Coal-fired Power Plant (CFPP) Retirement Policy is Important to Accelerate Decarbonization of Energy System in Indonesia

Jakarta, 22 September 2021 – As one of the extensive contributors of carbon emissions in Indonesia at 32% over 20 years, decarbonization of the energy sector is vital to achieving net-zero emissions that are compatible with the Paris Agreement. The power generation sector, especially coal-fired power plants as the largest source of emissions in the energy sector, therefore it is essential to apply the right policies for coal-fired power plants.

Based on the analysis of the Institute for Essential Services Reform (IESR), there are two policies to reduce emissions from coal-fired power plants to comply with the Paris Agreement, which is moratorium and retirement of the coal-fired power plants from their usual lifespan 30 years to 20 years. This is stated by Deon Arinaldo as Program Manager of Energy Transformation, Institute for Essential Services Reform (IESR) in his presentation at the Indonesia Energy Transition Dialogue (IETD) 2021 organized by the Indonesia Clean Energy Forum (ICEF) and the Institute for Essential Services Reform (IESR).

Deon said that implementing the policy requires an optimal roadmap to minimize costs and impacts as low as possible. In his opinion, it can rely on data and in-depth analysis carried out for each unit of the coal-fired power plant (CFPP) in Indonesia.

“What needs to be analyzed is the age of the coal-fired power plant because it is related to the contract, the contract effectiveness, operational cost compared to the retirement cost, the readiness for planning the electricity system, and non-technical aspects such as employment, pollution & human resource capabilities,” explained Deon.

Moreover, in compiling a roadmap for coal-fired power plant’s retirement, Deon said many strategies can be considered, including refinancing, and investment in renewable energy, repurposing, and retrofitting the CFPP.

“Economically, renewable energy generation is much cheaper than coal-fired power plants. If this policy is not implemented immediately, the State Electricity Company (PLN) is projected to become the company with the second-largest asset with the possibility of stranded assets of up to USD 15 billion,” added Deon.

State Electricity Company (PLN), through Herry Nugraha, Head of the Center for Excellence, said that his party responded to the National Electricity Supply Business Plan (RUPTL) and prepared a decarbonization roadmap by conducting various studies and analyzing data on coal power plants in Indonesia.

“We routinely record how much capacity, when retirement, the performance of each power plant, reliability, production of CO2 of each unit is calculated annually for the evaluation,” explained Herry.

The Director of Electrical Engineering and Environment of the Ministry of Energy and Mineral Resources, Wanhar, explained that the Energy Transition Mechanism (ETM) has included a mechanism to replace the capacity of the coal-fired power plant with new renewable energy (NRE).

“Indeed, need a study to do it, in collaboration with the Asian Development Bank. Also, we have held discussions with stakeholders in the coal industry about this mechanism,” he said.

Architrandi Priambodo, Senior Energy Specialist, Asian Development Bank (ADB) admits that currently, his party is developing an ETM that ensures an equitable or just energy transition.

“In the end, it is the community that receives and enjoys the electricity, so we ensure that the retirement of coal-fired power plants does not harm workers, the environment and supports social aspects, including inclusiveness,” said Chitra.

Roy Torbert, principal of the Rocky Mountain Institute, added that the funds obtained from the refinancing process could be used to invest in renewable energy and help affected communities, such as workers, to transition to new jobs.

Leaving coal-fired power plants requires innovation in renewable energy technologies that will take them over. Muhamad Reza, Engineering Expert, Business Development & Energy System Business Line Manager, Tractebel Engineering Indonesia stated that when variable renewable energy (VRE) enters the system, not only does the load fluctuate but also slightly from the generation side.

“The anticipation is that we must look for technology that can meet those needs, and we need to ensure its technical and economic feasibility,” said Reza. He added that energy storage technology or batteries will hugely help these problems.

Regarding PLN’s readiness, Djoko Prasetijo, Deputy Chairperson of Conseil International des Grands Réseaux Électriques (CIGRE) Indonesia stated that PLN does not need to worry about dealing with the entry of VRE.

“PLN’s colleagues (State Electricity Company) are used to dealing with variability, for example, demand from morning to night is also different. If, for instance, there are thousands of MW (solar PV-ed) in Java, our grid is supposed to be able to handle 3,000 – 4,000 MW as long as Solar PV (PLTS) is spread geographically,” he concluded.

The IETD 2021 event is in collaboration with Clean, Affordable, and Secure Energy for Southeast Asia (CASE), a partnership project from several countries in Southeast Asia and is funded by the Federal Government of Germany. Further information can be accessed at ietd.info.

