Local Government Has a Great Potential to Develop Regional Bonds for Green Development

Apart from the APBN (National Income and Expenditure Budget) and APBD (Regional Income and Expenditure Budget), local governments can now innovate to finance its infrastructure spending, especially those related to Sustainable Development Goals (SDGs), by issuing regional bonds and/or regional sukuk as a source of sustainable finance.

Istiana Maftuchah, Representative of the OJK (Financial Services Authority) in the online workshop Introduction to Sustainable Finance and Regional Bonds held by the Institute for Essential Services Reform (IESR), supported by the British Embassy Jakarta (9/3), explained in detail.

“The global push has been felt until now as we are facing the Covid-19 pandemic. The direction of the financial services industry has been aimed towards sustainability, and now there has been a paradigm shift: People, Profits, Planet,” said Istiana.

In her opinion, this development is connected to Indonesia’s commitment to the SDGs and also the Paris Agreement, which has been ratified in Law no. 16/2016. She emphasized that investors’ interest in green products is getting bigger and is not only focused on profit.

Istiana explained that there is an opportunity for green investment to become a global trend in emerging countries, up to USD 23 trillion, for renewable energy, transportation, waste processing, and green building sectors.

“We need around IDR 67 trillion to fulfill the investment and financing needs of Indonesia’s SDGs (2020-2030), consisting of 62% from the government and 38% from non-government,” said Isti.

To achieve this target, OJK issued a road map for sustainable finance, including the issuance of OJK Regulation (POJK) 51/03/2017 about the Implementation of Sustainable Finance for Financial Service Institutions, Issuers, and Public Companies and POJK 60/04/2017 concerning Issuance and Securities Requirements Environmental Friendly Debt (Green Bond).

“POJK 60 is securities and debt, the results of which will fund environmentally friendly activities. There are 11 categories of environmentally friendly activities, we add one sector, i.e MSMEs, so a total of 12 environmentally friendly activities, “added Istiana.

On the same occasion, Ferike Indah Arika, Young Expert Policy Analyst, Center for Climate Change and Multilateral Policy (PKPPIM), Fiscal Policy Agency, Ministry of Finance discussed the need for innovative funding for green development.

Ferike said that since 2016, the Ministry of Finance has identified government budgets aimed at controlling climate change, as well as to measure and evaluate the budgeting. The average spending of ministries and agencies on climate change reached up to IDR 86.7 trillion.

“That is a large number, which is equivalent to 34% of the financing needs for climate change mitigation in the Second Biennial Update Report (Rp. 266.2 trillion per year),” she said.

Given the very limited state budget for Indonesia, and to attract green investment flows to Indonesia, the Ministry of Finance has issued a fiscal policy to control climate change. It includes 3 (three) policies; the state income policy, state spending policy, and financing policy.

Ferike explained that in the state income policy, the most significant change was the tax holiday facility in which previously the percentage of tax reduction was 10-100%, now it is 100%. Besides, the period of the tax holiday has been shifted from originally 5-15 years to become 20 years depending on the investment value.

From the aspect of financing policy, the Ministry of Finance issued a Sovereign Green Sukuk to finance the government’s climate change mitigation and adaptation projects.

“In early 2018, we issued the 1st Global Green Sukuk worth USD 2.25 billion. Meanwhile, in November 2020, the issuance of Green Sukuk reached the value of Rp. 5.42 trillion,” said Ferike.

Furthermore, the Ministry of Finance is considering the application of Carbon Pricing, among others, to promote sustainable growth and encourage Green Investment.

“Regulations related to Carbon Pricing are currently under discussion coordinated by the Coordinating Ministry for Maritime Affairs, and the regulation will be in the form of a Presidential Decree,” she said.

 

Local Government Opportunities to Use Regional Bonds for Green Development

 

Simon Saimima, Head of Sub-Directorate for Special Allocation Funds (DAK), Directorate of Regional Balancing Funds and Regional Loan Facilitation, Directorate General of Regional Financial Development, Ministry of Internal Affairs, explained about Green Bonds or Regional Bonds.

Following the regional bond issuance policy, Simon explained that it is a regional right to provide regional loans in synchronization with the Regional Medium Term Development Plan (RPJMD) and related regulations. Furthermore, regional loans will be repaid from the local government in the form of bonds on the capital market. Green Bonds or bonds are included in the long-term loan category.

Simon explained that the capital market issues the bonds. However, the guarantor is the local government in the form of assets and activities in certain provinces carrying out. The regions are responsible for all risks resulting from the issuance of these bonds.

To follow the procedures, the regional head and the Regional House of Representatives (DPRD) must approve the issuance of bonds. The Regional Representative Council (DPD) was also involved in the process.

“There are 9 (nine) required documents for regional bonds, and these must be fulfilled to meet the requirements of the Ministry of Internal Affairs,” he said.

Bonds that have been issued are the obligation of the local government to pay the loan principal and coupons by the agreement. If the local government fails to pay, they will also receive administrative sanctions.

Russell Marsh, Green Finance Lead, ASEAN Low Carbon Energy Program Ernst and Young, in his presentation, explained that although the need for sustainable funding is increasing, there are many identified challenges found in its development.

