IESR: Electric Vehicle Incentives Need to Focus on Two-Wheeler Vehicles and Public Transportation Electrification

Jakarta, 20 December 2022 – The government plans to provide incentives for electric vehicles with details of Rp80 million for the purchase of electric cars, Rp40 million for the purchase of hybrid-based electric cars, Rp8 million for the purchase of new electric motorbikes, and Rp5 million for electric motorcycle conversion. The Institute for Essential Services Reform (IESR) views that providing electric vehicle incentives is better focused on purchasing two-wheeler electric vehicles, converting them into two-wheeler electric vehicles and electrifying public transportation.

IESR Executive Director, Fabby Tumiwa, thinks that this time is not proper to provide incentives for buying electric cars. He mentioned several reasons in the Energy Corner: Huge Electric Vehicle Incentives conducted by IESR (19/12), including limited fiscal capacity, as well as the need for a sizable budget for other activities to support a just energy transition, such as developing renewable energy and ensuring the quality of access to electricity in underdeveloped areas. Fabby said that with these considerations, the government should focus more on providing incentives for the purchase of two-wheeler electric vehicles to increase demand for electric vehicles and reach the target of 13 million electric motorbikes in 2030.

“Giving incentives for motorbikes is far more reasonable than cars. We also support the electrification of public transportation, such as electric buses. If this is realized, it will not only reduce fuel consumption but also reduce congestion and reduce emissions,” explained Fabby.

Fabby explained that providing incentives for the purchase of electric motorbikes would benefit the middle to lower-class people who use them not only as a means of transportation but also as earning incomes, especially in urban areas.

Meanwhile, incentives for the procurement of electricity-based buses for small transportation in urban areas will support the creation of low-emission public transportation. IESR Junior Researcher for Electricity Systems and Distributed Energy Resources, Faris Adnan, believes that the Indonesian government can learn from India’s experience in providing incentives for electric vehicles through the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. In this scheme, bus incentives are greater than private cars.

“When we discuss urban mobility, there is an Avoid, Shift, Improve framework. With this framework, in addition to using electric vehicles for private vehicles, the government can build transit-oriented cities and use electric-based public transportation. From existing experience, using only the avoid and shift frameworks can reduce emissions between 40-60%. For this reason, public transportation needs to be subsidized,” said Faris.

Moreover, IESR supports the government if incentives distribution is carried out for the conversion process from conventional motorbikes to electric motorbikes. The conversion process especially needs to be done on vehicles aged 6-7 years with good motor body conditions so that what needs to be replaced is only the engine and battery installation. Assuming the converted motorbikes are past the age of 10 years, it is estimated that there are 6 million motorbikes per year that are ready to be converted.

Based on a survey conducted by IESR, said Faris, the cheapest conversion rate for two-wheeler electric vehicles is Rp10 million, and the most expensive is Rp30 million, with an average range in the range of Rp15 million-Rp23 million. The IESR survey also shows the willingness to pay of Indonesians to convert conventional vehicles into electric motorbikes in the range of Rp5 million-Rp8 million per unit. For this reason, the government must think of additional schemes to make electric motorbike conversions cheaper.

“With incentives, assume we can cut Rp5 million so that the average price of converting electric vehicles from Rp15 million-Rp23 million to Rp10 million-Rp18 million for electric motorbikes without battery replacement system. With battery replacement, the price can be reduced by Rp6 million – Rp8 million. That way, the price of converting an electric motorbike with a battery system can be Rp4 million – Rp10 million, which means it is already under the willingness to pay,” said Faris.***

Opportunities are Increasingly Open for the Acceleration of Renewable Energy Development in 2023

The development of the energy transition in Indonesia

  • In general, based on the result of the transition readiness framework (TRF) made by IESR, Indonesia’s readiness for the energy transition is still low.
  • The share of renewable energy in Indonesia’s primary energy mix will decline from 11.5% in 2021 to 10.4% in 2022
  • The current share of renewable energy in the electricity mix is ​​12.8%, with a capacity of 8.5 GW.
  • In Q3 2022, investment realization was less than 35% of the target of USD 3.97 billion.
  • Energy intensity has decreased at a rate of 1.7% per year, according to the National Energy General Plan’s target of reducing by 1% per year.
  • Energy intensity in residential and commercial buildings also decreased at a rate of 1.38 % per year and 2.64 per year.
  • The government, through the Ministry of Energy and Mineral Resources, has identified that as many as 11 GW of coal-fired power plants (CFPP) can be retired early. It will be discussed further with other ministries.
  • There is increasing adoption of electric vehicles.
  • 8 out of 38 provinces in Indonesia set a renewable energy target of more than 31% by 2025
  • Financing from financial institutions for renewable energy development in Indonesia has increased but is still low compared to its portfolio.

Opportunities to accelerate the energy transition

  • Readiness for energy transition is high when viewed from the declining price of renewable energy technologies.
  • The issuance of Presidential Regulation 112/2022, if followed by the regulation that accommodates the interests of renewable energy developers, will increase energy transition readiness.
  • There will be higher installed capacity additions in geothermal, hydro and solar power plants. For example, increasing the capacity of 55 MW geothermal power plants, Peusangan and Asahan hydropower with capacities of 45 MW and 174 MW, and Cirata solar power at 145 MWac.
  • Indonesia received international funding through the Just Energy Transition Partnership (JETP), the Energy Transition Mechanism (ETM), and the Clean Investment Fund-Accelerated Coal Transition (CIF-ACT) for the energy transition in the amount of USD 24.05 billion.
  • 27 out of 38 provinces have issued local regulations on the Regional Energy General Plan (RUED).
  • The trend of biofuels is predicted to increase.

 

Jakarta, 15 December 2022- 2022 will close with the primary mix target for renewable energy decrease compared to the previous year. However, the presence of international support, the increase and improvement of regulations related to incentives and the renewable energy procurement process, and the existence of project pipelines that are ready to be developed can be a driving force for the accelerated growth of renewable energy in 2023.