Examining The Option of Low Carbon Technology

Jakarta, 21 September 2021– Accelerating deep decarbonization in the energy sector is needed to achieve carbon neutrality by 2060 or sooner as the Indonesian government has targeted. Different low-carbon technologies can be the option in decreasing greenhouse gas (GHG) emission, such as renewable energy, Carbon Capture, and Storage/Carbon Capture, Utilization, and Storage (CCUS), even Nuclear Power Plants (PLTN). However, the government needs to analyze it carefully because each technology has a different character and risk level.

In terms of global development, Mycle Schneider, an Independent International Analyst on Energy and Nuclear Policy, in his presentation said that the development of nuclear power plants has been stagnant in the last ten years, compared to renewable energy, which has increased rapidly. He gave an example that in France, the electricity mix from nuclear power reached the lowest record in 2020 for the last 30 years. The reason is that there is cheaper renewable energy.

“Investing in nuclear power plants can even hinder the achievement of climate change targets because existing funding should be allocated to technology options that are readily available, inexpensive, and can be implemented quickly,” explained Schneider on the second day of the Indonesia Energy Transition Dialogue (IETD) 2021 organized by Indonesia. Clean Energy Forum (ICEF) and Institute for Essential Services Reform (IESR), Tuesday (21/09/2021).

Sharing the same views with Schneider, Craig Morris, Independent Consultant of Energy Transition, said that it is difficult to predict the price of electricity from nuclear power plants considering that nuclear power plants do not respond to market prices.

“If we go back to the year 2000 and see projection and hope of 2050, we are already in 2050 by having renewables and storage, and if you go with nuclear and CCS, you go back to 2000. We are far further with renewables than with the two technologies,” said Morris.

Moreover, CCS/CCUS technology is one of the global strategies to reduce carbon emissions. Samantha McCulloch, Head of Carbon Capture Utilization and Storage Technology, International Energy Agency said CCS/CCUS could be one of the solutions in Southeast Asia to improve energy infrastructure in the region. However, renewable energy will be the main choice for decarbonization shortly. Meanwhile, the development of CCS/CCUS will play a role in avoiding lock-in emission due to newly built infrastructure and enabling emission mitigation options in the future.

Another opportunity for CCUS in the ASEAN region is the production of low-carbon hydrogen from gas and CCUS. Currently, this option can be cheaper than producing hydrogen using electrolysis of water at a natural gas production site that can be used as storage carbon at the same time. However, the cost-effectiveness of this option needs to observe the potential for hydrogen production using electrolysis which is also expected to have significant price declines in the next few years.

Dr. M. Rachmat Sule, Senior Lecturer at the Faculty of Mining and Petroleum Engineering, Bandung Institute of Technology (ITB), also sees that the development of CCUS can help reduce emissions, such as in coal power plants adjacent to oil and gas fields. Yet, there are limitations in its development, such as to be more economical, the source location of the emission and reservoir should be next to each other. Besides, it is necessary to implement other strategies such as hub clustering or use CCUS support infrastructure such as gas pipelines to reduce CAPEX costs.

However, on different occasions, Deon Arinaldo, Program Manager of Energy Transformation, IESR encouraged the government to prioritize renewable energy technology to carry out deep decarbonization in the energy sector.

“Decarbonizing the energy sector needs to happen quickly and start now to be compatible with the Paris Agreement. In Indonesia itself, low-carbon technology that is commercially ready and quickly built is renewable energy, while other technologies such as nuclear power plants and CCS are still in the development stages and piloting. We do not have much time to mitigate this climate crisis,” he said.

Responding to the variety of low-carbon technologies in the framework of new and renewable energy, Prof. Dr. Zaki Su’ud from the Faculty of Mathematics and Science at the Bandung Institute of Technology (ITB) recommends several policies that the government needs to take to support the achievement of Indonesia’s decarbonization target by 2060 or sooner. First, all energy resources must be utilized optimally to preserve energy quality and security in Indonesia. Second, the energy mix policy must be implemented and evaluated properly toward reliable, cheap, and sustainable energy availability. Third, The government needs to allocate sufficient research and funding for H&D related to new and renewable energy.

“New renewable energy is still developing and requires appropriate and consistent policies from the government to support national energy security and achieve Indonesia’s decarbonization target,” Zaki explained at the IETD 2021.