First, the lack of awareness and understanding of Environmental, Social, and Governance (ESG) risks and the importance of sustainable finance both from the demand and supply side. Second, there is a lack of constant definitions, measurements, standards, and disclosures so that financial services institutions can evaluate potential sustainable projects and so that project owners can prepare supporting documents. Third, there is a lack of coordination between stakeholders in implementing regulations. Fourth, green bonds may not create “additionality”, for example, the projects that are financed to support environmentally friendly purposes but these projects were not previously financed. 

There are several solutions that Russell offers, i.e providing incentives for sustainable finance, developing transitional finance, and increasing understanding and building the capacity of financial service institutions and project owners.

 

Constraints of Local Government and Financial Institutions in Issuing of Bonds to Support Green Development

 

Present as speakers at the workshop on the second day (10/3) were Darwin Trisna Djajawinata, Operations & Finance Director of PT Sarana Multi Infrastruktur (SMI); and Rahul Sheth, Executive Director, Head of Sustainable Bonds at Standard Chartered Bank.

In his presentation, Darwin shared valuable information on the criteria for projects that were eligible to get financial support from financial institutions. The feasibility of a project to be financed depends on several things, for example, whether an infrastructure project is included in the Regional Medium Term Development Plan (RPJMD).

“For projects aimed to fulfill the rights and empower the poor, much more mature planning is needed because this financing is a loan, and it is impossible to impose this loan on the poor, so the regional government must repay the loan. Well, these schemes need to be planned carefully, “said Darwin

The ability of the regions to see potential sectors for development, compile proposals and manage debt will determine the confidence of financial institutions. Especially regarding the issuance procedure of municipal bonds which are very dependent on the track record of the region in managing debt.

“The issuance of municipal bonds depends on the ability of the regions to manage their debts well, and currently there are not many regions that can manage their debts properly,” added Darwin.

Rahul Sheth, Executive Director, Head of Sustainability from Standard Chartered Bank added that the readiness of the regions to issue these bonds varies. Regions that will issue bonds for the first time need more careful preparation. Financial Institutions usually have 2 types of bonds that are commonly issued to finance projects with specific issues, i.e green bonds to finance projects related to the environment and climate, and social bonds to finance social community projects such as infrastructure, access to finance for MSMEs.

“The social bond market is one of the largest,” said Rahul. This shows great potential for local governments to develop regional bonds. At the end of his presentation, Rahul answered questions from the participant, Yugo from Bank South Kalimantan, about the challenges that often arise when issuing bonds.

“Data and data automation are challenges that often come. When the data is complete, various things can be done and monitored automatically, such as taxes, balances, and other financial reports. Data collection and data management are critical processes in this industry,” concluded Rahul.

Participants shared some of the obstacles in issuing regional bonds regarding regulations such as the sovereign guarantee that is given only to State-Owned Enterprises (BUMN), not Regional-Owned Enterprises (BUMD), which automatically makes it harder for local governments to plan bond issuance for strategic projects.

CASE Indonesia Encourages Synergy of Multi Stakeholders for Energy Transition in Indonesia

CASE (Clean, Affordable, and Secure Energy) project embraces many parties to encourage the energy transition in Indonesia by conducting online discussions within operational planning workshop for 3 days (February, 22-24 2021). Stakeholders from various government agencies, financial institutions, academia, and civil society organizations, shared their opinion and ideas about the activities they have undertaken to contribute to the energy transition.

This meeting was crucial to ensure that CASE activities would later remain aligned and complementing activities that are currently or have been planned by other relevant agencies regarding the energy transition, as well as reflect the inclusiveness of the CASE project.

Currently, the energy transition is deemed as an exclusive topic or only discussed by certain groups. On the other hand, the topic of the energy transition arose because of scientific concerns about the climate crisis that is experiencing and will impact human nature and our ecosystem, so it is important to introduce this process to form collective awareness of measures to avoid the more extreme impacts of the climate crisis through the energy transition, especially in the power sector.

Input and opinion from various parties are also important to see the various constraints and situations experienced by each party and how the project can play a role in CASE in these situations.

From the financial sector, for example, there are still difficulties in providing funding for renewable energy projects because they are hampered by several things, one of which is the risk assessment of renewable energy projects.

“We need to understand the risk of investing in renewable energy, and how to mitigate it, so that this renewable energy project is more bankable,” explained by an executive from one of the banking institutions in Indonesia who was involved in this discussion.

He continued, “In addition, there should be a body that can become a kind of consultant to provide an objective assessment of supply and demand in this sector, especially to answer the question, is this project in line with the government’s development plan? More importantly, how about government support for this particular project? “

The government has not responded to these questions. Several institutions have taken the initiative to find solutions to these questions, but a definite answer from the government in the form of official policies or regulations is still considered important and crucial as a positive signal of government support.

“Institutionally, we already have a target and work plan for 2021 that can be collaborated with the CASE program. Some of them are campaigns to raise awareness from financial institutions and investors about the potential of renewable energy projects, as well as inter-institutional meetings to discuss green recovery and green. jobs, “explained one ministerial official in Indonesia.

“As academics, we are open to being involved in making studies and developing pilot projects of the activities for the CASE project. We also have study groups focused on developing clean energy, so we look forward to having discussions about the activities we can do together,” said a lecturer of Technical University in Indonesia.

All parties agree that synergy is needed from all parties to respond to the issue of providing clean energy that is affordable and sustainable. However, the government still needs to be the initiator who first moves these parties.

