengthening the Government’s Commitment in Mitigating Climate Change

Jakarta, 15 December 2023 – The Indonesian government continues to improve in terms of strengthening its commitment to climate change mitigation. Since starting to aggressively commit to climate mitigation in 2021, the Indonesian Government has continued to carry out follow-up actions through various assessments of funding commitments and creating decarbonization roadmaps in each sector.

Nurcahyanto, Policy Analyst for the Ministry of Energy and Mineral Resources (MEMR), said at the launch of the Indonesia Energy Transition Outlook (IETO) 2024 report organized by the Institute for Essential Services Reform that one of the efforts currently being carried out by the government through the Ministry of Energy and Mineral Resources is to carry out revision of the National Energy Policy (KEN). It is hoped that the results of the revised KEN will be more relevant to Indonesia’s current efforts to carry out comprehensive decarbonization, especially in the electricity sector.

“Target revision (KEN) is only a method based on numbers, but from an implementation perspective it must be supported by regulations and we need to optimize it. For example, in carrying out early retirement for PLTUs, a road map needs to be prepared, as well as consolidation with related ministries/institutions,” he said.

The issuance of Presidential Decree 112/2022 is one of the guiding documents for the decarbonization of Indonesia’s electricity sector, with the main point being to accelerate the cessation of coal-fired power plants.

August Axel Zacharie, Head of Energy Cooperation, Danish Embassy, said that in the global context, Indonesia’s position as a developing country (emerging economy) is an investment attraction in itself, but Indonesia needs to prepare a supportive ecosystem.

“Investment needs for the energy transition, which reach approximately 1 trillion USD until 2050, must be seen as not just building infrastructure, but within these cost requirements there are community aspects, job transition, quality of life, and other non-physical aspects,” added August.

Still related to the high need for investment in renewable energy, and the government’s obligation to guarantee energy security, the Indonesian Government provides energy subsidies. However, this policy is not a sustainable policy.

Evita Herawati Legowo, PYC Senior Fellow, stated that it is necessary to think about a more targeted method for providing energy subsidies.

“There needs to be involvement of all parties in this matter, not just collaboration but a clear division of tasks as to who does what, starting from industry, research, energy, as well as investors,” said Evita.

The Indonesian Government’s commitment to decarbonization is a binding guideline. Delivered by Unggul Priyanto, Main Expert Engineer, BRIN, especially after 2060, all energy sources must come from clean energy sources.

“(The use-ed) LNG, or natural gas, is one option during the transition. But after 2060, like it or not, it has to be replaced with a truly clean (energy source-ed),” he said.

Scrutinizing Climate Commitments After COP 28

Jakarta, December 20, 2023 – The 28th Conference of the Parties to the UN Framework Convention on Climate Change in Dubai, United Arab Emirates (UAE) concluded on Wednesday (13/12/2023) afternoon, with several agreements, including a call to move away from the use of fossil fuels and a commitment to triple global renewable energy capacity. The summit also raised USD 85 billion in funding and secured 11 pledges and declarations supporting climate action.

Sicha Alifa Makahekum, Green Economy Program Staff, Institute for Essential Services Reform (IESR), assessed that firm funding commitments should accompany the various agreements. She believes reaching these targets may only be possible with adequate financial support. The USD 85 billion funding from COP 28 can be a significant first step. However, there needs to be further commitment from the government and the private sector to ensure that this figure is not just a nominal figure but channeled to support climate action.

“Along with the agreement, Indonesia aims to achieve a 44% renewable energy mix by 2030 within the Just Energy Transition Partnership (JETP). The Indonesian government needs to focus on pursuing the JETP target by conducting policy reforms and increasing the commitment of policymakers towards achieving the target,” said Sicha at IESR’s X Space with the topic “After COP28, What’s Next?” on Wednesday (20/12).

Arief Rosadi, Climate Diplomacy Project Coordinator at IESR, mentioned that for the first time, COP 28 discussed the results of the Global Stocktake. Based on the assessment, Indonesia could not achieve the targets in the 2015 Paris Agreement and needs to catch up. 

 

“Indonesia needs to strengthen its commitment through a second NDC that will be more ambitious and will be more aligned with efforts to keep the increase in the average temperature of the earth’s surface no more than 1.5°C. I hope that the latest NDC will reflect the pursuit of the global renewable energy capacity target by three times, increase energy efficiency, and be able to accommodate the concept of just transition clearly,” said Arief Rosadi.

