Decarbonization of the Iron and Steel Industry Needs a Comprehensive Roadmap

press release
The Executive Director of IESR, Fabby Tumiwa
The Executive Director of IESR, Fabby Tumiwa

Jakarta, March 20, 2024 – Indonesia’s iron and steel industry is experiencing consumption growth. Data from the Coordinating Ministry for Economic Affairs shows that in 2022, the average steel consumption was 15.62 million tons annually. This number exceeds the average steel production of around 12.46 million tons annually. Meanwhile, in terms of exports, the iron and steel industry experienced an increasing trend from USD 7.9 billion in 2019 to USD 28.5 billion in 2022.

Increased consumption of iron and steel on a national level directly impacts the amount of greenhouse gas emissions. According to the Institute for Essential Services Reform (IESR) report, the iron and steel industry alone contributes to 4.9% of total industrial emissions. This amounts to approximately 430 million tons of carbon dioxide in 2022, equivalent to 20-30 million tons per year. To promote greener and more sustainable business practices, the IESR recommends that the government and iron and steel industry players work together to reduce emissions.

The Executive Director of IESR, Fabby Tumiwa, stated it is crucial to address the transfer of iron and steel production process technology to decarbonize the iron and steel industry sector. Currently, 80% of iron and steel production in Indonesia is still produced using blast furnace technology, which relies heavily on coal and coke as fuel. This means that reducing emissions in Indonesia’s iron and steel industry will become increasingly challenging if the use of blast furnace technology continues to rise.

“Steel is a vital material required for various developmental purposes, including producing technologies that support the worldwide shift towards renewable energy. To generate 1 MW of renewable energy using solar panels and wind turbines, we need approximately 20-180 tons of steel. Therefore, it is essential to decarbonize the steel industry to ensure that the technology supply chain becomes low-carbon through increased energy efficiency. One way to achieve this is by switching to environmentally friendly technology, using renewable energy, and optimizing the use of recycled steel (scrap),” said Fabby Tumiwa in the Webinar Accelerating the Transformation of the Steel Industry in Indonesia and Southeast Asia organized by IESR and Agora Industry. 

The urgency to reduce carbon emissions in the iron and steel industry is influenced globally by low-emission product regulations, carbon limits for exports, and carbon trading. At the national level, Farid Wijaya, a Senior Analyst at IESR, stated that decarbonizing the iron and steel industry can help achieve Indonesia’s economic growth goals, protect the domestic supply chain and future economy, and increase export competitiveness for global markets that value environmentally friendly practices.

“To reduce carbon emissions in the industry, it is essential to establish regulations and standards for building a green industry ecosystem. This ecosystem should include the provision of green energy and low-carbon technology. To effectively achieve this goal, each industry and association needs to develop a clear roadmap for decarbonization. Currently, this roadmap only exists for a few sectors and has not yet been established as a regulation that can serve as a basis for action by industry players and associations,” Farid said. 

The IESR study provides recommendations to encourage the reduction of carbon emissions in Indonesia’s industrial sector. Firstly, the Ministry of Industry should complete the industrial decarbonization roadmap by the end of 2024 or sooner. Secondly, the study recommends strengthening the reporting and data collection process regarding implementing the Minister of Industry Regulation No.2/2019, which concerns the procedures for submitting industrial data through the National Industrial Information System (SIINAS). This will ensure the disclosure of industrial sustainability reports for transparency and access to information, mainly reporting on energy and raw material use and waste generated. Finally, the study suggests benchmarking green industry production processes and expanding the scope and limit values of green industry standards (SIH) from voluntary and referring to local best practices to mandatory, based on the emission reduction needs in 2060 or earlier.

Kajol, Southeast Asia Climate-Neutral Industry Program Manager, Agora Industri, said the transformation of the iron and steel industry requires three strategies, namely the use of direct and indirect renewable energy, resource efficiency and the implementation of a circular economy, and ending the carbon cycle with the use of Carbon Capture Use and Storage (CCU/S) and biomass and bioenergy supplemented with CCS (BECCS).

Fausan Arif Darmadi, Infrastructure Development Analyst, Center for Green Industry, Ministry of Industry (Kemenperin), it is worth noting that the party has introduced a green industry standard (SIH) that covers various aspects such as raw materials, auxiliary materials, energy, production processes, products, business management, and waste management. Minister of Industry Regulation (Permenperin) No. 12 of 2023 also sets limits on energy use, water consumption, and greenhouse gas (GHG) emissions for coated steel. This regulation aims to assist companies in adopting an efficient and eco-friendly production process.

“The commitment of the industrial sector is crucial in reducing carbon emissions. As a result, the Ministry of Industry has offered training to the steel industry on calculating greenhouse gas (GHG) emissions and determining the economic value of carbon. Meanwhile, a comprehensive guide to aid in calculating the economic value of carbon is currently in development,” said Fausan.

Encouraging the Decarbonization of MSMEs in Indonesia

press release

Jakarta, March 14, 2024 – Micro, Small, and Medium Enterprises (MSMEs) have become one of the important pillars of the Indonesian economy. Based on data from the Ministry of Cooperatives and Small and Medium Enterprises (Kemenkop), the MSME sector contributed to the Gross Domestic Product (GDP) by 60.5 percent and contributed to employment reaching 97 percent of the total workforce in 2021. 