The Institute for Essential Services Reform (IESR), supported by Bloomberg Philanthropies, has released its main report Indonesia Energy Transition Outlook (IETO) 2023, which monitors, analyzes and projects the development of the energy transition in Indonesia. The IETO report noted that the share of renewable energy in Indonesia’s primary energy mix decreased from 11.5% in 2021 to 10.4% in 2022. It was due to the share of coal increasing to an all-time high of 43%, making a target of 23% by 2025 will be difficult to achieve if the government does not immediately strengthen its political commitment to the development of renewable energy.

“There is a contrast between the ambition and the realization of renewable energy development. There is a commitment to accelerate the use of renewable energy, but there are still different perceptions and priorities of various policymakers about how the transition process is carried out. It can be seen in the decision to abolish the feed-in tariff in Presidential Decree 112/2022, the rejection of the power wheeling clause in the formulation of the new and renewable energy (EBET) Bill, as well as the decision to maintain coal subsidies in the form of Domestic Market Obligation (DMO) prices. To carry out an effective energy transition, the government must have a unified position and set no-regress targets,” said Fabby Tumiwa, Executive Director of IESR.

IETO 2023 also highlights the achievement of renewable energy investment, which is still below the target set by the government of only USD 1.35 billion by Q3 2022, only 35% of this year’s target of USD 3.97 billion. According to IESR, the investment climate needs to be improved by increasing financial support for renewable energy developers, clearer procurement processes, clear tariff schemes, shorter and clearer licensing processes, reducing barriers to entry for foreign investors, and increasing access to capital with lower interest rates.

Moreover, providing a wider space for the integration of renewable energy into Indonesia’s energy system must be carried out immediately.

“What can be done to provide space for renewable energy penetration, aside from early retirement from the CFPP, is to operate the CFPP flexibly. Technically, this operation will require changes in the main components of the CFPP. However, no less important, the flexible operation will require flexibility in terms of power purchase agreements and fuel supply contracts. According to the IEA, by making these contracts more ‘flexible’ there will be savings of 5% of the total operating costs for a year or the equivalent of USD 0.8 billion. The Grid Code also needs to be made more detailed. This is also necessary so that operators have guidelines for operating regulations flexibly,” explained Raditya Wiranegara, one of the main authors of the IETO, who is also an IESR Senior Researcher.

On the other hand, the transportation and industrial sectors are crucial for rapid decarbonization. In the transportation sector, there is an interesting trend of increasing the adoption of electric vehicles. It can be seen from the number of two- and three-wheeler vehicles which has almost fivefold increased from 5,748 units in 2021 to 25,782 units in 2022. Even so, this number is still far from the Nationally Determined Contributions (NDCs) target, which stipulates 13 million two- and three-wheeler vehicles in Indonesia. 2030.

For the adoption of electric vehicles to become more massive, the government needs to build an electric vehicle ecosystem, including building adequate charging infrastructure, increasing consumer knowledge and awareness, and providing incentives or subsidies.

“The government needs to encourage the creation of an energy transition ecosystem in all energy sectors, one of which is to create a level playing field between fossil energy and alternative low-carbon & renewable energy technologies. The first step that needs to be studied is how current energy subsidies and compensation can be diverted to providing incentives for the development of renewable energy and the adoption of low-carbon technologies while at the same time still helping to maintain people’s welfare. An interesting example is subsidies for the purchase of electric motorbikes, as an effort to divert fuel subsidies,” said Deon Arinaldo, Manager of the Energy Transformation Program, IESR.

The use of fossil energy in the industrial sector has contributed to around 20% of Indonesia’s total energy sector greenhouse gas (GHG) emissions. Increasing process efficiency and energy efficiency as well as fuel substitution have been implemented by several energy-intensive industries to reduce their emissions.

“Implementation of CCUS could be an important short-term strategy in reducing process emissions in the cement, fertilizer and steel industries, but it has yet to start. The industrial sector also needs to develop alternative low-carbon technologies, such as electrolysis-based ammonia for fertilizers and a hydrogen-based direct reduction iron-electric arc furnace (DRI-EAF) process for iron production. Currently, most of the development of low-carbon technologies in the industrial sector is still in the early stages of an MoU and a joint study agreement,” explained Raditya.

IESR encourages the government to achieve a 100% renewable energy mix in the primary energy mix in 2050 and a renewable energy mix of more than 40% in the electricity sector by 2030. If the government can take advantage of the opportunities and support mentioned above, then the attractiveness and energy mix of renewables will increase.

Published in 2017 with the Indonesia Clean Energy Outlook (ICEO) which later transformed into the Indonesia Energy Transition Outlook (IETO) in 2019. Apart from IETO 2023, which has entered its sixth edition, IESR also published it separately. Indonesia Sustainable Finance Outlook or ISFO and Indonesia Solar Energy Outlook or ISEO in 2022. Meanwhile, the Indonesia Electric Vehicle Outlook or IEVO report will be published in early 2023. ***

IETO 2023: Anticipating the Energy Crisis by Utilizing Renewable Energy

Jakarta, 14 December 2022- The global energy crisis shows the vulnerability of fossil-based energy security, including Indonesia, where 67% of the energy mix comes from fossil energy. Facing the uncertainty of social, political, economic and environmental conditions regarding national energy security, the government needs to make a sustainable and just energy transition by optimizing the use of renewable energy sources to replace fossil energy sources. This is the main discussion of the Institute Essential Services Reform (IESR) flagship report entitled Indonesia Energy Transition Outlook (IETO) 2023.

The impact of the energy crisis can be seen in energy prices such as coal, natural gas and crude oil, which have soared 2-4 times in mid-2022 compared to 2019. It has made domestic coal producers more interested in exporting overseas, which has led to a depletion of domestic coal supplies. To overcome the problem of the energy crisis in the short term, the Indonesian government made various decisions such as maintaining the Domestic Market Obligation (DMO) policy, disbursing fossil energy subsidies which reached 650 trillion and adjusting fuel prices to reduce subsidy burdens. However, coal, oil and gas reserves are decreasing every year, and the pressure to overcome the threat of the climate crisis demands a long-term solution so that Indonesia is free from an energy crisis in the future.

