Integrating the Biofuel Development Planning in the Long-Term Strategy of Indonesia’s Energy Transition

Jakarta, May 4, 2021– Since the early 2000s, Indonesia’s oil production has continued to decline. To meet domestic oil demand, the Indonesian government has imported oil. Therefore, the government has also sought to find alternative fuels. Biofuel is one of the government’s focuses to be developed and became the mainstream of Indonesia’s energy policy.

“There is a hope that biofuel will become a prime energy supply in Indonesia. However, we need to note several points such as the government planning and strategy for the future of biofuel amid the development of alternative technology and energy transition acceleration,” explain Fabby Tumiwa, the Executive Director of Institute of Essential Services Reform (IESR) at the opening of the report launching on the Critical Review on the Biofuel Development Policy in Indonesia. Moreover, the meeting, which was attended by around 70 people online, also discussed the availability of feedstock and price disparities with current fossil fuels. 

The Indonesian government’s strategy in developing biofuels has sparked the discussion. Julius Christian Adiatma, the author of the report, states that the use of liquid fuels in Indonesia is dominated by the transportation sector and the trend continues to increase. Under a business as usual scenario, the increase in liquid fuel consumption will triple. In the technology intervention scenario, the penetration of electric vehicles and the use of fuel cells were chosen as solutions. If not properly planned, the development of biofuels and the acceleration of penetration of electric vehicles will collide in the future. The global trend towards the use of electric vehicles also poses a threat that investment in the biofuel sector has the potential to become a stranded asset.

Djoko Siswanto as Secretary-General of the National Energy Council (DEN) said that based on the National Energy Plan (RUEN), until 2050 Indonesia will use a variety of energy sources to meet national energy needs, “We are using fossil fuels and new and renewable energy. Today, we still import crude oil, LPG, and gasoline. So our focus now is reducing imports, because we believe that if there are fewer imports, our energy security will certainly be better. “

Responding to the conditions of price disparity, he acknowledged that the price difference between biofuel and other fossil fuels is a challenge in itself.

“For example, currently green gasoline costs IDR 19,000. Can people afford to buy it? Or will the state be able to subsidize the price difference if it is sold at a lower price? ” he said. 

In line with Djoko Siswanto, Andriah Feby Misna, Director of Bioenergy at the Ministry of Energy and Mineral Resources, also said that one of the goals of developing biofuels, such as biodiesel in Indonesia, is to reduce the number of imports of fuel oil, which is currently still high.

“We are referring to RUEN as a roadmap for biofuel development. In 2020, our target is 8 million kiloliters. This target is achieved as biodiesel usage reaches 8.4 million kiloliters. Even so, in the National Grand Strategy, there is an adjustment, namely a reduction of the biodiesel target by 15% with the consideration of the entry of electric vehicles, “explained Feby. Feby added that the government’s homework is gasoline, 50% of which is still imported.

Chairperson of the Indonesian Bioenergy Expert Association, Tatang Hernas Soerawidjaja highlighted the government’s responsive, not-anticipatory tendency in issuing policies on biodiesel as well. “Government policy tends to be reactive rather than anticipative, it’s not prepared for new technologies to come,”

The feedstock for biodiesel, which currently depends on palm oil, is also in Tatang’s spotlight. He said that the dependence on oil palm in biodiesel development is an indicator of unsustainability.

The dependence on one raw material is also a concern of Ricky Amukti, Engagement Manager of Traction Energy Asia. “Unfortunately, our biodiesel product is a single feedstock from palm oil. We have the potential for other raw materials, such as cellulose from palm oil trunks, which can be processed into gasoline. Another potential that exists is biodiesel from used cooking oil which has an emission of 0.31 – 0.62 Kg CO2 equiv/L, “

According to Ricky, if this potential is realized, there will be six million kiloliters of biodiesel produced and 2.2 million new jobs that will be created.

IESR sees it is important for the government to ensure the availability of energy for the community. In the future, liquid fuel will still be needed considering that the penetration of electric vehicles in various regions in Indonesia will vary in the period. Through the launch of the Critical Review on the Biofuel Development Policy in Indonesia, IESR recommends that the government: 1) develop a long-term strategy for the role of biofuels in the energy transition, in line with the development of alternative technologies. 2) Establish clear and transparent criteria for measuring the economic, social, and environmental benefits of the biofuel program. 3) Diversify biofuel feedstocks. 4) Establish policy support to encourage the production and development of second, third, and next-generation biofuels. 5) Change the incentive scheme to encourage innovation to include sustainability as a requirement. 