“As the title of this project is CASE, Clean and Affordable, if we talk about affordable, it must be related to price and business model. So PLN must find the right business model to provide affordable clean energy for the community, ”said an official from a state-owned company in Indonesia.

This activity was closed by agreeing on a joint commitment from all parties present to make the program agenda for the provision of clean, affordable, and sustainable energy a success. The moderator at the plenary session emphasized that the Ministry of National Development Planning/BAPPENAS really hopes for the cooperation and synergy from each stakeholder invited to the workshop so that the achievement of the project will be good even better, as stated in the tagline “To Mobilize Stakeholders, to Make the Output Better.”

The CASE project is an initiative of the German government, funded by the German Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU). In general, this program aims to encourage an increase in public understanding of the energy transition issues in Southeast Asia.

The CASE program covers regional working areas in 4 Southeast Asian countries, namely Indonesia, the Philippines, Vietnam, and Thailand. In Indonesia, the CASE program is run by GIZ Indonesia in collaboration with the Institute for Essential Services Reform and the Ministry of National Development Planning / BAPPENAS as government representatives to partner with CASE. Globally, this program is also supported by international consortium partners Agora Energiewende and the New Climate Institute.

Strengthening the Development of Electric Vehicle Ecosystem in Indonesia, IESR Compare with the United States, Norway, and China

Jakarta, 23 February 2021 

Aligned with the Paris Agreement, Indonesia needs to prioritize reducing greenhouse gas (GHG) emissions in the transportation sector to maintain the earth’s temperature below 2oC. In Indonesia, the transportation sector consumes 45% of total final energy, of which 94% comes from vehicle fuels. Exhaust gas emissions are almost one-third of the total emissions of the energy sector.

Many countries adopted the massive and aggressive penetration of electric vehicles to reduce GHG emissions. Indeed, the source of the vehicle’s electric power must also come from renewable energy.

The Institute for Essential Services Reform (IESR) examines best practices from other countries to create an ecosystem that supports the advancement of electric vehicles in Indonesia, through a study entitled Developing an Electric Vehicle Ecosystem in Indonesia: Lessons learned from the United States, Norway, and China. More than 100 people followed the launch of the study online (23/2). IESR also invited Firdaus Manti, Assistant Deputy for Maritime and Transportation Industry of the Coordinating Ministry for Maritime and Investment Affairs, Alief Wikarta, Lecturer and Researcher of the Department of Mechanical Engineering, ITS, and Muhammad Samyarto, PT Wika Industri Manufaktur (WIMA) as responders.

Fabby Tumiwa, Executive Director of IESR, said in his opening that Indonesia has to built aggressively the proper ecosystem to support the accelerated adoption of electric vehicles in Indonesia, by learning from the experiences of comparative countries in the study. 

“Sales of electric vehicles in Norway reached 54.3% in 2020 compared to only 1% in 2011. This is the result of the consistency of the Norwegian government in implementing policies to encourage the penetration of electric vehicles, “he said.

Norway is listed as the country with the highest market share for electric vehicles, which is more than 50%, while the total number of electric vehicles is around 430 thousand. Meanwhile, in 2019, China had a total of 3.4 million electric vehicles, and the United States was 1.5 million.

Indonesia itself, through the Ministry of Industry, is targeting the number of electric vehicles to reach 20% of the total vehicle production in 2025 (400,000 Low Carbon Emission Vehicles (LCEV) and 1,760,000 electric two-wheeled vehicles). However, until August 2020, there were only 2,279 roadworthy electric vehicles.

Five Undeveloped Electric Vehicle Ecosystems in Indonesia

Idoan Marciano, author of the study Developing an Electric Vehicle Ecosystem in Indonesia: Lessons learned from the United States, Norway, and China, assessing that the vehicle ecosystem in Indonesia has not been well developed, even though the government has issued Presidential Regulation No. 55/2019 which is the basis for accelerating the development of electric vehicles, but its derivative policies have not been able to increase the adoption of electric vehicles significantly.

Idoan explained that there are at least five ecosystems that need special consideration, namely a) policy, b) infrastructure/charging, c) industry/supply chain, d) public awareness, e) supply and availability of models.

“Generally, Indonesia is still lagging in all these aspects. From a financial policy perspective, Indonesia has provided various incentives but its total has only reduced about 40 percent of the price of electric vehicles after entering Indonesia. Furthermore, Indonesia also does not have regulations on fossil vehicle restriction, while the comparison countries have targeted 100 percent electric vehicles and banned conventional vehicles, “he explained.

In terms of charging infrastructure, Idoan views that the ratio of chargers to electric vehicles in Indonesia is still lower, namely 70: 1, while countries with high penetration of electric vehicles have a ratio of less than 25: 1.

As viewed from the industrial and supply chains, Indonesia also does not have the production capacity that is already operating to produce electric vehicle components, especially batteries. Meanwhile, China is capable of producing batteries up to 200 GWh / year.

Besides, people’s motivation to buy electric vehicles in Indonesia refers more to economic reasons and the availability of infrastructure, while people in comparison countries are more influenced by economic, environmental, and technological reasons.

Furthermore, Idoan found that the availability of supply and various models is also an important factor in the adoption of electric vehicles.

“In Indonesia, there are already 15 companies with production facilities for two-wheeled electric vehicles, with a total capacity of around 877 thousand units/year. In China, there are already 500 companies with a total production of more than 3.5 million units/year, ”he said.