“To provide affordable and safe energy, increasing renewable energy for electricity supply, transportation and industry and reducing fossil energy must be accelerated. The energy transition needs to be carried out gradually following social, economic and political conditions that affect policy direction and people’s purchasing power. However, the faster we increase the renewable energy mix, the lower the vulnerability to energy security and the cheaper energy prices in Indonesia will be. It was shown in some IESR study results. The key word is ambitious but also flexible targets,” said Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), at the Media Conference for the launch of IETO 2023.

The condition of European countries and the UK, which are currently experiencing high energy prices, is an example of using transition fuels, such as natural gas, as a wrong strategy. When there is a gas shortage, they temporarily increase fossil energy which denies global efforts to reduce greenhouse gas (GHG) emissions which cause climate change due to rising earth temperatures exceeding 1.5 degrees Celsius.

IESR encourages the government to complete all homework to boost the development of renewable energy and energy efficiency quickly.

“There is still a lot of work to be done to make the energy transition truly happen and sustainable, for instance adjusting National Energy Policy (KEN) and National Energy General Plan (RUEN), phasing out coal and gas subsidies, reforming prices and electricity subsidies, accelerating the termination of coal-fired power plants, developing the domestic solar cell and module industry, adjusting the grid code, as well as integrating transportation and industrial decarbonization strategies according to the zero-emission path. The government must pursue all these reforms quickly, and the community must continue to push for the transition to occur,” explained Fabby.

IETO 2023 also highlights the high level of public awareness of the energy transition. However, in general, energy transition readiness in Indonesia is still low, although several policies, supporting regulations and renewable energy development plans have been issued, such as the enhanced NDC, RUPTL 2021-2030, which contains a 51.6% portion of renewable energy and Presidential Regulation 112/2022 concerning Acceleration Development of Renewable Energy for the Provision of Electric Power.

“Several things still need to be fixed, such as the capacity limit for installing PLTS roofs by 15%, which certainly reduces the public’s interest in utilizing this technology and contributing to the renewable energy mix on a national scale. Based on a public survey that we have conducted, more than 60% of the people we surveyed agree to accelerate the cessation of using coal as the main source in the electricity sector and support the government to start paying attention to other sources such as solar radiation, water and wind. With this huge public support, the government must begin to be able to prove its commitment to providing a cleaner source of electricity for the whole community,” said Handriyanti D Puspitarini, Main Author of IETO 2023 who is also a senior researcher at IESR.

All discussions regarding the status and analysis of the energy sector to accelerate the energy transition are summarized in the Indonesia Energy Transition Outlook (IETO) 2023. Published in 2017 with the Indonesia Clean Energy Outlook (ICEO), which later transformed into the IETO in 2019, the IETO presents several new chapters with analysis depth.

“IETO will consistently highlight, measure and provide recommendations for accelerating Indonesia’s energy transition from year to year. Several reports providing in-depth analysis on specific aspects related to the energy transition such as aspects of energy transition funding, solar energy, and electric vehicles were published in separate reports entitled Indonesia Sustainable Finance Outlook or ISFO, Indonesia Solar Energy Outlook or ISEO, and Indonesia Electric Vehicle Outlook or IEVO, which complements the IETO analysis and recommendations this year,” explained Deon Arinaldo, IESR Energy Transformation Program Manager.

Supported by Bloomberg Philanthropies, IESR will hold discussions and launch the Indonesia Energy Transition Outlook 2023 report on December 15, 2022. The IETO 2023 report can be accessed at s.id/IETO2023-IESR.

The Synergy of Central Java Provincial Government to Realize Low Carbon Development

Semarang, 8 December 2022 – The Provincial Government of Central Java has consistently strengthened their commitment, role and shared responsibility for implementing the energy transition to achieve sustainable and environmentally friendly development. Collaborating with the Institute for Essential Services Reform (IESR), the Central Java Provincial Government held the “Central Java Stakeholders’ Gathering: Energy Transition for Low Carbon Regional Development” to share developments and good practices that have been carried out in Central Java.

Taj Yasin Maimoen, Deputy Governor of Central Java, said in his remarks that the energy transition is crucial to reduce CO2 emissions that cause climate disasters. For this reason, he said, it is necessary to promote a green economy as one of the main parts of the energy transition by developing industries in the field of new and renewable energy, sustainable natural resource management, developing environmentally friendly production processes.

“In developing the energy sector, the government of Central Java has issued Local Regulation no. 12/2018 Concerning Regional Energy General Plans. As a follow-up to this regulation, Governor Regulation number 29 of 2021 was stipulated, which contains instructions for its implementation. The governor’s regulation emphasizes community participation in the implementation of new renewable energy, for example, community participation in the development of new renewable energy in Central Java through the Energy Independent Village program,” said Taj Yasin. He added that the availability of energy on a community scale, if supported, would leverage economic growth.

Fabby Tumiwa, Executive Director of IESR, added that leadership, regional innovation and collaboration are the keys to driving green economic growth and energy transition.

“The community can be involved in driving their energy transition with their efforts and support from the government. This is called energy transition cooperation. The energy transition requires a large amount of effort and investment, so contributions from the community must also be accommodated. The practice so far carried out in Central Java can become a reference in many regions in developing renewable energy and encouraging low-carbon development,” said Fabby.

Furthermore, the Head of the Central Java Provincial Energy and Mineral Resources (EMR) Office, Sujarwanto Dwiatmoko, explained that the Regional Energy General Plan (RUED) would later be integrated into the Low Carbon Development Action Plan (RAPRK) and the Regional Medium Term Development Plan (RPJMD). Thus, the Central Java RPJMD already contains a commitment to building environmentally friendly energy to achieve the goals of food and energy sovereignty. The office of EMR Central Java builds cooperation with various parties to achieve this goal, one of which is with IESR.

“In collaboration with IESR, in 2019, the Central Java Provincial Government has made a big commitment to the Central Java Solar Province. Since then, the capacity of rooftop PLTS in Central Java has increased from 0.1 MWp in 2019 to 22 MWp in 2022,” said Sujarwanto.

This progress has made other agencies such as the Environment and Forestry Service of Central Java Province, the Office of Industry and Trade (Disperindag) of Central Java Province, and the Regional Owned Enterprise (BUMD) PT Jateng Petro Energi (JPEN) join hands with IESR in glossing the energy transition and development low carbon in Central Java Province.