Indonesia Can Achieve Net Zero Emission Before 2070

Jakarta, 28 April 2021 — President Joko Widodo’s speech during the Leader Summit on Climate Change which stated that he would seriously tackle the issue of the climate crisis was considered less ambitious by a number of parties. This is because President Jokowi’s statement emphasizes the FOLU sector (Forestry and Land use Conversion), while the energy sector, which will be the largest contributor to emissions in the future, was not even mentioned at all. Meanwhile, on the same occasion, a number of country leaders expressed their commitment to reduce emissions and their target to be carbon neutral. Indonesia through the Ministry of Environment and Forestry has released a 2050 Long-term Strategy on Low Carbon and Climate Resilience (LTS-LCCR) which targets that Indonesia will become carbon neutral by 2070. Institute for Essential Services Reform (IESR) ) views this target as less ambitious and shows the government’s half-hearted efforts in dealing with the climate crisis.

Responding to this, IESR continues the discussion series #Before2070 to see Indonesia’s opportunities to achieve carbon neutrality by 2070. This webinar is the second part of a series of #Before2070 webinars aimed to encourage the government to make more ambitious climate policy targets. Indonesia’s target to become carbon neutral by 2070 is considered inconsistent with the Paris Agreement commitment that was signed by Indonesia in 2015 and ratified by Law no. 16 of 2016.

Preparing a Long-Term Strategy towards being carbon neutral by 2050 is the obligation of each country that signs the Paris Agreement. However, the LTS-LCCR 2050 document that is owned by the government has become a debate and has caused controversy even among the government itself. This can be seen from the inconsistency of documents and explanations between government agencies regarding Indonesia’s carbon-neutral targets.

For example, the Ministry of Bappenas previously explained about Low Carbon Development in Indonesia (LCDI) which offered several scenarios if Indonesia became carbon neutral in 2045, 2050, 2060, or 2070 and its implication to Indonesian economic growth.

“Climate commitments must be integrated with national development programs. Indonesia’s commitment to achieve net zero-emission has been stated in the RPJMN, ”explained Medrilzam, Director of Environment at Bappenas. He also emphasized that there should be no trade-off between economic growth and efforts to reduce emissions. According to him, achieving carbon-neutral requires a lot of funds. Therefore, apart from cooperation and multi-stakeholder commitment, Indonesia needs to receive strong support from international countries.

From the energy sector, Agus Cahyono Adi, Head of the Center for Data and Information at the Ministry of Energy and Mineral Resources, said that his party is preparing to support Indonesia in achieving net-zero emission to meet energy needs with various efforts.

“The energy sector is an important sector in the net-zero emission plan because we are one of the emission contributors. In addition to reducing emissions, we are also trying to increase energy demand. Increasing renewable energy and the use of clean fuels play an important role in increasing energy demand, “said Agus.

However, his party has not dared to announce a target figure or deadline to become carbon neutral from the energy sector.

“For each choice that we will take, we need to consider the aspects of availability, accessibility and affordability,” he explained.

To achieve carbon neutrality, more innovative efforts are needed, especially through developing an investment climate such as carbon trading. Kus Prisetiahadi, Assistant Deputy for Climate Change and Disaster Management, Coordinating Ministry for Maritime Affairs and Investment (Kemenko Marves) explained that currently the Presidential Decree for the value of the carbon economy is a guideline for GHG emission reduction and low-carbon national development is still being drafted. There are at least 8 regulatory components in this Presidential Decree and the marine sector is one of the sectors that will be developed for efforts towards mitigation.

Dian Afriyanie, Lokahita senior researcher, highlighted the lack of integration across sectors and scales in policymaking. This results in policy products that often feel out of sync between one ministry/agency and another ministry/institution. 

Furthermore, Eka Melissa, Senior Advisor of The Partnership for Governance Reform, emphasized that low-carbon development should be seen as an opportunity to develop the country, be environmentally friendly while meeting the targets of international agreements.

“I see that Bappenas has seen it (as an opportunity) but other ministries seem to still see it as a proven challenge from the various documents produced. Low carbon development is still seen as an obstacle and a challenge,” she said.