On the other hand, MSMEs produce greenhouse gas emissions that are responsible for the climate crisis. Based on a study by the Institute for Essential Services Reform (IESR), estimated energy-related emissions from MSMEs reached 216 MtCO2 in 2023, equivalent to half of the national industrial sector emissions in 2022. For this reason, the Institute for Essential Services Reform (IESR) encourages MSME players to make efforts to reduce emissions to achieve greener and more sustainable businesses. 

The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, said that MSMEs have a significant role to play in achieving Net Zero Emission (NZE) by 2060 or sooner. According to him, reducing emissions or decarbonizing the entire supply chain in the MSME sector will open opportunities for Indonesian MSMEs to compete at the global level.

“Our study found that 95 percent of emissions from MSMEs come from burning fossil energy. Reflecting on this data, the government needs to start identifying opportunities and challenges in decarbonizing MSMEs. The government also needs to propose strategies and provide assistance in the form of financial and technical assistance to MSMEs so that they are able to plan and encourage investment to reduce greenhouse gas (GHG) emissions,” Fabby said in a webinar on Decarbonization Opportunities for Small and Medium Enterprises (SMEs) in Indonesia and Learning from Global Experiences.

 

In collaboration with Lawrence Berkeley National Laboratory (LBNL), IESR formulated a study that offers solutions to decarbonize MSMEs, especially in the Small and Medium Industry (SMI). SMEs were chosen because the subsector emits higher emissions than other SME subsectors. In addition, SMEs can employ up to 100 people, potentially providing jobs for local residents. This can be a reference to ensure a just transition, both at the local and national level.

The IESR and LBNL analysis recommends technology upgrades and electrification to decarbonize SMEs. The study takes three examples of SMEs with their decarbonization solutions First, electrification for the textile and clothing sector. Second, the construction sector that needs to increase the use of low-carbon cement, innovative concrete formulations and propose eco-friendly equipment to building owners. Third, the tanning industry sector to encourage the penetration of variable renewable energy (VRE), such as solar panels and domestic wind turbines.

Energy Data Analyst of IESR, Abyan Hilmy Yafi, mentioned, through the initial strategy of decarbonizing SMEs, several economic benefits will be obtained such as the creation of new business opportunities, increasing brand value, and attracting customer trust. Not only that, decarbonization will also improve production processes, profitability, and competitiveness while reducing climate change risks and ensuring a positive impact on the environment.

“MSMEs need to get more assistance because many MSME players do not know about energy, its units and how to make it efficient. With collaboration between the government, private sector, and the community, MSMEs can become agents of change that drive the transition to a clean and sustainable economy for a better future for all,” Abyan said. 

Head of the Green Industry Development Program Team, Ministry of Industry, Achmad Taufik, said that his party is working on green funding/investment for SMEs from banks, private and international sources. In addition, his party is exploring several models and preparing studies to strengthen green industry service providers. 

“For small and medium industries in an effort to transform towards green industry, we will help with training and capacity building, access to green technology, access to markets or creating new markets,” said Achmad. 

Highlighting decarbonization opportunities in the Small and Medium Enterprises (SMEs) sector, Energy and Environmental Policy Researcher, LBNL, Bo Shen stated that the application of energy efficiency is an attraction for the market in choosing SME products. In China, energy efficiency certification for SMEs is the basis for large companies to take SME products, he said. Meanwhile, learning from the United States, a number of universities have created government-funded industrial assessment centers to determine the estimated energy consumption and emissions of SMEs. 

“There are several effective ways to encourage energy savings in SMEs in Indonesia that can be applied. Among them, the availability of a standardized and transparent system to track, assess and communicate the energy performance of SMEs. Second, the existence of a government-supported evaluation scheme in business image improvement. Third, the existence of clear decarbonization targets for the government, multinational companies and SMEs,” said Bo Shen. 

Note to Editors:

MSMEs are all micro, small and medium-sized enterprises/businesses. 

Small and Medium Enterprises (SMEs) means excluding micro enterprises.

Small and Medium Industry (SMI) is a business that has a production process/conversion of raw/half-raw goods to finished goods that has a small to medium business size.

The type of micro, small, medium can be seen from the capital/income/number of employees.

Civil Society Coalition: New Energy Sector Rules Set Back Energy Transition Commitment

press release

Jakarta, March 8, 2024 – The Renewable Energy Movement’s Civil Society Coalition is questioning the government’s commitment to the energy transition. They consider some regulations to be disincentives for switching to renewable energy. These regulations include the Energy and Mineral Resources (ESDM) Ministerial Regulation on solar PV, the Presidential Regulation (Perpres) on carbon capture and storage, and the Draft Government Regulation (RPP) on the National Energy Policy (KEN).

The Ministry of Energy and Mineral Resources (ESDM) has recently issued Regulation No. 2 of 2024, which outlines new rules for Rooftop Solar Power Plants. Unfortunately, these changes may discourage the public from installing rooftop solar power plants, particularly in households and micro, small, and medium enterprises (MSMEs). The first change is that excess rooftop solar power production can no longer be exported to PT PLN. Therefore, it won’t be counted as a bill reduction. The second change is that the development of rooftop solar PV will follow a quota system set by PLN. In addition, there will be only two registration periods per year. The problem is that the export of electricity to the PLN grid is the attraction of rooftop solar PV. With this provision, people can pay more to install batteries. Not only that, the payback period for rooftop solar power plants will also be extended to 9-10 years. In fact, with the 100% excess electricity export provision as in the current regulation, the cost of installing rooftop solar power plants can be recovered in four to five years.