Widi Hartanto, Head of the Environment and Forestry Service for Central Java Province, said that waste generated by industry and society can be processed into an energy source. For this reason, his party is working with IESR, among others, to carry out studies on reducing emissions through managing waste and waste into renewable energy, building capacity for stakeholders regarding reducing greenhouse gas emissions through waste and waste management and utilizing renewable energy.

“We have fostered the climate village program (Proklim), around 525 Proklim have received certificates from the Ministry of Environment and Forestry, and we are trying to collaborate with Energy Independent Village,” added Widi.

As a contributor to 34% of economic growth in Central Java, the Head of the Central Java Provincial Office of Industry and Trade, M. Arif Sambodo, acknowledged that the industrial sector is also responsible for producing carbon emissions. In collaboration with IESR, the Department of Industry and Trade is preparing a Map for the Development of Renewable Energy Utilization in the Industrial Sector and Industrial Areas. Moreover, his party will initiate a Partnership Network between Metal Small and Medium Industries (IKM) in Central Java and the Solar Panel Industry so that they can become part of the supply chain and increase Local content requirements (TKDN).

“Regarding the substitution of imported products, we need to increase domestic components. Central Java has metal potential, which has become tier 2 as a major automotive supply chain supplier in Indonesia,” Arif explained.

PT Jateng Petro Energi, through M. Iqbal, Main Director of JPEN, in collaboration with IESR and other partners, will carry out three big strategies to encourage energy transition efforts with solar power and clean mobility, namely strengthening ecosystem institutions, solopreneurship or creating green jobs and capacity building.

“We will socialize solar panels for Regional Apparatus Work Unit (SKPD) in Central Java province and provide Public Electric Vehicle Charging Stations (SPKLU) to support the acceleration of the use of battery-based electric vehicles,” he said.

Questioning the relatively small regional authority over the renewable energy sub-affairs related to the energy transition Tavip Rubiyanto, Head of Sub-department of ESDM Directorate of Synchronization of Regional Government Affairs I, Directorate General of Development and Development, Ministry of Home Affairs, said that his party was preparing a Presidential Decree as a follow-up to Law No. 23/2014 on Regional Government. This is done so that the authority of the local government in carrying out the energy transition is more flexible. 

“Anticipating the dynamics of development at the national and regional levels, it can be further regulated in a Presidential Decree for the division of functions so that it can strengthen regional authority so that it can play a bigger role in achieving the energy transition target,” Tavip explained.

In addition to presentations from the four institutions, the “Central Java Stakeholders’ Gathering: Energy Transition for Low Carbon Regional Development” also presented a dialogue with Achmad Husein, Banyumas Regent, Djoko Siswanto, Secretary General of the National Energy Council (DEN), Tavip Rubiyanto, Head of Sub-department of ESDM Directorate of Synchronization of Regional Government Affairs I, Directorate General of Development, Ministry of Home Affairs, M. Firdauz Muttaqin, Deputy Head of Bank Indonesia Representative for Central Java Province, and Ignatius Iswanto Santoso, General Manager Engineering, PT Djarum OASIS Kretek Factory.

In the dialogue, generally, the speakers underlined the need to carry out an energy transition in cooperation with the community, accompanied by support from the local government by issuing regional regulations which can become the basis for investors in the development of renewable energy in the regions, the application of green financing from financial institutions and implementation of sustainable practices in the industrial and commercial sectors.

IESR: Renewable Energy Integration in Electricity Plan Can Reach 129 GW by 2030

Jakarta, 24 November 2022- To be aligned with the GHG emission reduction target according to the Paris Agreement, the government and PLN need to achieve a renewable energy mix of up to 41% in the electricity system by 2030. However, until today the Indonesian government has only targeted 25% of the renewable energy mix by 2030. Technological innovation, competitive prices for renewable energy, and the potential for coal-fired power plants (CFPP) to become stranded assets are qualified factors for higher renewable energy penetration in eight years.

The Institute for Essential Services Reform issued its latest report entitled “Enabling high share of renewable energy in Indonesia’s power system by 2030” which analyzes the 2021-2030 electricity development plan (RUPTL), technological advances and prices, changes in fuel prices, and projections of electricity demand to provide more opportunities towards the integration of renewable energy into the electricity network in Indonesia. This study is based on the scenario of Indonesia’s energy system achieving net zero emissions in 2050, which is aligned with the target of limiting temperature rise below 1.5°C per the Paris Agreement. In this scenario, electricity growth is assumed to reach 4.5% and added to the additional electricity demand from accelerated electrification in the transportation and industrial sectors (heating).

Using a similar power system optimization model with PLN, IESR found that the capacity of renewable energy in the power grid in 2030 could be increased to 129 GW of renewable energy with 112.1 GW coming from solar energy, 9.2 GW hydropower, 5.2 GW geothermal, 1.5 GW wind turbine, and 1 GW of biomass in the combined Java-Bali, Sumatra, Kalimantan and Sulawesi systems. The renewable energy mix in the electricity sector is also projected to reach 32%, 35%, 35% and 51% respectively in the Java-Bali, Sumatra, Kalimantan and Sulawesi systems. Solar energy is dominant because of its highest potential, cheapest cost, and fastest installation period in any area, either on a roof or floating.

Meanwhile, the electricity mix from coal-fired power plants will significantly decrease to only 39% in the same year. Moreover, to overcome the variability and intermittency of renewable energy and maintain system reliability, Indonesia can optimize gas-fired power plants and build energy storage (batteries).

The findings from this study are far greater than the renewable energy in the 2021-2030 RUPTL, which only targets 20.9 GW.

“The results of this IESR study are very relevant to the Just Energy Transition Partnership (JETP) agreement that was announced at the G20. The target of JETP is a 34% renewable energy mix in 2030. Through this study, it is shown that the penetration of renewable energy generators in our electricity system is possible without impacting system reliability and electricity production costs,” said Fabby Tumiwa, Executive Director of IESR.