Synchronization of this point of view must first of all be carried out so that the policy produced by each institution leads to the same estuary. If the point of view of each institution on an issue is different, then the final outcome of the policy will definitely not go in the same direction.

The role of local government is considered very important in achieving carbon-neutral development. Andy Simarmata, Chair of the Indonesian Planning Experts Association (IAP) gave a view that the government and other relevant stakeholders can campaign for carbon neutrality down to the regional level so that it can be translated into the RPJMD (regional medium-term development planning). Incentives for the business world, especially the pattern of business behavior, also need to be provided in addition to encouraging the technology.

For climate commitments, especially targets to be carbon neutral, each related party needs to see the current climate situation as a crisis that requires a quick and precise coping strategy. The more we postpone dealing with the climate crisis, the greater the costs and the heavier the efforts that must be made in the future.

On Climate Crisis, Accelerating Energy in Indonesia is a Must

Jakarta, 27 April 2021 – Indonesia can protect the earth from carbon emissions by encouraging the acceleration of renewable energy development. The urge for the government to be more confident, courageous, and ambitious in developing clean energy was voiced in the discussion and book soft-launching “Footprints and Pathway for Indonesia’s Renewable Energy” by Kompas journalists hold by Harian Kompas and the Institute for Essential Services Reform (IESR) (27/4).

Sutta Dharmasaputra, Editor-in-Chief of Kompas Daily, said that Harian Kompas’ editorial policy supports the acceleration of renewable energy. He stated that the current increase in the earth’s temperature is due to the use of fossil energy so that the speeding up of renewable energy will be able to keep its temperature at not exceeding 2 degrees Celsius.

“Hydrometeorological disasters in Indonesia for one year caused a loss of 22.3 trillion rupiahs. I casually calculated that if using that amount of money to buy Padang rice, it would be equivalent to 639 million boxes of Nasi Padang (Lunch Box). It’s a huge loss, ”he said.

Fabby Tumiwa, Executive Director of IESR, on the same occasion, said that over time, the climate crisis would have to be more serious.

“The study of experts states that if the global temperature rises by more than 1.5 degrees, it has broader implications for the ecosystem, food production, and the economy as a whole,” he explained.

An energy transition is an option that must be taken by policymakers to reduce greenhouse emissions. Fossil energy systems contribute 75 percent of GHGs worldwide. The Paris Agreement even mandates all countries in the world to develop renewable energy to achieve carbon neutrality by 2050.

“This means, currently, our NDC target is not compatible with the Paris Agreement. If we want emissions compatible, then we have to reach the peak (peak emission) in 2030 and have to drop drastically by 2050. If it is too late, the efforts must be more drastic and more expensive, “he said.

IESR has completed carbon-neutral modeling of Indonesia in 2050 which shows that Indonesia will be able to achieve net-zero by 2050. Even by using 100% renewable energy, the cost of energy systems will be cheaper than systems based on fossil energy.

“The electricity sector is a quick win because the development of renewable energy in this sector can be faster than industry and transportation. Indeed, the energy transition policy requires many innovations, changes in regulations, and the way we look at the energy resources we have. However, if we can do 100% renewable energy, 3.2 million new jobs will be created, ”said Fabby.

In line with Fabby, the head of the writing team, Aris Prasetyo, explained that the development of renewable energy by boosting an energy transition is something that will happen. He also shared about the energy independence he met during his visit to Kamanggih Village in Kahunga Eti Subdistrict in East Sumba.

“The community is energy-independent. The electricity comes from the Micro Hydro Power Plant (PLTMH), and even they sold the surplus to PLN. For cooking, they use biogas from livestock manure. However, when this pandemic occurred, it turned out that PLTMH customers did not get a discount on electricity rates, meaning something clean and supporting government programs and climate change adaptation was not supported, while programs that depend on fossil energy received incentives, “he said.

Aris also added that policy imbalances also occur on an industrial scale, especially in the matter of buying and selling tariffs for electricity from renewable energy. He said that even the developer felt the tariff offered by PLN is not economical for developers because the production costs are higher. As for the renewable energy tariff policy, the Perpres does not establish yet.

Questioning about renewable energy policies, Sugeng Suparwoto, Chairman of the House of Representatives Commission VII DPR RI is determined to finalize the law on renewable energy, although, according to him, many interests do not support the emergence of this law.