This study recommends several strategies and policies that can be adopted by the government and all stakeholders to develop the electric vehicle ecosystem in Indonesia, as follows:

  1. Align the national electric vehicle adoption targets and make them binding
  2. Develop an integrated roadmap for the transition to electric vehicles
  3. Implement policies to limit the sales of fossil fuel vehicles 
  4. Provide financial incentives (from the central government) to reduce the purchase price of electric vehicles, a minimum of about 50 percent for electric cars, for electric motorbikes only 5-10 percent more expensive than the price of conventional motorbikes.
  5. Provide fiscal and non-fiscal incentives (from local governments) under the conditions of their respective regions 
  6. Impose technology transfer in collaboration with the international electric vehicle and battery manufacturers
  7. Issue supply-side policies, like fuel economy standard, conventional vehicles quota and to encourage production and increase the availability of electric vehicle models 
  8. Provide grants to research and academic institutions, as well as to EV and battery manufacturers to support R&D of electric vehicles and batteries technologies 
  9. Increase investment in domestic industrial and supply chain development of electric vehicles 
  10. Develop a more massive public charging infrastructure network through a mandate from government entities along with the subsidies for private developers 
  11. Electrify public transportation as an entry point for the adoption of the electric vehicle. IESR appreciates the ongoing collaboration.
  12. Promote electric vehicles as environmentally friendly vehicles and educate consumers on the benefits and incentives of purchasing EVs

Firdaus Manti, Assistant Deputy for Maritime Industry and Transportation at the Coordinating Ministry for Maritime and Investment Affairs, who attended the study launch webinar, said that the government will encourage and provide facilities for industry players.

“We want that Indonesia is not only a market so that we invite foreign manufacturing industries, especially four-wheelers, to be developed domestically. We also encourage hotel, retail, and small supermarket associations to provide two-wheeled public charging infrastructure, so that when shopping, they can charge their electric vehicles, “he said. 

Also, he emphasized the importance of close collaboration with all stakeholders including academics, the private sector, CSOs, and even the community as consumers to realize the development of electric vehicles in Indonesia.

Alief Wikarta, Lecturer and Researcher of the Department of Mechanical Engineering in ITS viewed that IESR study can be a solution for fuel diversification. He focuses on the community awareness ecosystem which is a challenge that deserves attention.

“Most of the Indonesian consumers are aware but not care. They know that, for example, certain technologies can reduce pollution but not using these technologies. Besides, our consumers have high price sensitivity, with only a thousand different prices, people will tend to choose cheaper ones. This is a challenge that requires a marketing strategy from production and government policies, “he added.  He said that Indonesia can also begin to develop a circular economy concept for battery recycling, which is one of the main components of electric vehicles.

Muhammad Samyarto, PT Wika Industri Manufaktur (WIMA), agreed on Idoan’s explanation regarding the quality of electric vehicles that are better than conventional vehicles.

“The problem of charging is just a concern. If you use an electric motor, you can manage your daily use of an electric vehicle. However, it remains a challenge for us together so that it answers people’s concerns, ”he said.

Supported by IESR, Central Java Provides Attractive Opportunities For The Community To Install Rooftop Solar PV

Semarang 16 Februari 2021 – The Central Java provincial government, through the MEMR (Ministry of Energy and Mineral Resources) Office, in collaboration with the Institute for Essential Services Reform (IESR), held a webinar on Central Java Solar Day 2021 (16/2). This event, presenting the Governor of Central Java, represented by the Acting Regional Secretary of Central Java Province, Prasetyo Aribowo, Dadan Kusdiana Director-General of EBTKE, Ministry of Energy and Mineral Resources, Sujarwanto Dwiatmoko, Head of the ESDM Office of Central Java Province, Manager of Revenue Assurance & Trading Mechanisms, M. Khamzah representing GM PLN UID Central Java and DIY. Also attending were Fabby Tumiwa – Executive Director of IESR, Chairiman VP Residential Market ATW Solar, and Karyanto Wibowo, Sustainable Development, Director Danone. 

On this occasion, several stakeholders explained that there is a great opportunity available for Central Java to seize the big goals i.e: to be the first solar province in Indonesia. Central Java Solar Province was initiated in 2019, the webinar is also meant to track the progress of the initiative.

Consistently, the Acting Regional Secretary of Central Java Province, Prasetyo Aribowo, who delivers the Governor of Central Java’s remarks, revealed that the regional government continues to support the efforts to meet the renewable energy mix target stated in the Regional Energy General Plan (RUED).

Dadan Kusdiana said that Solar PV is one of the priority solutions for fulfilling the clean energy mix by 23% in 2025 while reducing greenhouse gas emissions by 29% in 2030. He said that this is his concern in preparing a grand national energy strategy, to achieve an energy mix target of 23% by 2025.

“We only have five more years to go, so if renewables are not achieved, surely the target of reducing greenhouse gases will not be achieved,” he said.

Dadan also explained that to attract public interest to install rooftop solar PV, currently, the Director-General of EBTKE is revising MEMR Regulation No. 49/2018, especially for 3 main points: improving net-metering rates, extending the reset of electricity exports, and accelerating the provision of export-import (Exim) meters.

Executive Director of IESR, Fabby Tumiwa, in his presentation, explained that based on the studies that have been conducted by IESR, the potential for solar energy development in Central Java is high, both for ground-mounted PV as well as for floating PV.