 

Arief emphasized that the second NDC also needs to reflect other issues related to climate change at the local level. In terms of gender and social inclusion, detailed indicators should be measured, and a roadmap aligned with climate policies and strategies must be created. Additionally, concerning the energy sector, Arief emphasized the need for intense communication at the national government level and harmonization of existing policies with the latest climate policy documents.

“Over the past five years, Indonesia has made significant progress in updating its climate policies. However, the main challenge lies in the time-consuming harmonization process among government sectors. All sectors related to climate change are required to work towards achieving the NDC target,” Arief said. 

Ahead of the 2024 elections, Arief and Sicha hope that the elected presidential and legislative candidates can prioritize dealing with climate change by intensifying the issue of climate change and energy transition. 

“The issue of climate change is becoming more polarized due to the “echo chamber” effect on social media. This means that people are only exposed to one point of view, which often denies the existence of climate change, and they are immune to scientific explanations that prove otherwise. Climate change discussions are often limited to certain circles, which does not help create broader awareness. We must educate ordinary people on the urgent need for climate change action and energy transition. We should also focus on bilateral approaches to decarbonization rather than just being active in international forums,” they said.

Spurring the Electric Vehicle Battery Industry Sustainability

Farid Wijaya, Analis Senior Bahan dan Energi Terbarukan, Institute for Essential Services Reform (IESR)

Jakarta, December 19, 2023 – In recent years, energy transition has become a significant focus in various countries, including Indonesia. President Joko Widodo’s (Jokowi) has been promoting the shift from conventional energy sources to renewable energy. One of the strategic steps emphasized is the development of electric vehicles. This support is realized through various incentives, including tax breaks, to accelerate the growth of the electric vehicle industry and market expansion.

Farid Wijaya, Senior Analyst of Renewable Energy and Materials at the Institute for Essential Services Reform (IESR), explained that the battery is a crucial component in electric vehicles that enables high performance and efficiency. For this reason, nickel plays a critical role in producing electric vehicle batteries. According to the International Energy Agency (IEA), the shift towards sustainable energy will increase the demand for nickel in the global market, particularly for environmentally friendly vehicles that use electric batteries. By 2040, electric vehicles will account for 58 percent of global vehicles.

“Unfortunately, increased demand for nickel can result in greater reliance on natural resources. Nickel mining and refining processes can cause deforestation, water pollution, and ecosystem damage. Therefore, we must manage it responsibly and ensure it meets environmental impact analysis (AMDAL) and environmental standards. Additionally, we must also consider social justice aspects when managing nickel mining,” said Farid Wijaya at the Forum Group Discussion (FGD) with the title “Electric Vehicle Battery Supply Chain Electricity: Working Together to Build a Sustainable Supply Chain” organized by Traction Energy Asia on Tuesday (19/12). 

Farid mentioned that the nickel mining and refining industry has many issues related to human rights violations and environmental damage. According to IESR’s analysis, several things need to be considered to optimize nickel downstream through environmentally friendly industrialization. Firstly, the nickel mining and refining governance licensing process needs to be reviewed. License revocation and fines should be applied in cases of administrative, environmental, and social injustice issues.

“Secondly, creating a road map for each industry to decarbonize. Third, the development and implementation of Green Industry Standards (SIH) for nickel mining and refining,” said Farid Wijaya. 

Furthermore, Farid emphasized the improvements needed to optimize nickel downstream through environmentally friendly industrialization, such as using environmentally friendly clean technology, energy conservation, compliance with environmental standards, and analysis of AMDAL. There is also worker security and safety and stakeholder consultation. 

On the other hand, Farid explained that the world would be flooded with large lithium-ion batteries that have reached the end of their life and need to be disposed of as the number of electric vehicles on the road increases globally. Recycling is, therefore, essential to recover most of the battery’s active material. The International Energy Agency (IEA) estimates that by 2040, 10% of demand can be met by recycling used batteries.

“If used lithium-ion batteries (LIBs) are disposed of as such and stockpiled in large quantities, it can cause infiltration of toxic heavy metals into underground water, resulting in environmental pollution. Similarly, incinerating used LIBs as solid waste can generate various toxic gases, such as hydrogen fluoride (HF), from the electrolytes in LIBs, which can pollute the atmosphere. Therefore, proper waste treatment of these used batteries is crucial. Recycling is also essential to reduce dependence on imports,” said Farid Wijaya.

Exchanging Insights on Local Solar Manufacturer in Indonesia and Viet Nam

Ha Noi, 14 December 2023 – The Ministry of Science and Technology of Viet Nam hosted its annual event: Technology and Energy Forum 2023, in collaboration with the Ministry of Industry and Trade and Project Clean, Affordable and Secure Energy for Southeast Asia in Viet Nam.In recent years, Viet Nam has witnessed remarkable development in the trends of energy transition, particularly in wind and solar power. By the end of 2022, the total capacity from wind and solar power had reached 20,165 MW, constituting 25.4% of the overall power capacity within the system.