“This regulation is a setback because it will reduce public participation in installing rooftop solar power plants. Not only does it hinder household consumers, but this new regulation also makes it difficult for industries that want to install rooftop solar power plants. This means that the new regulation shows that the government is getting further away from its commitment to energy transition,” said Jeri Asmoro, Digital Campaigner of 350.org Indonesia.

Community enthusiasm for rooftop solar power installation in rural and urban areas is relatively high, according to Reka Maharwati, Coordinator of Enter Nusantara. For instance, the people of Sembalun Village in West Nusa Tenggara and the Al-Muharram Mosque community in Taman Tirto, Yogyakarta, have installed rooftop solar power to achieve their dream of energy independence.

“I’m sure many other communities want to install rooftop solar panels in their homes or even be empowered to work collectively in the community. The government should be able to collaborate with these enthusiasts and create new schemes more beneficial to the community,” said Reka.

Similarly, Hadi Priyanto, a Renewable Energy Campaigner of Greenpeace Indonesia, revealed that an equitable energy transition can only be realized if the community is involved. “Community participation is one of the keys to achieving the energy mix target, but various revisions to existing regulations show the government’s lack of seriousness in energy transition efforts. The principles of fairness and democratization of energy that have been echoed in the JETP program will only be a platitude without real steps to break away from fossil energy dependence,” he added. 

 

Similar to the updated regulations about rooftop solar PV, the draft RPP KEN containing a reduction in the renewable energy mix target from 23% to 17-19% in 2025 also hinders the acceleration of the energy transition. In the National Energy Council (DEN) document on the draft RPP KEN, the renewable energy mix until 2030 is targeted at 19-21% and will only increase in 2040 to 38-41%.

Deon Arinaldo, Program Manager of Energy Transformation, Institute for Essential Services Reform (IESR), explained that the draft KEN RPP only allows Indonesia to reach peak emissions in 2035, which is 7-10 years later than what is needed to limit the increase in global average temperature below 1.5°C, as recommended by the Intergovernmental Panel on Climate Change (IPCC) report. This puts the achievement of the Paris Agreement and carbon-neutral commitments by 2060 or sooner, which the government has aimed for, at risk.

The delayed peak emission in Indonesia means that the country will have to speed up its energy transition in a shorter time frame than previously anticipated, resulting in higher costs and more significant social impacts that will be difficult to mitigate. The draft policy has also affected the perspectives of various actors, including renewable energy investors and developers, regarding the government’s commitment to promoting renewable energy development.

“This also marks the reduction in primary energy mix targets in 2025 and 2030, especially the share of renewable energy such as solar and wind, which can hamper the cooperation of the energy transition. This is because renewable energy that can enable energy democratisation, such as solar energy, has a small portion. Greater support is given to large-scale projects such as fossil plants with carbon capture storage (CCS) or nuclear technology. So the draft KEN RPP does not favour energy transition with the community,” said Deon Arinaldo.

 

The plan to change KEN also contradicts Indonesia’s JETP Agreement commitment, which targets a renewable energy mix of more than 44% by 2030. It is feared that changes to KEN will impact the revision of the JETP commitment. In addition, as a large umbrella for national energy planning, the draft KEN RPP also has the potential to undermine efforts to transition to renewable energy that have been carried out in the regions.

Red Carpet for False Solutions

Not only does it disincentivize renewable energy development, but government policy encourages false solutions as an energy transition strategy. This step is fatal because it can lock Indonesia into fossil energy dependence, which leads to failure to achieve carbon neutrality.

 

In the revised KEN, for example, until 2060, the government still plans to operate fossil energy-based power plants and ‘green’ them with carbon capture and storage (CCS) technology. In addition, the government intends to operate nuclear power plants (PLTN) by 2032 and use gas fuel for transportation and households until 2060.

The government’s support for fake solutions is also shown by the issuance of Presidential Regulation No. 14 of 2024 concerning implementing Carbon Capture and Storage Activities. This regulation allows companies to inject and store carbon emissions into underground reservoirs. The IEEFA Report shows that out of 13 CCS projects with a total of 55% of the world’s capacity, seven projects performed poorly, two failed, and one stopped operations. The application of CCS technology is feared to be a greenwashing effort that perpetuates fossil energy-based power plants.

These three regulations raise questions regarding how serious the government is about encouraging renewable energy development. This is because the national renewable energy mix has always been below the target in the last five years. 

“Regulations will be a long-term legal basis to ensure that energy transition steps are carried out legally. If the legal basis is made exactly the opposite of the target stated by the government, then where is the commitment to the energy transition? If the regulations are continuously directed to continue utilising fossil energy, investors interested in doing renewable energy business will withdraw because they do not have legal certainty. Our problem is in legal certainty,” said Agung Budiono, Executive Director of the CERAH Indonesia Foundation.