“Even though the existence of this law will create an ecosystem that supports the development of EBT,” added Sugeng.

On the other hand, Satya Widya Yudha, a member of the National Energy Council, views that in building energy security, the government must ensure supply security, accessibility, affordability with capability, and environmentally friendly.

“If we talk about the economy, then the renewable energy that can be further developed is PLTS. We are pumping PLTS on a large scale, “he said.

Ambitious Climate Commitment and Deliberative Policy Formulation are Keys for Indonesia to Achieve Carbon Neutral #Before2070

Jakarta, 9 April 2021.  The government through the Ministry of Environment and Forestry (KLHK) recently announced a Long-Term Strategy to achieve carbon neutrality and climate resilience. The strategy stated that Indonesia will become carbon neutral in 2070. As indicated on the strategy document, Indonesia’s emissions are targeted to reach a peak in 2030. In the formulation of a target, it is necessary to have clarity regarding policy support for each sector to reach peak emissions in 2030.

As a party to the Paris Agreement, the 2070 carbon neutral target is inappropriate and less ambitious.

Collaborating with the Yayasan Madani Berkelanjutan, ICLEI Indonesia, Walhi, and supported by the Thamrin School of Climate Change and Sustainability, IESR organized a public discussion webinar entitled “Indonesia Mampu Capai Netral Karbon sebelum 2070”. The webinar aims to be a means of public participation in responding and providing input to the government on public policies concerning the interests of everyone’s life.

In his remarks, Fabby Tumiwa, Executive Director of IESR, said that the recent increase in hydrometeorological disasters could be due to the climate crisis phenomena. This is in line with the IPCC’s Intergovernmental Panel on Climate Change report which states that an increase in Earth’s temperature by 1.1 degrees since pre-industrial times has increased the frequency and magnitude of extreme weather.

According to Fabby, the pressure from various parties, especially the government to increase its ambition in responding to the climate crisis is important.

“We want to encourage ambitious efforts that require not only a different way of thinking but also commitment and leadership from our political leaders, the president, who should be able to see that this climate crisis has an impact on the lives of many people,” said Fabby ending his remarks.

Farhan Helmy, Principal of the Thamrin School of Climate Change and Sustainability also agrees that Indonesia’s commitment to achieving carbon neutrality by 2070 is far too long. In his remarks, Farhan explained that there are at least four points that are often missed in climate discussions, i.e (1) the absence of coherence in the climate agenda and policies, (2) there is no serious effort to involve non-state actors, including cities that are spearheading the process changes, (3) the scale of action which is still at the pilot project level is not yet an institutional transformation supported by economic transformation, (4) a change of leaders without any fundamental rules on climate makes policy direction less clear.

“Indonesia cannot do this alone. The role of the state can no longer be just procedural to follow negotiations, “said Farhan.

One of the sectors that have come under the spotlight to achieve carbon neutrality is energy. It is important to understand the energy system and increase the ambition to reduce emissions in the energy sector because this sector is the largest emitter. Deon Arinaldo,  program manager of the Energy Transformation, IESR, explained that there are several steps that can be taken to decarbonize the energy system. 

“A more ambitious energy transition scenario can be achieved if, (1) there is no new coal-fired power plant (PLTU) construction starting from 2025, (2) The initiative of the Ministry of Energy and Mineral Resources to replace 13.5 GW of fossil plants with renewable energy is implemented, and (3) carries out the phase-out Steam Gas Power Plant (PLTGU) and Diesel Power Plant (PLTD),” he said.

Deon also added that technically and economically, Indonesia is able to carry out the steps above and decarbonize the energy system before 2050. What is needed is comprehensive political commitment and support.

Several years ago, Bappenas released a report on Low Carbon Development Indonesia; which shows that the Indonesian economy is increasing even though we use the Low Carbon Development concept in development. So the doubt and assumption that doing development with a low carbon concept is expensive, and will have an impact on stagnating economic growth have been actually answered by this report clearly.

Anggalia Putri, Knowledge Management Manager of Yayasan Madani Berkelanjutan, added that Indonesia has an interest in achieving the target of 1.5 degrees C rather than 2 degrees to avoid climate risks such as hydrometeorological disasters, for example, increasing floods. In the Indonesian context, many unique ecosystems will be destroyed if we cross the 1.5 degree limit.

