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.

The Increase of Emission Reduction Targets in Indonesia’s NDC is Still a Long Way to Mitigating a Climate Crisis

Jakarta, 6 December 2022- Indonesia has submitted Enhanced Nationally Determined Contributions (ENDCs) documents by increasing the target of reducing greenhouse gas (GHG) emissions by only around 2%. The Institute for Essential Services Reform (IESR), which is a member of the Climate Action Tracker (CAT), a consortium of three think tanks that conducts monitoring and assessment of climate change policies in 39 countries and the European Union, found that the slight increase in Indonesia’s NDC target was still insufficient to prevent a global temperature rise of 1.5°C.

In Enhanced NDC, the target of reducing emissions by own efforts (unconditional) increases from 29% in the Updated NDC document to 31.89% in 2030, and with international assistance (conditional) increases from 41% to 43.2%. IESR and CAT view that Indonesia should be able to set even more ambitious targets, especially after the issuance of Presidential Regulation (Perpres) No 112 of 2022 concerning the Acceleration of Renewable Energy Development for the Provision of Electricity.

“Indonesia is still hesitant to set ambitious emission reduction targets and play in the safe zone. The reduction target set in the Enhanced NDC (E-NDC) is too easy to achieve because the reference is the business-as-usual emission increase projection in 2030. The emission reduction target should be based on the absolute emission level based on a certain year. To be in line with the 1.5°C ambition, emissions from the energy sector in 2030 must be equivalent to the level of emissions from the energy sector in 2010,” said Fabby Tumiwa, Executive Director of IESR, at the launch of the results of the CAT assessment of Indonesia’s climate action and policies.

To achieve significant emission reductions, Indonesia needs to carry out more ambitious mitigation in the sectors with dominant emitters, such as the energy sector, and the forest and land sector. Having abundant renewable energy potential, even up to more than 7 TW, Indonesia can utilize it as a source of energy with minimal emissions.

However, until 2021, the renewable energy mix in the energy system in Indonesia is still 11.5%. IESR views that several developments in international support and the government’s commitment to early retirement coal power plants will provide free space for the development of renewable energy so that it can achieve the target of 23% renewable energy in 2025, even reaching 40% in 2030. In the Deep Decarbonization of Indonesia Energy System study (2021), IESR concludes that by 2050, 100% utilization of renewable energy in Indonesia’s energy system is technically and economically feasible.

“Indonesia’s climate action status can be enhanced by ensuring that climate policies in this decade are implemented to fulfil a fair contribution based on global efforts (fair share). The NDC target with international assistance must also be consistent, at least with the optimal path with the lowest cost for the ambition of 1.5°C (global least cost pathways),” explained Delima Ramadhani, Coordinator of Climate Action Tracker, IESR.

According to her, the dominance of coal-fired power plants, which are currently around 61% of Indonesia’s energy system, needs to be significantly reduced to only 10% of coal-fired power plants that do not use carbon capture and storage technology (unabated coal-fired power plan) in 2030 and terminate their operations gradually until stop completely by 2040. For that, Indonesia must increase its climate commitments, and international assistance plays a major role in the implementation of the coal phase-out per the Paris Agreement.

Several funding mechanisms for ending coal operations have also been discussed and agreed upon by Indonesia, such as the Energy Transition Mechanism scheme and the Just Energy Transition Partnerships (JETP). IESR considers that, although it is still not aligned with the 1.5°C targets, the JETP agreement is a step forward in the energy transition in Indonesia. The funding commitment of USD 20 billion is not enough to achieve decarbonization of the energy sector which requires at least a total investment of USD 135 billion by 2030.

“The portion of grants in JETP funding needs to be enlarged, which can be used to accelerate the strengthening of the energy transition ecosystem and project preparation. In addition, the next step after JETP has been agreed upon is the preparation of an investment plan that is carried out transparently and mainstreams the principles of justice in the energy transition by involving the participation of the community, local government and affected groups,” concluded Fabby.