Realizing Bali Net Zero Starts with 100 Percent Renewable Energy in Nusa Penida by 2030

press release

Nusa Penida, March 6, 2024 – The energy transition agenda in Bali Province will be one of the main axes to achieve Bali’s target for net zero emission (NZE) by 2045. The Bali Provincial Government is collaborating with various parties, such as the Bali Net Zero Emission Coalition, which includes the Institute for Essential Services Reform (IESR), WRI Indonesia, New Energy Nexus Indonesia, and CAST Foundation. One of the initiatives taken to achieve this goal is to transition from fossil energy to 100% renewable energy in Nusa Penida by 2030.

Nusa Penida is an island located south of Bali Province, belonging to the Klungkung Regency. The demand for energy is projected to grow with the increase in tourism in Nusa Penida. The energy requirements of Nusa Penida are met by diesel and solar power plants, with a total capacity of 17.06 MW and more than 21 thousand customers. The solar power plants, with batteries of 1.8 MWh, have a capacity of 3.5 MW. Using renewable energy in the form of solar power plants has raised the ratio of renewable energy in the energy mix to nearly 26 percent.

During a speech by the Governor of Bali, S. M. Mahendra Jaya, which was delivered by I Dewa Gede Mahendra Putra, Assistant 1 Government and Welfare of the Regional Secretary of Bali Province, mentioned that the development of renewable energy should be aligned with the economic road map. This alignment will help create a green economy that can flourish in Nusa Penida and Bali.

“The government of Bali is committed to supporting the development of a renewable energy ecosystem that offers various opportunities for green employment, promotes moral and spiritual values in society, and works in synergy with various policies. This ensures that the 2045 Net Zero Emissions (NZE) target is achieved, starting with Nusa Penida. The Bali government always supports the development of a renewable energy ecosystem that provides a variety of opportunities for green labor, raising moral and spiritual values in society and synergy with various policies issued so that the 2045 NZE target can be realized, starting from Nusa Penida,” said I Dewa Gede Mahendra Putra at the launch of the Nusa Penida 100 Percent Renewable Energy Roadmap report organized by IESR in collaboration with the Bali Provincial Government.

To achieve a 100% renewable energy mix by 2030, IESR and Udayana University’s CORE have finalized the Nusa Penida renewable energy roadmap.

Fabby Tumiwa, the Executive Director of IESR, stated that since the renewable energy mix in Nusa Penida has already reached 24 percent, the island only needs to aim for an additional 76 percent by 2030, taking into account the rise in electricity demand, reliability, and production costs.

“To achieve 100 percent renewable energy in Nusa Penida by 2030, three stages need to be completed. Stage one will occur from 2024 to 2027, during which PLTD will be replaced with rooftop solar PV during the day. In stage two, from 2027 to 2029, PLTD will be used as a backup generator, while other renewable energy sources, such as biodiesel and ocean currents, will be optimized. Finally, during stage three in 2029-2030, pumped hydro energy storage will be built to complete the transition to 100 percent renewable energy., “said Fabby.

Alvin Putra Sisdwinugraha, a renewable energy analyst at IESR, stated that solar PV is crucial in increasing Nusa Penida’s renewable energy mix. It has a more significant technical potential and cost-competitiveness than other renewable energy plants, with a capacity of up to 3.2 GW.

“Encouraging the use of rooftop solar panels in Nusa Penida can reduce generation costs borne by system operators. This is because the higher the penetration of rooftop solar panels, the lower the costs. The potential savings can reach up to 7.3 percent, which exceeds the integration costs incurred by the operator. Therefore, it’s beneficial to promote the use of rooftop solar panels,” Alvin explained.

 

According to him, to overcome the problem of variability by renewable energy power plants in Nusa Penida, there are several systems and technologies that can be used, such as power conversion systems, energy management systems, and energy storage systems.

Technical research on renewable energy sources is necessary to advance the Nusa Penida 100% renewable energy roadmap. The roadmap must align with regional development, energy planning, and PLN’s RUPTL. Additionally, adopting rooftop solar power plants in the commercial sector should be encouraged, and social and economic impact studies should be conducted. These measures will enable Nusa Penida to increase its investment in renewable energy.

Ida Ayu Dwi Giriantari, who is the Chairperson of CORE Udayana University, has expressed the importance of answering existing challenges, such as unoptimized and inconsistent regulations, limited investment, underdeveloped human resources, imported technology, and limited accessibility and infrastructure due to the location of Nusa Penida, for the successful implementation of the road map. 

Welcoming Nusa Penida’s roadmap of 100 percent renewable energy, Luh Ketut Ari Citrawati, Assistant for Economy and Development of the Klungkung Regency Government, stated that the Klungkung Regency government has made the concept of sustainable tourism one of its development priorities, including the establishment of Solar PV development areas in the Spatial and Regional Plan of Klungkung Regency.

Explore South Sumatra Energy: Promoting Renewable Energy in the Land of Sriwijaya

Palembang, February 26, 2024 – South Sumatra, also nicknamed “Bumi Sriwijaya”, is one of the provinces that achieved a regional renewable energy mix target greater than the national target. In 2022, the renewable energy mix in South Sumatra reached 23.85 percent, higher than the national energy mix target of 23 percent by 2025. To encourage greater renewable energy utilization and promote renewable energy at the regional level, the Institute for Essential Services Reform (IESR) through the Energy Transition Academy in collaboration with the Energy and Mineral Resources (ESDM) Office of South Sumatra Province held Jelajah Energi South Sumatra on February 26 – March 2, 2024.