However, despite this progress, 90% of equipment for renewable energy projects in Viet Nam is imported from countries like China, Germany, India, and the US. This reliance is due to the country’s limited ability to perform specific tasks during project assessment and development phases and its high dependence on imported technologies. Factors contributing to this situation include inadequate local technology capacity, production levels falling short of requirements, and a lack of support from industrial policies and mechanisms to encourage renewable electricity.

Consequently, Vietnamese enterprises and local supply chains have seen limited participation. Similarly, Indonesia faces comparable challenges in its procurement of renewable energy, particularly in solar power. Despite both countries boasting immense potential in solar power, their domestic markets are not yet equipped for solar manufacturing. This deficiency stems from uncertainties in local demands and the lack of competitiveness in the local supply chain.

Fabby started with an explanation about local content regulation that could minimize dependence on imported products. 

“Indonesia is currently facing domestic market issues; these local products encounter difficulties entering the market. The lack of a credible development pipeline limits financial viability for new solar modules manufacturing facilities. When it comes to Rooftop PV, PLN limits the installation capacity to 15%. This regulation further restricts the market for domestic solar modules,” state Fabby.

Fabby went on to highlight several lessons learned from implementing Local Content Regulations (LCR) in Indonesia, which could potentially accelerate the development of Viet Nam’s solar energy local content. First, despite the projected growth in solar power, there’s insufficient market signal to stimulate the growth of the solar module industry without a reliable pipeline. Second, inconsistencies in policies across government bodies might discourage investment in the solar power market due to increased uncertainty. Third, support for the domestic solar modules industry should encompass downstream raw material industries to reduce import dependency and enhance the competitiveness of end products. Lastly, governments should offer incentives, both fiscal and non-fiscal, to encourage the development of solar module manufacturing facilities. Fabby emphasized that LCR, without a conducive investment climate for the industry, might impede rather than foster the development of solar power.

Preparing for the Energy Transition in South Sumatra for Youth

Palembang, 5 December 2023 – The increasing intensity of hydrometeorological disasters in the last decade indicates that climate change is currently underway. Secretary General of the United Nations (UN), Antonio Guterres, said that the earth is entering an era of global boiling, where July 2023 was recorded as the hottest day in history.

Climate change occurs due to high greenhouse gas emissions. The energy sector is one of the highest emitters, especially with the use of fossil energy such as coal. Indonesia is one of the coal producing countries, with 80% of its coal output for export needs. Indonesian coal production is concentrated in four provinces in Indonesia, namely East Kalimantan, South Kalimantan, North Kalimantan and South Sumatra. South Sumatra is a food and energy barn for the island of Sumatra. The coal produced by South Sumatra will be used to generate electricity which will supply all the electricity needs on the island of Sumatra, according to projections, it will even export electricity as far as Singapore.

Marlistya Citraningrum, Sustainable Energy Access Program Manager of the Institute for Essential Services Reform (IESR), in a public lecture at Sriwijaya University quoted a survey related to the current climate change phenomenon, young people aged 24-39 years had high concerns about the climate crisis and impact.

“The energy transition is a systematic effort to mitigate the impact of the climate crisis that we are increasingly feeling,” said Marlistya Citraningrum, who is familiarly known as Citra.

This change in the energy system also has other impacts, namely the growing need for workers who have skills and insight into sustainability.

However, young people’s enthusiasm for getting involved in green jobs is hampered by several things, one of which is the limited information about green jobs and job vacancies in the green jobs sector.

“In the energy transition process, young people can take roles according to their respective skills, not limited to the engineering field alone. Social departments such as economics and international relations can also contribute to the energy transition process,” said Citra.

Citra added that currently a number of challenges still face the development of green jobs in Indonesia, one of which is related to certification. Currently, certification is still limited to technical sectors related to renewable energy-based electricity generation.

On the other hand, reducing and stopping the use of coal and switching to renewable energy will have an impact on social and economic aspects in coal-producing regions in Indonesia. Hari Wibawa, Head of the Economic and Development Funding Division of South Sumatra Bappeda, on the same occasion, said that coal reserves in South Sumatra province will run out in 12 years, so economic diversification is very important to avoid major economic shocks when the coal sector stops.

“Our (government’s) current priority is to integrate the energy transition plan into the RPJPD so that every action or activity has a strong legal basis,” said Hari.