Climate Action Tracker is an independent scientific analysis initiative that tracks countries’ climate actions and measures them against the globally agreed Paris Agreement goal of holding warming well below 2°C and pursuing efforts to limit warming to 1.5°C. CAT has provided an independent analysis of around 40 countries since 2009. CAT members include Climate Analytics, the New Climate Institute, and the Institute for Essential Services Reform (IESR), which joined as partners in 2022.

 

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.

ISFO 2023: Non-Public Financing Opportunities for the Energy Transition

press release

Jakarta, 18 October 2022- Under the Paris Agreement, Indonesia needs significant financing to achieve its zero emissions target by 2050. The Institute for Essential Services Reform (IESR), through its latest report, Indonesia Sustainable Finance 2023, examines that to optimise public financing, the Indonesian government needs to immediately mobilize non-government investment by establishing policies, regulations, and an attractive investment ecosystem.

Fabby Tumiwa, Executive Director of IESR, said that the Indonesian government needs to make a transformative and massive effort to completely decarbonize the energy system by raising around USD 1 .2 trillion by 2050. Based on a study by IESR & the University of Maryland, the cost of ending 9.2 GW of coal-fired power plants (CFPP) in 2022-2030 requires around USD 4.6 billion. Furthermore, early retirement of all CFPPs in 2045 with an average age of 20 years requires USD 28 billion to compensate for stranded assets and the cost of decommissioning coal power plants.

Fabby explained that some efforts to end the CFPP operational period should be accompanied by an increase in the addition of renewable energy plants, strengthening of transmission and distribution networks, and massive energy efficiency.

“We need USD 135 billion for CFPP retirement in the 2022-2023 period, the increase of renewable energy, development of transmission and distribution, energy storage, and energy efficiency,” he said.

On the other hand, the government’s budget portion will only be able to allocate 0.83% of the total financing needed to achieve the target of 23% of the renewable energy mix by 2025 based on ISFO 2023. It refers to the average budget allocation for climate change mitigation of the Directorate General of New Renewable Energy and Energy Conservation of the Ministry of Energy and Mineral Resources in 2018-2020, amounting to USD 67 million per year.

Farah Vianda, one of the authors of ISFO 2023, revealed that the same trend is also taking place at the provincial level. She gave an example of Central Java as one of the provinces that supports the development of renewable energy the most. Still, fiscal constraints make Central Java allocate less than 0.1% of the total available Regional Revenues and Expenditures Budget (APBD).

“This encourages local governments to seek financing outside the Regional Revenues and Expenditures Budget. The Indonesian government also needs to make the same effort by expanding funding sources to attract investment in the renewable energy sector,” she stated.

In addition, she also explained that so far, the Regional Revenues and Expenditures Budget allocation is still dominantly targeting the fossil energy sector, including spending 5% of the Regional Revenues and Expenditures Budget throughout 2021 for fossil energy subsidies and 20.8% subsidies from the Regional Revenues and Expenditures Budget when the projections of the Ministry of Finance are related to the need for energy subsidies. There will be Rp649 trillion in 2022 realized. Not only that, Indonesia’s dependence on coal will be one of the challenges in implementing blended finance instruments (Energy Transition Mechanism).

“Currently, Indonesia is experiencing an excess electricity supply which makes PLN reluctant to build renewable energy plants. While on the other hand, investors in the ETM platform want to encourage renewable energy development,” Farah said. 

Meanwhile, Ichsan Hafiz Loeksmanto, the Lead Author of ISFO 2023, explained that implementing a carbon tax, the cap, and the trade mechanism (limit and business) on 92 coal-fired power plants in 2022, the carbon tax revenue was non-taxable. It was not earmarked. Carbon tax revenues have not been devoted to financing climate change mitigation and adaptation efforts.

“The government needs to ensure the allocation of carbon tax revenues for climate mitigation & adaptation and social safety nets. In addition, public transparency regarding payment of carbon taxes and carbon transactions is also necessary,” said Ichsan.

Talking about international support, based on IESR’s calculation in ISFO 2023, there is a potential for international funding of USD 13.1 billion or 35.4% of the total projected financing needs of USD 36.95 billion in 2025.

“The promises voiced by nine countries to support the energy transition in Indonesia through various financing instruments and technical support are quite a positive signal from the international community regarding the energy transition in Indonesia,” explained Ichsan.