“According to the Ministry of Public Work and Public Housing Regulation No. 6/2020 that part of the reservoir area can be used for floating PV, we see that the technical potential of floating PV can reach more than 700 MW if the 10 largest reservoirs in Central Java are also used for floating PV mini-grid, “said Fabby. 

Head of the Central Java MEMR, Sujarwanto Dwiatmoko, explained that despite the difficult situation due to the outbreak of Covid-19, Central Java in 2020 managed to exceed the target of the renewable energy mix, from the target of 11.60% to 11.89%. In 2025, Central Java has set a renewable energy mix target of 21.35%.

He emphasized that in the future, “Central Java Solar Province” should not just be a slogan, but to achieve the highest possible results. One of the ways that his office will encourage in 2021 is by opening a consultation room for those who are interested in installing rooftop PV.

Sujarwanto also targets that the industrial and commercial sectors will be the main target to develop rooftop solar power plants. To make the investment cost for the rooftop PV more attractive, Sujarwanto encourages various financial institutions to get involved and explore the potential of a zero Capex financing scheme, or without the initial investment cost with soft credit. 

“To support the national government program of battery-based electric motorized vehicles (Kendaraan Bermotor Listrik Berbasis Baterai – KBLBB), we also plan to build a charging station from solar PV in a hybrid manner,” he said.

Furthermore, he said that for 2021, the development agenda would focus on economic recovery after Covid 19 through the construction of roof-top PV at MSMEs and Islamic boarding schools. The construction of the rooftop PV 2021 will be carried out in 31 units in around eight districts/cities in Central Java.

Muhammad Khamzah from PLN UID Central Java and DIY also gave an illustration of the distribution of rooftop PV users in Central Java, which are generally dominated by households in the R2 class (customers of 2200 VA and above). PLN UID Central Java and DIY are trying to accelerate the process of customer requests to use grid-connected solar rooftops and supply export-import kWh.

Industrial customers such as Danone are one of the groups that have a great interest in using renewable energy, including rooftop solar power plants. Karyanto Wibowo underlined the commitment of various multinational companies to use 100% renewable energy in a certain year. Many of the RE100 members also have operational facilities in Indonesia, so the government must also look at this condition in planning and adjusting the electricity system. 

According to Chairiman from ATW Solar, product knowledge from prospective users determines the level of adoption of the rooftop PV, so service and product providers (EPC companies) must ensure to build public awareness and that the quality of the product offered is assured. Comprehensive information regarding benefits, costs, and maintenance, and operational certainty are important factors for users to install roof-top PV mini-grid. The solarhub.id portal is an IESR initiative that is expected to be able to answer the imbalance of information for the public about solar energy in general and rooftop PV in particular.

Considering that Indonesia has a target to achieve a renewable energy mix of 23% by 2025, the penetration of rooftop solar is important because this is the most strategic way to do it at this time. Collaboration from various parties supported by clear policies and regulations will accelerate the penetration of solar energy in the national energy mix.

Indonesia – Germany Collaborate to Accelerate the Energy Transition in the Electricity Power Sector through the Clean, Affordable, and Secure Energy for Southeast Asia (CASE) Program

 

The Kick off workshop of the Clean, Affordable, and Secure Energy for Southeast Asia (CASE) program (2/2/2021) signifies the collaboration between the Indonesian and German governments to support the energy transition, especially in the electricity sector in Indonesia and also the Southeast Asia region.

Norbert Gorrißen, Deputy Director-General of the German Federal Ministry for the Environment, Nature, Conservation and Nuclear Safety (BMU), said in his opening remarks that climate change is currently the concern of many major countries in the world. He pointed out regarding Japan, China, Philippines that have taken a commitment to fulfill the Paris Agreement to maintain the earth’s temperature below 2°C by reducing the use of coal in its energy sector. He pointed out that Indonesia, as one of the most influential countries in Southeast Asia and the G20, should also do the same.

“The energy situation in Indonesia is indeed very complex, but there is no other way than to do an energy transition. The CASE project is a big project between Germany and Indonesia. Through it, we are ready to share experiences related to the energy transition that Germany has undertaken. Currently, in Germany, more than 50 percent of electricity comes from renewable energy, ”he explained.

Lisa Tinschert, Program Manager for CASE Indonesia for GIZ Indonesia, stated that one of CASE’s most prominent challenges to overcome to achieve its goal is a low capability and political will or the limited and decent or sufficient information about the energy transition.

“The next challenge is policies, regulations, and plans that are not always consistent and do not prioritize the development of decentralized renewable energy, as well as business ecosystems and access to funding that are not very supportive of the energy transition,” explained Lisa.

Fabby Tumiwa, Project Lead CASE Indonesia from the Institute for Essential Services Reform (IESR), explained that the energy transition is not only by developing and increasing the number of renewable energy power plants but also stopping the construction of (new) coal-fired power plants after 2025, and phasing out the older coal-fired power plants than 20 years as soon as possible.

“Although growing modestly, there will be an increase in renewable energy development in 2020, generally coming from hydro and solar power as much as 28.8 MW. The total capacity of renewable energy generators installed until 2020 is around 10.5 GW, “he added.

According to Fabby, our homework in the energy transition is energy efficiency. Several programs to support energy efficiency in Indonesia need to be monitored, such as reducing energy consumption in the transportation sector, updating and introducing Minimum Energy Performance Standards (MEPS), and requiring the inclusion of Energy Saving Labels for electrical appliances, as well as utilizing the potential of green buildings. Quoting the latest IESR report, Indonesia Energy Transition Outlook 2021, Fabby stated that the lack of funds and the lack of monitoring made the extensive potential in green building energy wasted. 