The results of the IESR analysis show that even with high penetration of renewable energy, the reserve margin (the percentage of additional installed capacity to annual peak demand) remains at PLN’s ideal limit of at least around 30%. This study also conducts a power flow analysis and analysis of system frequency stability in the Java-Bali and Sulawesi electricity systems in 2030. As a result, it requires upgrading several substations so that power can be distributed properly. However, this need can be minimized by distributing the development of renewable energy generators. Frequency stability was still achieved and complied with Indonesia’s grid code.

One of the keys to integrating renewable energy is increasing the flexibility of network operations, including implementing a flexible CFPP operation.

“Renewable energy’s intermittency is a challenge, but there are many strategic options that can be studied to be implemented in Indonesia. For instance, by using energy storage such as batteries and also more accurately forecasting renewable energy. System operations need to be changed to accommodate this,” said Akbar Bagaskara, Main Author of the Enabling high share of renewable energy in Indonesia’s power system by 2030 report.

The capacity of the transmission and distribution network also needs to be increased to ensure a smooth supply of electricity from renewable energy, especially in the Java-Bali and Sulawesi systems.

IESR views that higher integration of renewable energy in the electricity system needs to be encouraged by policymakers in Indonesia by issuing regulations that support the acceleration of renewable energy development, accelerate electrification in the industrial sector, stipulate flexible PLTU operating regulations, and support the development of the domestic solar panel industry.

Furthermore, PLN as an electricity utility company needs to actively develop infrastructure and network operations to become more flexible network operations to enable high integration of renewable energy.

“There is a need to change the operating paradigm of the electricity system to flexible operation, no longer baseload. Of course, it is necessary to develop an operating framework for an electricity system that can provide incentives for assets that can provide services to maintain network reliability or ancillary services. The design of this framework needs to be prepared from now on so that it is ready to be implemented when the renewable energy mix begins to grow rapidly,” explained Deon Arinaldo, Manager of the Energy Transformation Program, IESR.

APLSI Declares Just Energy Transition, Supports Acceleration of Green Energy Mix

press release

Jakarta, 15 November 2022- Presidential Regulation No. 112/2022 on the Acceleration of Renewable Energy Development for Electricity Supply mandates the Ministry of Energy and Mineral Resources (MEMR) to develop a roadmap for the early retirement of the coal-fired power plants (CFPP). It is in line with Indonesia’s commitment to the Global Coal to Clean Power Transition declaration at the Conference of the Parties 26 Summit (COP26 Summit), which considers the early retirement of coal-fired power plants in the 2040s, with international funding and technical assistance, and achieving the Net Zero Emission (NZE) target by 2060 or earlier as stated by President Joko Widodo.

The Institute Essential Services Reform (IESR) views that the government’s goal needs to be supported by various parties, including Independent Power Producers (IPP), who currently operate more than 15 GW of power plants in Indonesia.

“Indonesia Independent Power Producers (APLSI) supports the Government of Indonesia’s plans and policies that encourage decarbonisation and energy transition. We are ready to transform to continue contributing to an independent, increasingly environmentally friendly and sustainable national electricity, to support the Indonesian Government’s Net Zero Emission target,” said Arthur Simatupang, Chairman of APLSI, at the declaration of the Just Energy Transition Initiative by Indonesian Power Producers organized by IESR in collaboration with APLSI in conjunction with the 2022 Indonesia G20 Summit in Bali. 

“APLSI wishes to optimize the role of the private sector as a government partner in building a reliable electricity system based on just energy transition by diversifying investment in power plants from various renewable energy sources whose potential is huge in Indonesia,” Arthur explained.

It has also been stated in the Expression of Interest between APLSI and the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) at the Kadin Net Zero Hub event at the B20 Indonesia Summit. At that event, Arthur mentioned that his party had signed an agreement to conduct an intensive joint study on the diversification of power plant investment so that the role of the private sector would be optimal in realizing low-carbon economic growth by partnering with the government in building a reliable, independent electricity system, and a just energy transition.

Furthermore, IESR said that a just energy transition would run with the availability of space for renewable energy development, including by terminating the operational period of CFPP more quickly.

“The IESR study found that to be consistent with limiting temperature rise to 1.5°C, all CFPPs, that are not equipped with carbon capture, must be retired before 2045. In the period 2022-2030, at least 9.2 GW of power plants must be retired, of which 4.2 GW comes from private electricity, without which it will be difficult to achieve NZE,” said Fabby Tumiwa, Executive Director of IESR.

On the same occasion, Rida Mulyana, Secretary General, MEMR, said the importance of partnership to decarbonise the energy system. He explained that based on Presidential Regulation 112/2022, Indonesia plans not to build new coal-fired power plants after 2030 except those that are committed or under construction.

Furthermore, Wanhar, Director of Electricity Program Development at the Directorate General of Electricity, MEMR outlined a roadmap for the early retirement of coal-fired power plants in Indonesia.

Through his presentation, Wanhar explained that the government also took various steps to achieve the NZE 2060 target, including ensuring the retirement of CFPP owned by IPP after the power purchase agreement (PPA) was ended, and Combined Cycle PP retired after the age of 30.  Furthermore, starting in 2030, there is an increasingly massive development of solar power plants, followed by wind power plants both on land and offshore starting in 2037.

However, Wanhar emphasized, several provisions need to be fulfilled in terminating the operational period of coal-fired power plants in Indonesia.

“Retirement of CFFP can only be done once grid reliability is ensured, with substitution from renewable replacement and/or transmission system installation, the assurance of just transition of a fair energy transition. There should not be any negative social impact from coal plant early retirement, affordable renewable energy generation prices, and the availability of international financing support,” Wanhar explained.

Based on IESR’s “Financing Indonesia’s Coal Phase-out” study with the Center for Global Sustainability, University of Maryland, to retire 9.2 GW of coal-fired power plants by 2030, Indonesia needs international funding support to meet the cost of retiring the power plants, around USD 4.6 billion by 2030. 