One financing encouraged by the private sector is Indonesian financial institutions, increasing public pressure to shift financing to clean energy. However, until 2021, financial institutions, especially domestic commercial banks in Indonesia, will only finance limited renewable energy projects. ISFO 2023 noted that renewable energy financing only contributed 0.9%-5.5% of the total sustainable portfolio of four domestic and commercial banks with the highest total asset value in 2021, namely Bank Mandiri, BNI, BRI, and BCA.

“To increase the allocation of renewable energy credit from the banking sector, the government must prepare comprehensive guidelines to encourage credit allocation for renewable energy. They also need to increase business credit opportunities from banks (bankability) for renewable energy projects and increase awareness and confidence of domestic investors to invest in renewable energy,” he explained.

In addition to the carbon tax mechanism, support from financial institutions in Indonesia, and international financing, ISFO 2023 also discusses green taxonomy, green bonds, and green sukuk as part of the opportunity to attract funding for the energy transition in Indonesia.

The Indonesia Sustainable Finance 2023 report is IESR’s main report, first launched in 2022. Since 2018, IESR has consistently reported on the development of the energy transition in Indonesia through the Indonesia Clean Energy Outlook report from 2017 to 2019, which was later transformed into the Indonesia Energy Transition Outlook in 2020. The ISFO 2023 report can be downloaded at s.id/ISFO2023.

Coal Fired-Power Plants Retirement Needs International and Private Support

press release

 

Jakarta, October 11, 2022 – International collaboration and support are needed to encourage Indonesia to make an energy transition towards clean, affordable, and secure energy. In addition to providing funding assistance for the development of renewable energy, the experiences of developed countries and international organizations in carrying out the energy transition can be a valuable lesson for Indonesia in planning an energy transition that involves public participation. This learning process can be accelerated with the right commitment of technical assistance from developed countries to developing countries.

Owen Jenkins, UK Ambassador, at Indonesia Sustainable Energy Week (ISEW) 2022 said that his party supports the acceleration of the energy transition in Indonesia, especially in encouraging financing policies from the private sector.

“In the UK, it has been the private sector which is driving the investment, driving down the cost of new and renewable energy. That’s what we plan to see here,” said Jenkins.

Similarly, Jiro Tominaga, Country Director, ADB Indonesia said that the right policy would be able to attract private interest in boosting renewable energy. In addition, he also highlighted the taxonomic issue in climate financing, which does not include financing for the phasing out of coal-fired power plants, making investors reluctant to invest.

“This needs international efforts to have the taxonomy to incentives private sector financing to come to coal phase-out issues. This is particularly important for a country like Indonesia, where around 60% of its generation comes from coal,” said Tominaga.

The same thing was also expressed by Sylvi J. Gani, Director of Financing and Investment of PT SMI. To get around the taxonomic limitations, his party involved multilateral and philanthropic banks to finance the energy transition.

Meanwhile, Germany as the president of the G7 leadership in 2022 places the issue of the energy transition as an important priority on its agenda.

“We encourage market development in accelerating the shift to clean energy through multilevel partnerships that also involve Indonesia,” added Thomas Graf, Chargé d’Affairs German Embassy to Indonesia. He also said that the issuance of Presidential Decree 112/2022 by setting the highest benchmark price for renewable energy to be purchased by PLN was an important step that should be appreciated.

Executive Vice President of Generation and EBT of PT PLN (Persero), Herry Nugraha said to support the efforts to retire the steam power plant, PLN is preparing to build a transmission and distribution network to accommodate the entry of new and renewable energy sources.

“PLN has conducted many studies to anticipate this. On the distribution side, we conducted a study on smart grids,” said Herry.

ISEW was held in collaboration with the Indonesia Clean Energy Forum (ICEF), the Institute for Essential Services Reform (IESR), and Clean, Affordable, Secure Energy for Southeast Asia (CASE). CASE is a cooperation program between two countries: Indonesia – Germany (Directorate of Electricity, Telecommunications and Information Technology, Ministry of National Development Planning/Bappenas, and funded by the Ministry of Economy and Climate Action of the German Federation Government).