“Increasing energy efficiency will stop energy demand, thereby reducing the burden on building power plants, especially coal power plants in the future. Increasing renewable energy development and energy efficiency are the keys to accelerating the energy transition, “he added.

Answering the mandate of the renewable energy mix with a target of 23 percent by 2025, PLN’s EVP Electricity System Planning Edwin Nugraha Putra said that PLN committed to achieving it. One of its efforts is by intensifying co-firing at coal-fired power plants. However, he realized that the biggest challenge for co-firing is the availability of feedstocks, up to 16 million tons of biomass/year.

“We hope that by working together with CASE we will be able to solve problems regarding demand and encourage renewable energy investment. We are ready to build renewable energy by (one of them – red) renewable energy based on economic development (REBED), “said Edwin.

Zulvia Dwi Kurnaini, Senior Policy Analyst, Fiscal Policy Agency, Ministry of Finance also highlighted renewable investment strategy.

“The finance ministry is committed to an energy transition. CASE will be a partner in providing fiscal policy input that supports renewable energy investment to accelerate this energy transition. Currently, the government is doing its job to supply affordable electricity by providing subsidies for fossil energy. However, on the other hand, the government also has other obligations to develop clean energy. Even though the state budget (APBN) is still very limited, “she said.

Zulvia hopes that Bappenas as the political partner of the CASE program can play its role as a locomotive to see various aspects of the energy transition such as the fitness of PLN condition, the state budget, and the economy of renewable energy into one integral part.

Representing Bappenas, Director of Electricity, Telecommunications and Informatics, Rachmat Mardiana, hopes that working together on the CASE program can help provide solutions to problems in the electricity sector in Indonesia, starting from the primary energy side such as dependence on fossil energy, transformation in the electricity system, including not yet integrated and synergistic, as well as obstacles at end-users, such as unequal access to electricity.

The programme “Clean, Affordable and Secure Energy for Southeast Asia” (CASE) aims to drive change in the power sector in SEA towards increased ambitions with regards to climate change. It focuses on the four main SEA countries including Indonesia in terms of energy demand and also foresees regional activities.

Anchored in Indonesia with the political partner “Ministry of National Development Planning”, with support of a country implementation team and international partners, CASE will propose evidence-based solutions to the challenges met by decision-makers in the design and implementation of the energy system of the future and build societal support around those solutions. A joint fact-finding approach will be applied, involving expert analysis and dialogue to work towards consensus by narrowing areas of disagreement.

CASE will also support dialogue and coordination in the Indonesian power sector, provides technical and policy support, and facilitate dialogue around a new energy vision. Through these activities, CASE will directly contribute to the transition of the power sector towards an innovative, economically successful, and environmentally friendly model for SEA. CASE functions as an aligned programme to the SEA Energy Transition Partnership (SEA ETP).

Presentation materials

Fabby Tumiwa_CASE KickOff_Energy Transition Status in Indonesia

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CASE Kick-Off Workshop - CASE Intro - Lisa Tinschert final

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02.02.2021 - (rev5)Presentasi Direktorat KTI - Kick Off CASE

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02.02.2021 - (Pak Yusuf?) Outlook and Agenda

Unduh

The Surpassing Potential of Rooftop Solar Market to Achieve the Target of 23 Percent Renewable Energy Mix in 2025

Jakarta, 15 December 2020 – “What are the investment costs and roof area that I need to install a solar rooftop PV system? Does it save electricity costs? How is the integration with the PLN network? What are the installation regulations like?”

These questions often arise from the community before they decide to use the solar rooftop. Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) said that it is a natural thing because generally, as energy consumers, they want to know the rooftop solar PV system they will use. Product knowledge is a considerable part in determining this decision.

“The need for information related to solar rooftops is increasing compared to 3 years ago when we initiated the National Movement for One Million Solar Rooftops (Gerakan Nasional Sejuta Surya Atap-GNSSA). The rooftop PV market is now also more open, even available online,” he explained in the discussion on Pursuing the Gigawatt Solar Energy Order in Indonesia, which was held by IESR.

However, this interest has not become a significant realization. As compared to Vietnam, in the same period, the last 2-3 years, Vietnam was able to increase its solar rooftop installation to 1.5 GWp. Meanwhile, Indonesia has just recorded the establishment of a solar rooftop of less than 20 MW.

In general, Indonesia’s renewable energy targets in the National Energy General Plan (Rencana Umum Energi Nasional-RUEN) have not gone according to plan. Until the end of 2019, the achievement of renewable energy was only 9.15%. Meanwhile, only 5 (five) years left to realize 23% renewable energy.

“To pursue that target is by encouraging the implementation of the solar rooftops. GNSSA exists to foster the formation of the gigawatt order in Indonesia. If this order establishes, the solar roof penetration to reach the target of 6.5 GW of renewable energy in RUEN will be faster, achieving economies of scale, will also increase public interest, and the price will be more affordable, “said Fabby.

Indeed, the GNSSA echo has had a pretty good impact. There has been an increase in the number of PLN customers using solar rooftop PV during the last 3 (three) years, from 268 in 2017 to more than 2,500 customers by October 2020. Regulations issued by the Ministry MEMR also triggered this increase – Permen ESDM No. 49/2018 as an updated Regulation from Permen ESDM No.13/2019 and No. 16/2019.