Supporting decarbonisation efforts in the power sector, the Government of Indonesia will work with the International Partners Group (IPG) to realize investment plans to support the early retirement of coal-fired power plants as well as other low-carbon technologies. The cooperation will support the achievement of Indonesia’s electricity system decarbonisation targets, including achieving peak electricity sector emissions of 290 million tonnes of CO2 by 2030, preparing CFPP projects that must be retired early, and ensuring the achievement of a renewable energy mix of at least 34% by 2030.

“For the early retirement of coal-fired power plants, especially those owned by IPPs, to take place with the principle of just energy, the government must form a national commission or task force involving relevant government agencies by the end of this year. Its tasks include comprehensively assessing the list of coal-fired power plants that have the potential to be retired immediately, as well as renegotiating with IPPs,” explained Deon Arinaldo, Energy Transformation Programme Manager, IESR.

Deon added that CFPP contract negotiations between PLN and IPP must begin by considering the potential for additional costs without jeopardizing the investment climate in Indonesia. 

“The government also needs to assess the appropriate financing mechanism to retire coal-fired power plants owned by private power producers. The financing mechanism also needs to support the link between the financing of early retirement of CFPP and investment in renewable energy so that it can mobilize international financial support,” he concluded.

The Declaration of Supporting the Roadmap of Just Energy Transition was carried out to coincide with the G20 Summit. This is expected to provide a positive signal for the Indonesian Government’s leadership at the G20, which also highlights the energy transition or the transition from polluting energy to renewable energy as one of the main issues.

“Indonesia’s leadership in conducting early retirement of power plants to accelerate the energy transition will create a good precedent for other G20 countries.  The spirit to accelerate the end of CFPP operations through the declaration of IPPs  supported by the government and PLN will be an example for India, which will hold the G20 presidency in 2023 and become an example for other ASEAN countries in Indonesia’s leadership in ASEAN in 2023,” concluded Fabby Tumiwa.***

Points of declaration:

Support the Roadmap for a Just Energy Transition in Indonesia

  1. Willing to transform to continue to contribute to an independent national electricity that is increasingly environmentally friendly and sustainable to support the net zero emission target.
  2. Support the Indonesian government’s plans and policies that encourage decarbonisation and energy transition.
  3. Diversify investment in power generation from various alternative renewable energy sources, in which Indonesia has enormous potential.
  4. Committed to opening up opportunities for renewable green energy sources and a sustainable energy supply ecosystem.
  5. Optimizing the role of the private sector as a government partner in building a reliable electricity system and a just energy transition. 

Approaching the G20 Summit, Government Needs to be Consistently Calling for and Raising Climate Ambitions

Jakarta, 9 November 2022-The journey of the Indonesian G20 Presidency will end after the G20 summit in November 2022. Therefore, Indonesia needs to show strong attention to climate mitigation efforts, by increasing its commitment to significantly reducing greenhouse gas (GHG) emissions. The Climate Transparency 2022 report shows Indonesia’s power sector which is dominated by fossil fuels (81%) and produces 62% of its electricity from coal, making the energy sector still the largest contributor to GHG emissions (43%), followed by the transportation sector (25%) in second place in 2021.

Besides that, Indonesia’s emission intensity of the power sector increased throughout the 2016-2021 period by 5.5% to 784.8 gCO2/kWh. This number is greater than the average emissions in the energy sector of G20 countries in the same period which decreased by 8.1% to 444.7 kWh. This is presumed economic activity that has returned rapidly after the pandemic. 

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform, believes that the G20 countries which are responsible for 85% of the world’s GHG emissions, must take a greater role in drastically cutting GHG emissions. Globally, they must cut approximately 45% of GHGs at 2010 levels by 2030. Unfortunately, until now, none of the G20 countries has met this target, including Indonesia, which is the G20 president. 

“Along with the G20 meeting in Bali next week, it is necessary for G20 countries to accelerate the energy transition, moving away from fossil energy that is expensive, polluting and dangerous. Taking the energy transition as one of the G20 priority issues, President Joko Widodo (Jokowi) needs to remind G20 countries to be more ambitious in carrying out the energy transition, including Indonesia. The key to reducing emissions is to first, immediately reduce coal power plants and plan to phase out coal power plants, which must be done before 2040. Second, accelerate renewable energy to replace energy and encourage energy efficiency,” said Fabby.

Furthermore, Fabby implied the fossil subsidies, which are increasing every year and hindering the development of renewable energy and energy efficiency. He hopes that at the G20 Summit, President Jokowi can invite G20 countries to take a stand to cut fossil energy subsidies. 

Meanwhile, based on Climate Transparency 2022 calculations, Indonesia’s unconditional Nationally Determined Contribution (NDC) target will increase emissions by 421% above 1990 levels, or an average of 1,661 MtCO₂e by 2030. To stay below the 1.5°C temperature limit, Indonesia’s emissions by 2030 must be around 449 MtCO₂e, at an ambition gap of 1,212 MtCO₂e. All of these figures do not include emissions from land use.

Despite submitting the Enhanced Nationally Determined Contribution (NDC) in September 2022, the emission reduction targets in the emission sector are not at all consistent with the Paris Agreement’s 1.5°C temperature limit. Based on the  Enhanced NDC, by 2030, the target level of unconditional emission (unconditional) NDCs in the energy sector will be 1,311 MtCO₂e, with a target of unconditional reduction of NDCs of 358 MTon CO₂eq. 

“The increase in emission reduction targets, especially in the energy sector, should be appreciated, but unfortunately, the increasing ambition is still far from achieving a trajectory of 1.5 degrees Celsius. In addition, the implementation is still far from the target that has been set,” explained Farah Vianda, Green Economy Program Officer, IESR. 

According to her, Indonesia’s commitment to gradually stop the use of coal-fired power plants and start the transition to renewable energy referred to in the declaration of ‘Global Coal to Clean Power Transition’ at COP26, needs to be realized immediately. Even Climate Transparency 2022 reveals that the energy transition process must equitably take place, one of which is,  by accommodating the interests of around 100,000 people working in the coal industry.

“The Indonesian government needs to facilitate a just transition for coal mining sector workers and ensure alternative sources of economic growth in areas dependent on fossil energy. The government can diversify the economy to prioritize investment in the clean energy sector, engage in social dialogue to ensure an inclusive transition, and implement carefully designed early mitigation actions,” Farah said.