“There is a significant difference in climate impacts between 1.5 and 2 degrees, so we stick to it to reach 1.5 degrees,” said Anggalia.

Furthermore, Anggalia added that with the existence of a net sink in the FOLU sector in 2030, Indonesia could actually reduce its deforestation quota.

Ari Mochamad, Country Manager of ICLEI Indonesia, emphasized the role of cities that are also crucial in reducing emissions and the journey towards carbon neutrality. “The city contains both problems and solutions. 70% of greenhouse gas emissions come from urban activities, but on the other hand, the city is a place that can be managed. Several leaders and non-government actors have made the issue of climate change a necessity because its impacts are already before the sight, “he concluded.

Several cities in Indonesia are members of the Global Covenant of Mayors (GCoM), a commitment from city leaders across the country who realize that climate change is a necessity so that it changes the mindset in decision making. 

Indonesia’s target to achieve carbon neutrality is an important issue regarding transgenerational justice between our generation and our children and grandchildren generation.

Yuyun Harmono, WALHI’s Climate Justice Campaign Manager emphasized that Indonesia’s target to become carbon neutral by 2070 is way too late.

“It is clear that it is too late if our target to be carbon neutral is in 2070, many country leaders and even the UN Secretary-General have stated that the current condition is a climate emergency, we must be ambitious in setting targets and taking action. We need something (policies) that are fast, both developed and developing countries.”

On the other hand, there are many loopholes to shrug off ambitious emission reduction obligations such as carbon trading offsets schemes to developing countries. This scheme will make developing countries have to bear a double burden in the future, namely the offset burden of developed countries and the emission reduction targets of their respective countries.

Regarding justice across generations, Yuyun emphasized that we should ask what we want to pass on the earth’s condition to our future children and grandchildren.

“Are we going to ensure they are safe from the ecological crisis and the climate crisis? Or are we leaving something that will make them unfortunate in the future? In climate justice, justice between generations is also an important context, so it must be considered. We want to demand more ambitious climate policies that reflect justice between generations and climate justice, “said Yuyun at the end of his presentation. 

Closing the webinar, Dian Afriyanie, committee member of the Thamrin School of Climate Change and Sustainability, highlighted two points as the key takeaways of the webinar. First, the importance of coherence between government policies in addressing the root of the problem; and policy coherence across sectors, locations and government hierarchies.

“The results of the IESR and Madani research show that the government’s target for emission reduction in the energy sector and FOLU can still be increased and accelerated, so the government should not only carry out procedural negotiations but also see and refer to the findings of this research,” said Dian.

Second, the deliberative process in policy formulation. Participation and representation of various groups is indeed a challenge in itself during this pandemic, however, in the formulation of public policies this process must be pursued, so that the policy products really belong to the public. 

The Government of Jambi signed an MoU with IESR to accelerate energy transition

Committed to Achieves Regional Renewable Energy Mix Target 2025 and Boosts Energy Transition, Jambi Government Signed MoU with IESR

Jambi has a regional renewable energy mix target of 24 percent in 2025 and 40 percent in 2050. This target has been stipulated in local regulation, Perda No. 13 of 2019, concerning the 2019-2050 Regional Energy General Plan (RUED). The target number of the Jambi renewable energy mix is larger than the national, which are 23 percent and 31 percent in 2025 and 2050 respectively.  To overcome challenges, such as the different understanding of energy transition definition, the Jambi government, through the Department of Energy and Mineral Resources (ESDM), signed the MoU with Institute for Essential Services Reform (IESR). Moreover, increasing human resources capacity and enabling supporting infrastructure are also Jambi ESDM’s need to develop renewable energy.

“The potential for renewable energy in Jambi is quite impressive. However, it is not yet a priority, so we should start to develop it with a correct understanding of the energy transition. For this reason, we are working with IESR to define the right direction for maximum results,” said the Head of the Jambi ESDM, Harry Andria, at the Signing of the MoU between the Jambi Province ESDM Service and IESR (22/3 ).

Harry thought that understanding the definition of the energy transition at the regional executive and legislative levels will help in implementing the programs to achieve regional renewable energy targets. 

Agreed,  Fabby Tumiwa, Executive Director of IESR on the same occasion, also stated that the energy transition has become a phenomenon that is continuously being adopted by many countries in the world. They are committed to fulfilling the Paris Agreement to keep the earth’s temperature less than 2 ° C. 