Based on data from the Department of Energy and Mineral Resources, South Sumatra Province, the potential for renewable energy in this area is around 21,032 MW, consisting of solar energy of 17,233 MWp, hydro of 448 MW, wind of 301 MW, bioenergy of 2,132 MW and geothermal of around 918 MW. However, currently only around 4.70% of this potential has been utilized, with an installed capacity of renewable energy of around 989.12 MW.

Secretary of the Energy and Mineral Resources Agency (ESDM) of South Sumatra Province, Ahmad Gufran said, to encourage the utilization of renewable energy, his party carried out several implementations of regional energy management strategies in South Sumatra. For example, conducting a study of renewable energy potential in South Sumatra. Then, the South Sumatra Provincial Government supports the acceleration of the battery-based electric motor vehicle program for road transportation with the issuance of South Sumatra Governor Regulation Number 26 of 2021 concerning the Use of Battery-Based Electric Motor Vehicles, and encourages the private sector to participate in developing renewable energy both to meet company needs and for corporate social responsibility.

“In order to implement the energy transition, we will continue to contribute to the development of the renewable energy sector to obtain clean energy that is environmentally friendly. In the future, we hope that the utilization of clean energy can be more developed to all levels of society,” said Ahmad Gufan. 

Sub-National Coordinator, Sustainable Energy Access Program, IESR, Rizqi M Prasetyo mentioned that South Sumatra is known as an energy granary, particularly renewable energy such as solar energy. According to him, South Sumatra has the largest solar potential among other technical renewable energy potentials. However, its utilization is actually small, only 7.75 MWp in the 2012-2022 period. For this reason, IESR believes that South Sumatra can encourage the use of ground-mounted solar power and rooftop solar power by preparing supporting regulations and policies, conducting socialization about solar power in the community, and encouraging community participation to be involved in the adoption of rooftop solar power accompanied by attractive incentives. Rizqi views that the collaboration between the government, the private sector and the community is the determining factor for the success of the utilization of environmentally friendly energy.

“Based on the practice of utilizing renewable energy in South Sumatra from the private sector at the Solar Power Plant (Solar PV) in Tanjung Raja Village, Muara Enim, South Sumatra, it has been useful for irrigation of agricultural land for farmers in the village. The solar power plant has a capacity of about 16.5 Kilowatt peak (kWp), with about 525 farmers benefiting from the irrigation solar power plant and enabling harvests more than 3 times a year. The government needs to encourage initiatives from various sectors to gain benefits from the huge potential of renewable energy such as solar energy, so that more and more people can feel the impact both environmentally and economically,” said Rizqi.

Rizqi explained that IESR realizes that access to knowledge about renewable energy and its benefits tends to be limited. Meanwhile, proper understanding is needed to mobilize support for renewable energy development in the regions. Addressing the knowledge gap on renewable energy, IESR has provided an energy transition learning platform called the Energy Transition Academy that can be openly accessed by the public.

“IESR, through the academy.transisienergi.id platform, has provided various energy transition classes that are organized in an interesting and easy-to-understand manner. Not only learning about energy transition, IESR also has a special channel for everyone who wants to know about rooftop solar PV adoption by visiting solarhub.id,” Rizqi explained.

In Jelajah Energi South Sumatra, participants will be invited to see firsthand various renewable energy projects that are already running in various locations in the province, including PT Pupuk Sriwidjaja Palembang’s PLTS, Tanjung Raja Village Irrigation PLTS, and PT Green Lahat’s PLTMH. In addition, there were discussion forums and meetings with relevant stakeholders, to discuss strategic steps in accelerating the implementation of renewable energy in South Sumatra.

 

About Institute for Essential Services Reform

The Institute for Essential Service Reform (IESR) is a think tank organization that actively promotes and strives for the fulfillment of Indonesia’s energy needs, upholding the principles of justice in natural resource utilization and ecological sustainability. IESR engages in activities such as conducting analysis and research, advocating for public policies, launching campaigns on specific topics, and collaborating with diverse organizations and institutions.

MEMR Regulation No. 2/2024 Limits Public Participation to Support Energy Transition through Rooftop Solar PV

press release

Jakarta, February 23, 2024 – The Indonesian government has officially issued Minister of Energy and Mineral Resources (MEMR) Regulation No. 2 of 2024 concerning Rooftop Solar Power Plants Connected to the Electricity Network of Holders of Electricity Supply Business License for Public Interest, which is a revision of MEMR Regulation No. 26 of 2021. 

In this new regulation, the net-metering scheme is abolished so that excess electrical energy or export of electrical power from users to State Electricity Company (PT PLN Persero) cannot be calculated as part of the reduction in electricity bills.  The regulation also stipulates a quota mechanism for rooftop solar power systems in the electricity system of owners of Electricity Supply Business License for Public Interest (IUPTLU) for five years. In addition, this regulation stipulates the registration period twice a year and the compensation provided by the state to PLN if the cost of electricity supply is affected due to the penetration of rooftop solar PV.

The Institute for Essential Services Reform (IESR) considers that the elimination of the net-metering scheme will make it difficult to achieve the National Strategic Project (PSN) target of 3.6 GW of rooftop solar PV by 2025 and the 23% renewable energy target in the same year. The impact of the elimination of this scheme is a decrease in the economic level of rooftop solar power plants, especially in the household segment, which generally experiences peak loads at night. 