The IETD 2021 was held for five days, from September 20-24. This event is in collaboration with Clean, Affordable, and Secure Energy for Southeast Asia (CASE), a partnership project from several countries in Southeast Asia and is funded by the Federal Government of Germany. Further information can be accessed at ietd.info.

Joining the Renewable Energy Era Needs Supporting Policy Packages

Jakarta, 21 September 2021– Achieving Indonesia’s carbon-neutral target in Indonesia by 2060 or sooner as the Indonesian government has targeted, requires clear policies and strategies, including in the energy sector as one of the largest emitting sectors in Indonesia. The pack of the energy sector decarbonization policy is being prepared by the Indonesian government to realize a smooth and just energy transition.

Arifin Rudiyanto, Deputy for Maritime Affairs and Natural Resources at the Ministry of National Development Planning, Bappenas, said that there are several strategies that Bappenas has prepared to achieve low-carbon development and climate resilience. These include the development of sustainable energy, waste management, circular economy, and the development of green industries. Moreover, he explained that there are three important things in realizing energy transition, they are political will, solid legal basis, and a comprehensive strategy.

“Political will has been obtained, a good strategy has been outlined in the Medium-Term National Development Plan (RPJMN) to transform towards green energy, while a strong legal basis has been prepared through the new and renewable bill,” said Arifin on the second day of the Indonesia Energy Transition Dialogue (IETD) 2021 organized by Indonesia Clean Energy Forum (ICEF) and Institute for Essential Services Reform (IESR), Tuesday (21/09/2021).

Responding to the statement, Sugeng Suparwoto, Chairman of Commission VII the House of Representative of Republic Indonesia (DPR RI) promised that the New Renewable Energy Bill would be ratified in 2021.

“The era of renewable energy has become a necessity. In the new renewable energy bill, there are incentives for developing new renewable energy and disincentives for energy development, which still contributes the largest carbon contribution,” he explained.

Herman Darnel Ibrahim, a Member of the National Energy Council, warned that the implementation of energy system decarbonization should also mitigate economic risks, as well as maintain national energy security, in particular, to keep energy prices affordable. Furthermore, it needs to create a level playing field between renewable energy and fossil energy, such as by utilizing carbon tax instruments.

Knowing that needed the higher funding to achieve carbon neutrality with renewable energy, Febrio N. Kacaribu, Head of the Fiscal Policy Agency (BKF), Ministry of Finance of the Republic of Indonesian analyzed that at least needs IDR 3500 trillion to achieve the NDC target in 2030.

“Our state spending planning budget is only 40% of the need, so it must involve the local government, the private sector, and international support,” he said.

Febrio revealed that the government has prepared financial instrument green bonds with low-interest rates in which the global market has responded well. The Ministry of Finance is also currently conducting tax harmonization to support the principle of reducing carbon emissions.

“So we need a carbon market mechanism to connect sectors that have not implemented net zero emissions with those carried out,” said Febrio.

Febrio added, if the carbon market mechanism in Indonesia has been established, the carbon tax signal for coal actors will be stronger as well. Therefore, Indonesia will be recognized by the global new energy market. It will certainly help the process of funding renewable energy projects in Indonesia to accelerate the achievement of Indonesia’s decarbonization targets.

Dewa Putu Ekayana, Policy Analyst, Ministry of Finance of Indonesia stated that now Indonesia is almost in the final process for the draft presidential regulation related to the economic valuation of carbon.

“The fiscal aspect of the economic valuation of carbon is not a carbon tax but a levy on carbon. This expansion of meaning is expected to include not only taxes but also other instruments. The next consideration is the balance of central and sub-national government finances. Our suggestion from the Ministry of Finance is that the financing mechanism will be paid for with carbon credits or carbon certificates,” explained Dewa.

On a different occasion, responding to the carbon economic value policy, Fabby Tumiwa, Executive Director of IESR said that the government needs to set emission reduction targets and determine targets in each sector, as well as assess the value or effective carbon price that can support the achievement of these targets.

“The price of carbon should be linked to emission reduction targets and should promote economic actors to change their technology choices. If the carbon price is too low, it is worried that it will not provide an adequate signal to encourage substantial emission reduction efforts,” explained Fabby.

Regarding the implementation of the carbon tax, Fabby said that the government needs to openly communicate the importance of carbon tax instruments to restrain the growth of carbon emissions, determine the mechanism and instruments, as well as the economic sectors that will be affected by the implementation of the carbon tax.