“Energy transition is unnegotiable. Accelerating renewable energy requires the commitment of all stakeholders, both regional leaders, policymakers, and the affected communities. Instrumental collaboration is needed to achieve the RUED target and build a joint consensus for the application of renewable energy,” he said. 

Fabby also views that the implementation of the energy transition and the achievement of renewable energy targets in Jambi will be advantageous for Jambi in the future. Jambi will continue to develop its economies, such as in the industrial, business, agriculture, fishery, and tourism sectors. It will require more energy, especially renewable energy.

IESR will provide technical assistance to the Jambi Government in increasing the utilization of renewable energy potential, energy conservation, and energy transition. The event was closed by virtually signing the MoU document between the Jambi ESDM Agency and the IESR.

IESR and Unhan (University of Defense in Indonesia) Sign a Memorandum of Understanding for Renewable Energy Development

Bogor, 30 March 2021 – Institute for Essential Services Reform (IESR) signed a memorandum of understanding for cooperation with Pertahanan University (Unhan). This collaboration aims to showcase each other’s potential in research and community service on renewable energy and energy security.

Pertahanan University is opening a vocational school located in Atambua, East Nusa Tenggara. One of the focuses of this vocational school is to develop renewable energy sources such as solar and wind in these locations to provide reliable energy sources for schools, as well as providing qualified human resources. In his remarks, the Rector of  Unhan, Amarulla Octavian, stated that through this collaboration, his party is open to collaborating in education, research and community service related to renewable energy.

“We can start to conduct seminars and workshops, as well as joint research. Please also involve our students as interns in projects and research in the future, “he said.

On a separate occasion during the IESR’s Pojok Energi interview, Amarullah Octavian stated that the Pertahanan University plans to open 10 vocational schools in frontier areas of Indonesia.

“Atambua is the first and will become a pilot project, if this is successful we will replicate it in other places,” concluded Amarullah.

Fabby Tumiwa, Executive Director of IESR emphasized that the trend to use clean energy will bring demand for skilled labourers as installers in the clean energy sector.

“As a think-tank that concerns on renewable energy and environment, we support the Unhan to open vocational schools and develop renewable energy in the frontier regions of Indonesia. One of the implications of developing a microgrid that comes from renewable energy is the need for skilled workers as installers. So, we must see this phenomenon and opportunity so that we can catch it up to develop energy security,” said Fabby in his speech. 

We Discover Indonesia has Higher Technical Potential of Solar Energy, IESR Encourages the Government to Update Renewable Energy Potential Data

March 18, 2021 — Indonesia has a higher solar power technical potential than 207 GW, which the official data released by the Indonesian government through the Ministry of Energy and Mineral Resources in 2017. Institute for Essential Services Reform (IESR), in collaboration with the Global Environmental Institute (GEI), presented the result of their research in the launching of the study Beyond 207 Gigawatts: Unleashing Indonesia’s Solar Potential (18/3). 

Fabby Tumiwa, Executive Director of IESR, in his speech explained that based on technical potential and land suitability, solar power in Indonesia could reach 3000-20,000 GWp.

“If the minimum technical potential, 3 GW, is utilized effectively, it can meet 7 (seven) times the electricity consumption of 2018,” he said.

IESR measures this technical potential using geospatial data, therefore suitable land for PV mini-grid can be identified.

Fabby added that this study recommends the government update data sources on renewable energy for providing a better signal for developing solar energy in the future.

“Indeed, it will also increase the confidence of various parties involved in solar energy development that Indonesia can rely on solar power to meet clean energy needs. Besides, this study supports PLN’s efforts to develop solar power and local governments in implementing the Regional Energy General Plan, ”he said.

At the global level, the Indonesian government can use the data to strengthen its commitment to global climate action, as stated by Jiaman Jin, Executive Director of GEI. GEI, in particular, has a program to assist developing countries in developing renewable energy by providing capacity building, technical and financial assistance.

“China and countries in Southeast Asia have collaborated on a global climate action program, including Indonesia. To achieve the Paris Agreement, today, about 29 countries have targeted carbon neutrality by relying on renewable energy. Other tools to be carbon neutral are carbon storage and carbon trading (carbon credit). These two things are also what China is currently developing, “he explained.