Farah stated that every commitment must be realized, considering that Indonesia has signed the Silesian Declaration on Solidarity and Just Transition (COP24), but until now both policies to increase renewable energy and retiring coal-fired power plants are still at the middle level.

Furthermore, Climate Transparency 2022 encourages Indonesia to design a clear roadmap to phase out coal power and start the energy transition. The 2021-2030 Business Plan (RUPTL) still maintains the use of coal.

Climate Transparency identified several opportunities for Indonesia to increase its climate ambitions. First, Bappenas has developed a net zero emissions  2045 roadmap which is considered to provide economic and social benefits compared to the zero emissions target of 2060. Second, the energy sector’s high carbon intensity continues to increase. Third, the transportation sector accounts for 33% of final energy consumption, and 95% of this demand is met through oil. Strong policies to decarbonise the transport sector would help Indonesia achieve its net zero targets. 

Based on the evaluation of the Climate Action Tracker (CAT), Indonesia’s climate targets and policies are “highly insufficient”. The rating shows that Indonesia’s climate policies and commitments lead to rising rather than reducing emissions and are completely inconsistent with the Paris Agreement’s 1.5°C temperature limit. To get a better ranking, Indonesia needs to set more ambitious NDC targets and policies. Its unconditional NDC targets need to be brought well below its current policies to result in emissions close to present levels by 2030. Meanwhile, its conditional NDC targets need to be well below present levels in 2030. 

COP 27: Indonesia Needs to Attract International Support for Energy Transition with Ambitious CFPP Retirement Targets and Renewable Energy Development

Jakarta, 8 November 2022- Indonesia delivered its national statement at the Conference of the Parties 27 Summit (COP27) in Sharm El-Sheikh, Egypt, through Vice President Ma’ruf Amin. He mentioned various climate commitments that Indonesia had made, including increasing climate ambition by submitting Enhanced Nationally Determined Contributions (NDCs) documents last September. Moreover, Ma’ruf emphasized that the climate agreement needs to be implemented immediately with clear international support at the national level in climate action funding, creating carbon markets and investing in the energy transition.

The Institute for Essential Services Reform (IESR) views that apart from needing to further increase Indonesia’s climate ambitions, to accelerate the implementation of the energy transition, Indonesia needs to encourage the inclusion of international financing support for climate change mitigation through strengthening renewable energy development plans, energy efficiency, strengthening clean energy systems, and preparation of bankable projects. This needs to be supported by policies and regulations that provide investment certainty with low risk and information transparency for the public and encourage community involvement.

In the Enhanced NDC, Indonesia has increased its GHG emission reduction target from 29% in the Updated NDC document to 31.89% in 2030 with its efforts (unconditional) and from 41% to 43.2% with international assistance (conditional). Although it is a step forward, IESR considers that this target is still not in line with the Paris Agreement, which encourages more ambitious efforts for countries to limit the earth’s temperature below 1.5 degrees Celsius.

One of the factors contributing to the increase in the emission reduction target is the increase in the emission reduction target in the energy sector from 11% in the Updated NDC to 12.5% ​​(unconditional) and from 13.9% to 15.5% (conditional).

“To be aligned with the targets of the Paris Agreement, Indonesia needs to increase its renewable energy mix target to 42% in 2030. Meanwhile, in the 2050 Long Term Low Carbon and Climate Resilience Strategy (LTS-LCCR), which is the basis for this Enhanced NDC, the renewable energy mix is ​​only 43 % in 2050,” said Fabby Tumiwa, Executive Director of IESR.

He said the opportunity to increase the renewable energy mix target is wide open with the implementation of the early retirement commitment of 9.2 GW of coal-fired power plants.

Through Presidential Decree 112/2022, the government opened up the opportunity to accelerate the termination of PLTU operations before 2050. At this COP, this commitment must be echoed, and the need for funding for early retirement for CFPP, which has an average age of 13 years, and financial support from developed countries must be met and delivered straightforwardly, followed by ambitious targets. Currently, the government has not agreed on the certainty of the CFPP early retirement target before 2030, and it still uses PT PLN’s target, which is different from the target of 9 GW set by the Ministry of Energy and Mineral Resources,” said Fabby.

Based on the IESR “Financing Indonesia’s Coal Phase-out” study with the University of Maryland, in 2030, it will cost around USD 4.6 billion to close 9.2 GW PLTU and USD 27.5 billion by 2045 for all CFPPs. Meanwhile, to decarbonize the energy system in Indonesia, at least a total investment of USD 135 billion is required by 2030. Even though the amount looks large, the benefits to be gained from the early retirement of CFPP are far greater in terms of economic, social and environmental aspects.

“The cost of generating electricity from renewable energy such as solar energy is already cheaper than building a new CFPP, and even in the next decade, it will be cheaper than operating an existing CFPP. Economically, the benefits of retiring a CFPP and replacing it with renewable energy can reduce the average electricity generation cost in the long run. In addition, health benefits are available, increasing the availability of green jobs on the social side, as well as on the environment, can avoid air pollution, control retrofit costs, improve air quality, save water and water quality, and reduce GHG emissions,” explained Deon Arinaldo, Manager of the Transformation Program. Energy, IESR.

Investment needs for decarbonizing Indonesia’s electricity system reaching USD 135 billion towards 2030 and increase to USD 455 billion and USD 633 billion in the following decades respectively. This investment is to build renewable energy to meet the growing demand for electricity, storage systems, energy efficiency investments, as well as the development of transmission and distribution networks. Therefore, the focus of public financing as well as international financing support must be directed towards creating a positive investment climate for clean energy systems.

Having Slow Solar PV Development in 2022, Indonesia Needs to Push the Implementation of Supporting Policies

press release

Fabby Tumiwa delivered his speech at the Shine Bright: Advancing G20 Solar Leadership event

 

Jakarta, 27 October 2022 – To achieve the target of a 23% renewable energy mix by 2025 and the energy system’s decarbonization by 2060 or earlier, Indonesia needs to seriously improve and implement policies that encourage the development of renewable energy, especially solar energy. The utilization of solar energy is believed to be fast and strategic to achieve these targets. Presenting the complete review of the development of solar energy throughout 2022 and providing a projection in 2023, the Institute for Essential Services Reform (IESR) published the flagship report, Indonesia Solar Energy Outlook (ISEO) 2023.