IETD 2021 runs for five days, from 20-24 September. This event is in collaboration with Clean, Affordable, and Secure Energy for Southeast Asia (CASE), a partnership project from several countries in Southeast Asia and is funded by the Federal Government of Germany. Further information can be accessed at ietd.info

Luhut: President Jokowi orders to promptly implement the energy transition

Jakarta, 20 September 2021 – Indonesia needs to take several steps to accelerate the transition and development of renewable energy by 2050 by aligning regulations and policies and encouraging investment in renewable energy.

Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan said that basically, the Indonesian government always stays committed and tries its best to prevent the increase of earth’s temperature to more than 1.5 degrees Celsius. He stressed that President Jokowi’s directions explicitly ask for an immediate energy transition as the government is currently preparing an energy transition mechanism, especially for Indonesian coal-fired power plants.

“Financial support is significant to support the transition to renewable energy. We need help from developed countries to achieve carbon neutrality by 2060 or sooner. Currently, the transition from coal to renewable energy is underway. There are coal-fired power plants that must be replaced (by renewable energy) and are being prepared with PLN. We are optimistic it can be done faster because technology is also developing. So it is more efficient,” said Luhut in The 4th Indonesia Energy Transition Dialogue (IETD) organized by the Institute for Essential Services Reform (IESR) and the Indonesia Clean Energy Forum (ICEF), Monday (20/09/2021) virtually.

He said that the Indonesian government is targeting tourism areas, especially Toba Lake and Bali to be carbon neutral in 2045 or the 100th anniversary of Indonesia’s independence.

“Toba Lake is possible (to phase out from fossil fuel-ed) because it has 1,000 megawatts of geothermal and some hydropower energy. Therefore, the community there no longer needs to use fossil energy, so as Bali,”  he added.

In his opinion, the change is undeniable even in the next six years. Currently, all industries worth almost USD 100 billion have started to use renewable energy.

“We have great potential for renewable energy. By 2050 Europe will not use fossil fuels. We have goods from renewable energy or green products. PLN must also participate and make a start,” he said.

On a different occasion, at the Press Conference of The 4th Indonesia Energy Transition Dialogue (IETD) 2021. The Director of Electricity, Telecommunications and Information at the Ministry of National Development Planning (Bappenas), Rachmat Mardiana, said that Bappenas had compiled several studies on net-zero emission. The study comprises considerations of social, economic, environmental, and the needed funding to accelerate decarbonization in Indonesia.

“Indeed, we also need to explore the efforts to reduce coal dependence through several endeavors. For instance, studying future technological developments, the potential of hydrogen energy to meet the needs of transportation, industry, power plants,” said Rachmat at the Press Conference of The 4th Indonesia Energy Transition Dialogue (IETD) 2021, Monday (20/09/2021) virtually.

Director-General of New, Renewable Energy and Energy Conservation of the Ministry of Energy and Mineral Resources, Dadan Kusdiana, said that the transition to renewable energy needs to wait for the National Electricity Supply Business Plan (RUPTL). 

“We will complete the RUPTL, examine it from the budget side, whether it needs a state budget or replacement costs. Then we will inform the Ministry of Finance of the Presidential Decree on New Renewable Energy (EBT). It has been processed, soon the National Electricity Supply Business Plan (RUPTL) will be discussed, then the Ministry of Finance will only do the budget calculations,” said Dadan. 

Furthermore, the integration of renewable energy needs to be supported with solutions to overcome the oversupply from power plants. The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa said that it can be overcome through deep decarbonization in the industrial and business sectors.

 “The solution is by substituting heating energy that uses fossil fuels to electrification. The second solution, the most effective,  is with rooftop solar PV. Official data from the government in 2019, the solar PV only covered 186MV, but data in the Solar Energy Association is much larger, on 2020-2021 both in the pipeline and complete stage until July shows the total of 480 MW, “says Fabby.

Fabby said the government needs to scale up investment opportunities for renewable energy projects. The IESR study shows that to meet the target of 23 percent of the renewable energy mix by 2025, it requires investment of around US$14 billion to US$15 billion, or equivalent to Rp. 210 trillion. 

Meanwhile, to achieve net zero-emission, IESR estimates that the required investment until 2030 will reach US$25 billion to US$30 billion per year, or around Rp 420 trillion per year. This number will be higher in 2030–2050, reaching about US$50 billion to US$60 billion per year. The investment cost includes the development of low-carbon technology in the electricity, transportation, and industrial sectors. Fabby said the investment also includes the development of green hydrogen, as well as synthetic fuels for the transportation sector that are difficult to electrify such as planes and ships.