There are more companies providing rooftop PV installation services and increasing public interest in using rooftop solar PV as part of their lifestyle.

However, it is still not enough to meet the target of solar energy in RUEN, and the aim of the GNSSA, 1 (one) GW cumulative solar rooftop by 2020.
According to Fabby, rather than hoping for the development of solar panels on a utility-scale that requires land, time, and funding, the government should also focus on roof solar power plants for households, business and commercial sectors, and MSMEs.

“The IESR study shows that by 2030, the market potential for rooftop solar power plants in Java and Bali could reach 10-12 GW,” he also explained.

In Central Java alone, based on the IESR survey, there is a market potential of up to 9.6% for the residential group, 9.8% for business/commercial, and 10.8% for MSMEs. Furthermore, this survey also shows that 7 out of 10 homeowners give a positive response to using solar rooftops. However, 92% still have high doubts because they do not understand the technology, assume the price is still costly, and have not got the right answer regarding the products and benefits of saving electricity from solar rooftops.

Regarding the price, according to Fabby, in the past 3 (three) years, there has been a decrease in the investment cost for installing the roof PLTS, which was previously Rp. 25 – 35 million per kWp to Rp. 15 – 20 million per kWp. Likewise, the price of solar modules has decreased by 40% from $ 30 per Wp to 20 cents per Wp.

“Customers’ hesitation in installing roof solar power plants is based on the lack of reliable information and flat socialization of regulations regarding the use of roof solar power plants. Besides, information regarding the procedure for installing solar rooftops connected to the network (on-grid), the benefits that can be felt by users, to where they can buy their products is still limited and is still concentrated in big cities in Java, “said Fabby.

Bambang Sumaryo, Chairman of the Solar Roof Solar Power Users Association (Perkumpulan Pengguna Listrik Surya Atap-PPLSA), a rooftop solar user for 6 (six) years to date, expressed other dilemmas that are usually considered by potential consumers in installing rooftop solar power plants.

“The availability of kWh Exim (export-import) allows solar rooftops users to enter the on-grid network, making it more efficient. However, the availability of kWh Exim is hard to obtain, especially in the regions, “he complained.
Bambang also agrees with IESR’s observations regarding the lack of evenness of information accessible to potential users.

Moreover, Bambang mentioned the net-metering tariff rule of 1: 0.65 in the Permen ESDM No. 49/2018. This rate causes the payback period to be more than 5 (five) years, and the percentage of savings is not as high as expected.

Responding to the information gap accessible to the public, IESR built an online portal for SolarHub Indonesia (solarhub.id), which aims to provide information about solar energy for prospective users of PLTS rooftop and connect them with companies presenting products and installing rooftop solar power plants.

“Maybe there are still people who think they need a large area to install solar rooftops. Whereas with advances in technology, we can install solar rooftop PV on the roof of the house, in the canopy, or as a hybrid system, “said Chairiman from ATW Solar as a provider of solar rooftops installation products and services who joins SolarHub Indonesia.

Chairiman hopes that this portal, with its information and accuracy of the narrative, will attract more people to invest in rooftop solar PV.

On the other hand, Marlistya Citraningrum, Manager of the IESR Sustainable Energy Access Program, explained that the SolarHub Indonesia portal would bridge the Indonesian people, especially those outside urban areas and outside Java, to get information about the solar rooftops.

“Those who live in Jakarta, for instance, are advantageous because they can be directly exposed to socialization activities and connect with product and service providers if they want to know more about designs, the benefits of savings, and after-sales services for solar rooftops PV,” she explained.

At SolarHub Indonesia, there is also a sophisticated calculator. By using it, the users can calculate the amount of savings in electricity costs, details of the need for PV mini-grid for prospective users’ buildings, and the amount of budget required for the investment.

The market potential for rooftop solar electricity also shows that the solar energy target in Indonesia can be achieved easily through the deployment of roof solar power alone. Of course, with a combination of supporting policies and regulations and the availability of complete and equitable information about rooftop solar power plants, installation procedures, product providers, and installation services, to the choice of financing schemes.

The IESR market survey also shows that most people want a payback period of fewer than five years, which is difficult to achieve if the net-metering rate used is still 1: 0.65 as stipulated in Permen ESDM No. 49/2018. Furthermore, the clarity of the installation procedure in different areas also needs to be uniformed so that users of solar rooftops do not have to wait for months to get kWh Exim (export-import). The government needs to pay attention to the aspirations of people so that their interests can be encouraged into adoption and practice.

Coal Exports is Declining, It is Time for Energy Transition

Day 4 Indonesia Energy Transition Dialogue 2020, Energy transition in the power sector and its implications for the coal industry

Jakarta, December 10, 2020 – Indonesia’s coal export destination countries in Asia have begun switching to renewable energy. According to research by the Institute for Essential Services Reform (IESR), the coal industry will suffer losses. Energy transition is the only way to prepare for a decline in exports to Asia.

According to the IESR Data and Information Specialist, Deon Aprinaldo, coal export destination countries such as China and Japan began to commit to zero carbon from 2025 to 2050. This indirectly affected Indonesia’s coal export demand.

“Demand from these countries is declining, while Japan has begun to switch to high-quality coal. If we wanted to compete there, we would compete with the United States, Russia, and Canada,” said Deon.