Arifin Tasrif, Minister of Energy and Mineral Resources of Indonesia on the event of Shine Bright: Advancing G20 Solar Leadership organized by IESR, said that based on IRENA data, the cost of electricity (Levelized cost of electricity/LCOE) has decreased significantly by 88% between 2010 and 2021, from USD 41.7/kWh to USD 4.7/kWh.

“But based on current practice in the industrial sector, we get offers of up to USD 3/kWh, including USD 4/kWh battery costs,” said Arifin at the Shine Bright: Advancing G20 Solar Leadership event organized by IESR with support from Bloomberg Philanthropies, and in collaboration with the International Solar Alliance, and the Indonesian Solar Energy Association.

Furthermore, he explained that based on the energy transition roadmap in Indonesia, solar energy plays an important role in electricity in Indonesia with 421 GW of 700 GW coming from solar.

“We need support from local producers and industries to fulfil local requirement content (LCR), considering that Indonesia has mineral potential and critical material for solar PV, battery, and electricity network, Besides, the aspect the easy access to cheap financing, incentive, and other financing facilities is very important to provide a financial feasibility study and increase renewable energy investment such as solar energy, “explained Arifin.

Fabby Tumiwa, Executive Director of IESR, said that in general, Indonesia made some progress since 2018, although it is relatively slow in encouraging the development of solar energy. According to him, some reforms are needed in regulations and their implementation, especially before the deadline for realizing the target, which is only three years left.

“Rooftop solar power plants that have the potential of 655 GW for building only, can be built quickly and involve community investment, without overburdening the government. Moreover, to expect additional renewable energy generation capacity from the implementation of PLN’s Business Plan (RUPTL) 2021-2030, rooftop solar power plants can meet a renewable energy mix target of 3 to 4 GW in 2025,” said Fabby.

Fabby added that the government and PLN need to allow permits for rooftop solar power plant installation.

“Availability of soft loan funds from financial institutions can support the adoption of household-scale PV mini-grid. Also, encouraging the adoption of solar PV in industrial areas, and non-PLN business areas needs to be done,” suggested Fabby.

ISEO 2023 stated that the progress of Indonesia’s solar energy can be seen from the decline in the price of solar electricity obtained through a power purchase agreement (PPA) made by PT PLN (Persero) with Independent Power Producers (IPP). Between 2015 and 2022, solar PPA prices declined by 78%, from $0.25/kWh to $0.056/kWh. 

Furthermore, in terms of the project pipeline, there are currently eight projects that have been tendered totalling 585 MWp in capacity. 

“In terms of utility-scale solar power plants, Indonesia has the potential for floating solar power plants. Its future development can make Indonesia a leader, and at the same time realize Indonesia’s leadership in terms of energy transition and use of solar energy in the G20 and ASEAN,” said Fabby.

Dr Ajay Mathur, Director General, of International Solar Alliance said solar energy is a potential energy source to be developed considering the increasingly competitive price of the technology.

“The International Solar Alliance (ISA) is proud to associate with the Institute for Essential Services Reform (IESR) to drive forward our common goal of making solar electricity the energy source of choice across the world. Solar Energy is the world’s most abundant and clean energy source, but also the global energy imperative to drive international climate action due to its fast-decreasing cost,” said Mathur.

At the same time, IESR and ISA signed a memorandum of understanding to accelerate the adoption of solar energy in Indonesia. ISA is an international institution that has various experiences and members from many countries. It has carried out innovations and facilitation to support solar energy development globally. The scope of the collaboration between ISA and IESR includes mapping the domestic solar industry, capacity building, and identifying financing schemes.

ISEO 2023 considers that the establishment of the ceiling price-based pricing in Presidential Regulation No. 112/2022 is expected to provide more space for developers to submit their bids. This regulation has been drafted since 2019 and initially considered feed-in-tariff instruments to encourage the development of renewable energy, especially small scale. 

To encourage the effective implementation of PR 112/2022, a clear and transparent auction mechanism is needed, as a regular and planned auction schedule, as well as providing regulatory certainty and ease of licensing.

ISEO 2023 notes that local content requirements (LCR) are still one of the main obstacles in the auction of solar power plants in Indonesia. Based on Minister of Industry Regulation No. 5/2017, the minimum LCR value of goods for solar module components must reach at least 60% since 1 January 2019. However, the realization of the LCR of solar modules currently only reaches 47.5%. Moreover, the efficiency and price of domestic solar panels still do not meet the requirements of international financing bankability standards. 

“The government needs to review the solar module LCR value provision policy based on industry readiness while preparing a long-term solar module industry policy to decarbonise Indonesia’s energy system,” said Daniel Kurniawan, Researcher, Photovoltaic Technology & Materials Specialist at IESR and Lead Author of ISEO 2023.

On the adoption of solar PV, although the Ministry of Energy and Mineral Resources has issued Ministerial Regulation No. 26/2021, some of its provisions have failed to be implemented, resulting in the slow growth of solar power plants. PLN’s oversupply of electricity is suspected to be the cause of the limitation of rooftop solar power plant (PVP) utilization to 10 to 15 per cent of capacity by PLN in early 2022. If it continues, it will be difficult to realize the solar targets that the government has set, such as the government’s 3.6 GW rooftop solar PSN target by 2025, and the 2.3 GWp solar project pipeline of 31 declarators at the Indonesia Solar Summit 2022.

“The government, in this case, the Ministry of Energy and Mineral Resources and PLN, needs to immediately provide a solution to this issue. Not to hinder adoption at a very early stage of adoption but to nurture the growth of rooftop solar until it reaches self-sufficiency. This can be achieved by providing a stable policy environment for market growth and development of the solar industry,” said Daniel.

The Indonesia Solar Energy Outlook (ISEO) 2023 report was first launched this year. Initially, the progress of solar energy development within the framework of the energy transition was integrated into the Indonesia Energy Transition Outlook (IETO) report.