Fabby Tumiwa, Executive Director of IESR said that household or small business customers will tend to delay the adoption of rooftop solar PV because their peak electricity demand occurs at night, while solar PV generates peak energy during the day. Without net-metering, rooftop solar PV investment becomes more expensive, particularly when users have to spend additional funds for battery energy storage.

“Net-metering is actually an incentive for household customers to use rooftop solar systems. With PLN’s controlled electricity tariffs, net-metering helps improve the economic viability of rooftop solar systems installed at a minimum capacity of 2 – 3 kWp for R1 category consumers. Without net-metering and the relatively high cost of batteries, this minimum capacity cannot be met, resulting in higher investment costs per kilowatt-peak unit. This will reduce the economics of rooftop solar systems,” said Fabby Tumiwa.

For rooftop solar PV with a capacity greater than 3 MW (three megawatts), this regulation requires users to provide weather forecast database settings that are integrated with the Supervisory Control and Data Acquisition (SCADA) system or distribution smart grid owned by the Holder of Electricity Supply Business License for Public Interest (IUPTLU).

“The regulation removes the obligation to pay parallel generation charges, i.e. capacity charges and emergency service charges previously applied to industry – equivalent to 5 hours per month. The elimination of this parallel charge adds to the attractiveness for industrial customers, but the obligation to provide weather forecasting for systems of more than 3 MW will also add to the installation cost component,” said Marlistya Citraningrum, Program Manager of Sustainable Energy Access, IESR.

Marlistya also highlighted the regulation of the term for submission of applications by prospective customers, which is carried out twice per year, namely every January and July.

“This arrangement and the determination of quotas per network system raise questions regarding the transparency of quota determination and approval, especially for industrial customers who want to install rooftop PLTS on a large scale, while the IUPTLU mechanism to add quotas when the system quota has run out is not clearly regulated in this regulation,” he continued.

This regulation guarantees that customers who have utilized rooftop solar power systems before this regulation is enacted, remain bound by the previous regulation, for the next 10 years. This includes still benefiting from the rooftop solar power export system.

“As an on-grid rooftop PV user, I actually have questions about this transitional rule – considering that during installation, rooftop PV exports are still calculated as equivalent to 0.65 of the electricity tariff based on Permen ESDM No. 49/2018, not 1:1 like Permen ESDM No. 26/2021. This transitional rule needs to be clearly informed to current rooftop solar power users,” said Marlistya.

IESR regrets that this regulation is too favorable to the interests of PLN, which can have an impact on hindering the participation of electricity consumers in supporting the government’s goal of accelerating Indonesia’s energy transition, efforts to reduce GHG emissions at low cost and not burdening the state because renewable energy investments are made by electricity consumers without the need for state subsidies.

Fabby Tumiwa hopes that this new regulation can be implemented by paying attention to the benefits obtained by the state if rooftop solar PV is allowed to grow rapidly, namely increasing renewable energy investment, growing the solar PV industry, creating jobs, and reducing GHG emissions. For this reason, IESR urges an evaluation after a year of the Ministerial Regulation’s implementation to determine its effectiveness in encouraging the utilization of renewable energy in Indonesia. The government needs to openly revise it in 2025 as the threat of electricity overcapacity faced by PLN in Java-Bali decreases.

Steps to Achieve Bali’s Net Zero Emission by 2045 and Attain 100 Percent Renewable Energy in Nusa Penida by 2030

Denpasar, February 21, 2024 – Following its declaration in August 2023, the Bali Provincial Government has formulated and executed strategies to pursue Bali’s target of achieving net-zero emissions (NZE) by 2045 and to actualize Nusa Penida as a location powered entirely by renewable energy by 2030. Collaborating with non-governmental partners in the Bali Net Zero Emission Coalition (comprising the Institute for Essential Services Reform, WRI Indonesia, New Energy Nexus Indonesia, and CAST Foundation), a series of initiatives supporting Bali’s NZE 2045 goal have been underway, including the formulation of the Bali NZE 2045 roadmap and the Sustainable Energy Bali public campaign conducted last November 2023.

In the development of the Bali NZE 2045 roadmap, the Institute for Essential Services Reform (IESR) conducted an analysis focusing on Nusa Penida’s transition to 100% renewable energy by 2030, effectively transforming it into a renewable energy-based island.

Nusa Penida was selected for this initiative due to three primary factors: its abundant renewable energy potential, its geographical separation from mainland Bali, and the economic opportunities presented by the development of green tourism. Fabby Tumiwa, Executive Director of IESR, highlighted the significant potential for Nusa Penida to serve as a pilot island for renewable energy and even to supply energy to the rest of Bali. Furthermore, the adoption of renewable energy is expected to enhance Nusa Penida’s appeal to tourists, consequently bolstering the local economy.

“In the IESR study conducted for Nusa Penida, an increase in renewable energy generation would result in lower electricity production costs compared to diesel-powered plants. Presently, the production cost using Diesel Power Plants (PLTD) alone can reach Rp 4.5 thousand/kWh. With 100 percent renewable energy, the production cost can decrease by 30-40 percent,” stated Fabby during the Media Gathering event “100 Percent Renewable Energy in Nusa Penida,” organized by IESR.