To achieve its commitments under the Paris Agreement, Indonesia is trying to reach the target of 23% renewable energy mix by 2025. Nevertheless, until the end of 2020, only 11.5% was realized. Meanwhile, in the National Energy General Plan (RUEN) itself, the government has a target for solar power development of 6.5 GW by 2025.

“However, the target is currently under review, and it turns out that solar (photovoltaic (PV)) is targeted to represent a third (17.6 GW) of the total net power generation of 48 GW by 2035 in the national energy grand strategy prepared by the Ministry of Energy and Mineral Resources and the National Energy Council (DEN). About 60 or 76 percent are expected to come from utility-scale solar power including floating solar PV, “said Daniel Kurniawan, Lead Author of the Study Report” Beyond 207 Gigawatts: Unleashing Indonesia’s Solar Potential “.

Daniel explained that out of 23 types of land cover, the IESR research team chose the suitable land type for PLTS development. Only 9 (nine) types of land cover were selected for mapping the technical potential of the PV mini-grid.

“Man-made forest and dry agricultural land mixed with shrubs are also included in the calculated land types, which is why these three lands were found to be acquired in the development of the solar power plant 3 x 7 MWp project, in Lombok and the solar power plant 21 MWp project in Likupang. North Sulawesi, “he explained.

Using the most optimistic scenario, 9 (nine) types of land cover covering an area of ​​1.9 million km2, the results obtained from the calculation of the technical potential of PLTS are very abundant, reaching 19.8 TWp, which is 95 times higher than the government’s estimate.

“The greatest technical potential is in Kalimantan, Sumatra, West Java, and East Java,” explained Daniel.

Moreover, talking about the General Plan for Electricity Supply (RUPTL) (2021-2030) that is being drafted by PLN, Daniel explained that until today, there is no definite information regarding the allocation of the target capacity for solar power from a total of 3.7 GW of a combined capacity plan for power solar, water, and garbage in the upcoming RUPTL.

Technical Potential Data Will Motivate Optimization of Solar Power Plant Development

Furthermore, the latest technical potential study data launched by the IESR can also be used by local governments to optimize renewable energy development. Daniel gave an example of Bali and Sumba as two islands in Indonesia that already have sufficient capital in terms of the consistency of the local government in encouraging the use of solar power through the policies they issued and also have higher technical potential of solar power.

Director of Various New Energy and Renewable Energy of Indonesian Ministry of Energy and Mineral Resources (EMR), Chrisnawan Anditya, on the same occasion, said that his party would update the data on the technical potential of solar power in Indonesia.

“Further, we are also trying to identify the sun’s potential according to the transmission line. The better the transmission line, the bigger the solar power plant development. However, if the location is outside the transmission line, we will develop it through off-grid, “said Chrisnawan.

Having comparable perception with Chrisnawan, the Executive Vice President of the New and Renewable Energy Division of PLN, Cita Dewi, said that PLN is committed to increasing the development of renewable energy. However, due to the COVID-19 pandemic, PLN is still dealing with conditions of low demand for electrical energy.  

“The demand crisis is likely to last 2 to 3 years. However, our approach to pursuing renewable energy targets includes accelerating the completion of solar, hydro, geothermal power generation and considering converting 5,000 diesel power plants to solar. The potential of solar after converting is 2 GW, “said Cita.

From the developer side, Andhika Prastawa, Chairman of the Indonesian Solar Energy Association (AESI), said that the results of the study are beneficial for developers to explore more opportunities to invest in solar PV in Indonesia. Notwithstanding, according to him, this must still be in line with the government’s support in establishing friendly policies for solar PV developers.

“The economy of solar PV is already competitive, but until now the net metering regulation is still at 6.5, it should be changed to 1, so that it has a good psychological impact on the solar PV market,” Andhika added.

Agreeing with Andhika, Herman Darnel Ibrahim, a member of the National Energy Council hopes that there will be reforms in the net metering policy. He also emphasized that in terms of installation, solar PV is the easiest renewable energy to develop because it is available in almost all places in Indonesia, so it is easy to harvest in the form of the solar power plant, and has various scales so that it is quickly built.

Wirawan, Acting President Director, PT PJB Investasi appreciated the results of the IESR study and offered to calculate the technical potential of about 192 dams and reservoirs spread across Indonesia.

“The water catchment area in Indonesia is approximately 86 thousand hectares. This is also a huge potential for the development of floating solar, “he suggested.

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.