In Southeast Asia, the demand for Indonesian coal exports is still high. However, Vietnam, which has successfully improved its renewable energy transition, is likely to serve as an example for other Southeast Asian countries. That way, the demand for coal in Southeast Asia will decline in the future.

“Meanwhile, currently 27 GW of coal power plant construction is still in progress. In August 2020, the Director of PLN said that PLTU has installed pollution controls to reduce carbon, but it will increase the operating costs,” said Deon.

Special Staff of Coal and Minerals within Energy and Mineral Resources Ministry, Irwandy Arif, said that 2027 would see the peak of the worldwide decline in coal demand. This is a challenge for the Indonesian government because currently, the government is using coal-derived products to handle the budget deficit from LPG imports.

“Therefore, currently the ESDM ministry is preparing a grand strategy with regard to important renewable energy commodities. Coal’s phaseout is largely determined by renewable energy and the overall policy designed by the government,” said Irwandy.

State-owned Companies (BUMN) such as PT Bukit Asam also undergo energy transition. PTBA conducted a green airport program by building solar infrastructure. In addition, they built solar panels in several regencies.

Renewable Energy Policy in Indonesia is Overlapping

Day 4 Indonesia Indonesia Energy Transition Dialogue 2020, Better energy system planning to transition the Indonesian power sector

 

Jakarta, December 10, 2020 – The climate of renewable energy policies in Indonesia is considered unsupportive towards renewable energy as of yet. Researchers and experts noticed an overlap between the General Plan for State Energy (RUEN) and the Electricity Supply Business Plan (RUPTL) devised by PT PLN.

Chairman of the Indonesian Renewable Energy Society (METI), Dr. Surya Darma, said that the government had detailed the efforts to reduce carbon emissions in the RUEN. But, on the other hand, the government still signed the RUPTL of PT PLN which is not in accordance with the RUEN. “This is a paradox. The target itself is already unsuitable, let alone the achievement?” said Surya.

According to Surya, the targets between RUEN and RUPTL that are not in line with each other will keep creating overlapping policies in the renewable energy sector. The government still has 8 years to revise the RUEN.

However, if it is impossible, the only way to handle that is by accelerating energy transition to make up for the gap between RUEN and RUPTL. “If the renewable energy target in RUEN is 45.2 GW, then the realization scenario could reach up to 22.62 and 25 GW,” said Surya.

Apart from the conflicting targets, the policy climate in Indonesia is still unclear in regard to the party responsible for implementing renewable energy. This was explained by academics from the School of Electrical and Informatics Engineering, Bandung Institute of Technology (ITB), Pekik Argo Dahono.

“In implementing the RUEN, it is unclear who will be responsible, this is what causes many overlapping renewable energy policies. Those who supervise are different each time, ”said Pekik.

Pekik considered the policy revision is too time-consuming. That being said, what can be done is to fulfill the targets written in RUEN. In addition, providing incentives for renewable energy development must also be accompanied by the readiness of the electricity system to receive renewable energy. Pekik said that the government should avoid being unprepared when coal is completely eliminated from Indonesia’s electricity system.

Energy Transition Acceleration Must be Just

Day 4 The 3rd Indonesia Energy Transition Dialogue 2020 | #IETD2020 #TransisiEnergi

Reducing carbon emissions through renewable energy transition needs to consider all aspects other than energy source. The goal is to ensuring just energy transition.

Therefore, the Institute for Essential Services Reform (IESR) published a series of reports outlining scenarios of renewable energy transition model structure for the road map of the National Energy General Plan (RUEN). Based on the national policy changes this year, the model structure would not achieve carbon emission reduction target by 2025. “The renewable energy transition only achieved 15%,” said IESR Executive Director, Fabby Tumiwa.

However, if the plan to stop using Coal Power Plants in 2029 was applied, Indonesia could contribute 24 GW of renewable energy in 2025 and 408 GW in 2050. Using this model structure scenario, greenhouse gas emissions could decrease by 700-750 million tonnes of carbon by 2050.

In the report, IESR also advocated achieving the decarbonization figure. Two main sectors that must be prioritized for transition are electricity and transportation. The government must accelerate the electricity mix in transportation with renewable energy, while in the electricity sector, the government must implement a moratorium on new Coal Power Plant.

Director of Electricity Program Development of the Ministry of Energy and Mineral Resources (ESDM), Jisman Hutajulu, said that limiting coal consumption at coal power plants must be balanced with the government’s efforts to maintain affordable electricity rates. “Coal has a large consumption and that keeps the price of electricity affordable. If the price of renewable energy is close to that price, we can aggressively undergo energy transition,” said Jisman.

Jisman said that for now, the government had implemented blending—using biofuel for power generation. Jisman said 815 GW generated from it had gone well. Up to this point, there has been a potential of 1.8 GW as the result.

Head of the UGM Center for Energy Studies (PSE), Dr Deendarlianto, said that transition from coal to renewable energy should be done slowly. Based on the PSE survey, Indonesia is still in need of massive research and development. With limited research and development, coal restrictions will disrupt electricity system.

“Imports will surge, then the economy will be disrupted. We can do vehicle electrification, but only for new vehicles so that the investment will not be too expensive. According to our study, electric cars that can enter Indonesia are only 400,000 at most and can only increase 2% each year,” said Deen.