Additionally, Fabby disclosed that the initial study for Nusa Penida’s transition to 100 percent renewable energy by 2030 is underway and is scheduled for launch on March 6, 2024. This marks the first step in testing the concept and conducting electricity system planning. Achieving Nusa Penida’s 100 percent renewable energy target by 2030 necessitates support from various stakeholders, including governmental bodies at both central and regional levels, development and non-governmental partners, the private sector, and the community.

According to analyses conducted by IESR and Udayana’s Center of Excellence for Community-Based Renewable Energy (CORE), Nusa Penida boasts a renewable energy potential exceeding 3,219 MW, comprising 3,200 MW of ground-mounted solar photovoltaic (PLTS), 11 MW of rooftop solar PV, and 8 MW of biomass, excluding wind energy, ocean currents, and biodiesel potentials. Moreover, to address the variability of renewable energy availability influenced by weather conditions, Nusa Penida exhibits potential for pumped hydroelectric storage (PHES) of up to 22.7 MW. The analysis also underscores the necessity of energy storage systems such as battery energy storage systems (BESS).

IESR’s modeling results indicate that achieving 100 percent renewable energy in Nusa Penida by 2030 primarily relies on solar photovoltaic systems due to their cost-effectiveness and abundance. Alvin Putra Sisdwinugraha, IESR’s Analyst for Electricity Systems and Renewable Energy, asserted the technical feasibility of a 100 percent renewable energy electricity system for Nusa Penida, capable of generating electricity at lower costs compared to diesel plants. Currently, the roadmap is undergoing finalization following input from various stakeholders.

“The initial phase towards achieving 100 percent renewable energy by 2030 involves transitioning to a diesel daytime-off system, maximizing the utilization of solar and BESS systems during daylight hours,” explained Alvin. “Simultaneously, further studies on alternative energy sources such as biomass production, biodiesel, ocean currents, and wind are necessary. This will enable the harnessing of these potentials to phase out diesel usage by 2030,” Alvin concluded.

South Sumatra Journalists Form Energy Transition Journalist Network

press release

Palembang, February 20, 2024 – The Alliance of Independent Journalists (AJI) Palembang together with the Institute for Essential Services Reform (IESR), a leading think tank in Indonesia that focuses on energy and the environment and the Society of Indonesian Environmental Journalists (SIEJ) took the initiative to form the “South Sumatra (South Sumatra) Just Journalist Network” to build public awareness of the energy transition through quality journalistic work.  Through this Just Journalist network, it is hoped that there will be more quality news related to the issue of energy transition so as to increase public understanding and trigger the acceleration of the transition from fossil energy to renewable energy at the regional level.

Based on data in the report “Insights on energy transition news in the electricity sector in Indonesia from 2020-2022” published by CASE Indonesia in 2023, national media dominated the news about energy transition in the electricity sector. Meanwhile, regional media has yet to make a significant contribution. IESR views that optimizing the role of media in the regions is crucial to reach public participation in supporting the energy transition process and greater use of renewable energy.

Chairman of AJI Palembang, M. Fajar Wiko, said that journalists who are members of the South Sumatra Just Journalist Network can shape public opinion on energy transition, identify challenges and opportunities in covering complex issues related to renewable energy, and identify the economic, social and environmental impacts of the energy transition program effectively to communicate to the public.

“The establishment of this Network is expected to clarify the role of the media in providing explanations about renewable technologies, government policies, and private sector initiatives in the energy transition, as well as encouraging better public understanding to actively participate in supporting the energy transition, and encouraging the role of stakeholders to create a more favorable environment for renewable energy, to motivate collaboration between the media, government, private sector and society to design the best solution,” said Wiko. 

Forum Jurnalis Sumsel

Marlistya Citraningrum, the Program Manager of Sustainable Energy Access, IESR, mentioned that the energy transition is happening in various parts of the world, including Indonesia has diverse contexts at the regional or subnational level. The shift from fossil fuel to renewable and more sustainable energy systems is demonstrated by the trend of retiring and early retirement of coal-fired power plants around the world – as well as in Indonesia under the Just Energy Transition Partnership (JETP) plan. This will have a direct impact on Indonesia’s coal-producing provinces and districts, particularly in the economic and development sectors. Subnational governments need to anticipate this trend in advance, including to boost the alternative economy sector and optimize the use of renewable energy. The media can play a role in educating the public to immediately switch to low-emission energy.

“IESR’s studies in several coal-producing regions show that although regional income depends on the coal economy, the economic multiplier effect is not directly enjoyed by surrounding communities in the form of infrastructure, economic improvement, or basic services such as education and health. In Muara Enim, around 78% of profits are absorbed by mining companies, in addition to local laborers working more freelance for contractors or vendors of mining companies instead of professional workers in the company,” said Marlistya.

Aryansyah, Head of Energy Division, Energy and Mineral Resources Agency of South Sumatra Province, said that the province has a renewable energy potential of around 21,032 MW with an installed capacity of renewable energy of around 989.12 MW or around 4.70%.

“In the future, the utilization of clean energy based on renewable energy in South Sumatra can be further developed to all levels of society. Some of the strategies we carry out to encourage the use of renewable energy, including providing energy for regional needs by increasing exploration of the potential for new renewable energy, utilizing new renewable energy such as solar energy, water, geothermal and others, as well as conserving and diversifying energy,” said Aryansyah.

Civil Society Recommendations for the Development of Indonesia’s Second NDC

press release

Jakarta, February 2, 2024 – Indonesia, under the coordination of the Ministry of Environment and Forestry (MoEF), has initiated the drafting process for its Second National Determined Contribution (SNDC) aimed at emissions reductions by 2030 and 2035. The MoEF intends to submit the SNDC to the UNFCCC in 2024.

The Institute for Essential Services Reform (IESR) along with several civil society organizations have requested for revisions in the SNDC, proposing updated scenarios and targets aligned with the objective of limiting global warming to below 2 degrees Celsius. They advocate for striving to achieve the ambitious goal of 1.5 degrees Celsius, as set forth by the Paris Agreement and reinforced by the Global Stocktake decision at COP 28.

IESR also urges the government to engage public participation in the preparation process of the SNDC. Furthermore, it is essential for the government to adhere to the principles outlined in Article 4, Line 13 of the Paris Agreement and the provisions of the COP series during SNDC preparation.

Currently, the government continues to utilize the business-as-usual (BAU) scenario for calculating emission reductions. However, civil society deems this scenario irrelevant as a basis for emission calculations. Indonesia must transition to a more accurate calculation system that references relative emissions in a given year, considering a realistic trajectory of global and Indonesian economic growth.

“While the emission reduction target in the Enhanced NDC (ENDC) appears to be increasing, it still does not align with the goal of limiting temperature rise to 1.5 degrees Celsius. Presently, the ENDC target only aims for a 31-43 percent reduction below BAU. If using the BAU calculation method employed thus far for setting emission reduction targets in the NDC, Indonesia’s target should be at least a 60 percent reduction from BAU for unconditional efforts and a 62 percent reduction from BAU for conditional efforts with international assistance. These figures do not include emission reductions from the agriculture, forestry, and land sectors,” remarked IESR Executive Director Fabby Tumiwa.

According to the analysis conducted by IESR, using 2022 emissions as the benchmark for target setting, Indonesia must establish an unconditional emissions reduction goal of 26 percent, equivalent to 859 MtCO2e by 2030, and a conditional reduction target of 28 percent, amounting to 829 MtCO2e with international assistance. These targets are crucial for contributing to the objective of limiting temperature rise to 1.5 degrees Celsius.

In addition to increasing emission reduction targets, Indonesia must also diminish the reliance on fossil energy sources such as coal and gas within its energy system. Based on calculations from the Climate Action Tracker (CAT), the coal component in Indonesia’s electricity system should be reduced to 7 to 16 percent by 2030, with the phasing-out of PLTU operations before 2040. Similarly, gas usage needs to be curtailed to 8 to 10 percent by 2030, with phasing-out operations by 2050.

Deon Arinaldo, IESR’s Energy Transformation Program Manager, emphasized that the reduction in the fossil energy mix should be accompanied by an increase in the share of renewable energy, ranging from 55 to 82 percent by 2030. However, it is worth noting that the target listed in the ENDC pertains to the installed capacity of renewable energy rather than the actual mix. IESR contends that solely focusing on installed capacity does not adequately reflect the relationship with emission reduction objectives.

“With the clarity of the renewable energy mix target in the electricity sector, it becomes possible to anticipate and even calculate the emission intensity of the electricity sector by 2030 to achieve the SDNC target. Furthermore, a significant presence of renewable energy will offer a clearer roadmap for electricity planning, specifying the types of renewable energy that should be prioritized to bridge the existing gap. With only 7 years remaining, it’s evident that solar and wind power plants, known for their shorter construction periods, should take precedence in development efforts to meet the mix target. Additionally, interventions are necessary for fossil fuel power plants, emphasizing the importance of reducing the reliance on fossil energy through various strategies such as terminating the operation of PLTU or reducing its utilization,” stated Deon.

Furthermore, IESR and other civil society organizations criticize the ENDC document for neglecting to incorporate the principle of climate justice. Civil society advocates for the SNDC preparation process to be more inclusive, ensuring climate protection for vulnerable groups and transparency throughout.

Wira Swadana, IESR Green Economy Program Manager, emphasized that the government must ensure fair distribution of the burden of emission reduction.

“Entities responsible for the highest emissions must shoulder a larger portion of the emission reduction efforts. Furthermore, the formulation of the SNDC should prioritize the principle of climate justice, which aims to mitigate both short-term and long-term risks while ensuring fair distribution of benefits, burdens, and risks, particularly for marginalized communities,” remarked Wira.

IESR and other civil society groups have outlined six recommendations for the preparation of the SNDC. First, the government should adhere to the principles of the Paris Agreement as outlined in Article 4, Line 13, and the guidelines set forth by the COP. Second, there should be a focus on integrating measurement, reporting, and verification (MRV) systems tailored for developing country parties. Third, the government should abandon the use of the BAU scenario as the basis for emission reduction calculations and instead adopt a method based on relative emissions in a given year, which takes into account more precise global and Indonesian economic growth projections. Fourth, climate targets should be established in alignment with the Paris Agreement. Fifth, there should be transparent and publicly accessible monitoring and evaluation mechanisms put in place. Sixth, principles of climate justice should be incorporated and implemented throughout the process. These recommendations for the preparation of the Second NDC have been submitted to relevant ministries and institutions.