In terms of the coal industry, a member of the Indonesia Clean Energy Forum (ICEF), Widhyawan Prawiraatmadja said the coal industry needed a robust signal through a carbon tax to participate in the transformation and support the decarbonization of the energy system. 

“In this context, we apply the tax carbon US$ 5 per ton. The fossil fuel producer will think that it is okay to deal with such a tax (low tax-ed). So, it means that the regulation is not working. Unless like in another country where the tax is about USD 50 (per ton). It will drive you to deeply consider using fossils,” said Wawan. 

Deep Decarbonization of Indonesia’s Energy System in 2050 Needs Social Political Support

Jakarta, 20 September 2021– Indonesia’s commitment, incompatible with the Paris Agreement by not increasing the mitigation target in the updated Nationally Determined Contribution (NDC) and only targeting carbon neutrality by 2060 in the Long Term Strategy for Low Carbon and Climate Resilience (LTS-LCCR) document, is predicted to harm the environment and the Indonesian economy in the future. Indonesia is among the top 20 countries that are severely affected by the impacts of climate change in the form of extreme weather. Moreover, the global trade trends are embedding forward the green aspect of their manufactured products. Therefore, the Indonesian industry must compete harder with other countries in the world that have already developed renewable energy technologies and various policies to reduce carbon emissions by 2050 at the latest. 

The energy transition is the right step to overcome the earth temperature’s rise and keep Indonesia competitive in global trading, however, it needs clear and appropriate socio-political support to oversee the energy transition process. It was expressed by Prof. Dr. Kuntoro Mangkusubroto, Chairman of the Advisory Board of the Indonesia Clean Energy Forum (ICEF), at the opening of the annual Indonesia Energy Transition Dialogue (IETD) 2021 organized by ICEF and the Institute for Essential Services Reform (IESR).

“For developing countries like Indonesia, the phase-out of fossil fuel energy development is crucial otherwise it will be too late and too expensive to reduce greenhouse gas emissions and air pollution,” he said.

 

He said that the Indonesian government still has significant homework to do, such as immediately regulate an integrated national energy plan, mitigate the impact of the energy transition on the fossil fuel industry, use low-carbon technology in the transportation industry, and consider the just energy transition. 

Fabby Tumiwa, IESR Executive Director on the same event emphasized that based on the IESR’s study, Deep Decarbonization of Indonesia’s Energy System stated that Indonesia can achieve the target of the Paris Agreement carbon neutral by 2050. He added that this decade is vital because Indonesia must soon reach the peak of emissions in the energy sector by 2030 and boost the renewable energy mix in the electricity sector to reach 45%.

“It implies that the development and investment of renewable energy must be increased 7 to 8 times from the current status, including energy efficiency on the demand side, and start phasing out the thermal power generation to accommodate large-scale renewable energy, and modernizing our grid,” explained Fabby.

At the IETD 2021, Suharso Monoarfa, Minister of National Development Planning/Head of Bappenas in his remarks at the IETD 2021, said that the Indonesian government realized that the energy transition process needed to be carried out to reduce carbon emissions. He revealed that several steps are to be taken to decarbonize Indonesia’s energy system to accelerate the energy transition to renewable energy and develop new renewable energy.

 

“Another strategy is the energy efficiency program by considering the alignment between resource management, financial policy variables, and the role of all sectors,” he continued.

 

Still projecting carbon neutrality in 2060, Arifin Tasrif, Minister of Energy and Mineral Resources added that based on the scenario prepared by the government, the electricity demand in 2060 will be 1885 TWh. To meet electricity demand and achieve net-zero emissions, several policy steps have been taken including phasing out coal power plants, massive new renewable energy development, development of Indonesia’s super grid interconnection, and implementation of energy conservation. 

 

“All of these electricity needs will be fully supplied by new renewable energy power plants in 2060. Massive addition of variable capacity of renewable energy such as solar and wind will be carried out starting in 2031. Meanwhile, the utilization of geothermal and hydro energy will also be optimized to be able to maintain a balanced system,” said Arifin Tasrif.

 

Affirming Arifin Tasrif’s statement, Dadan Kusdiana, Director General of New, Renewable Energy and Energy Conservation, Ministry of Energy and Mineral Resources said that one of the challenges to realizing zero emissions in Indonesia by 2060 is to mobilize all sectors, not only the energy sector.

 

“Currently, in the electricity sector, the technology has already improved, while in the non-electricity sector, it still requires a more specialized study. The development of renewable energy has now begun, such as geothermal projects,” he explained.

 

IETD 2021 is held for five days, from 20-24 September in collaboration with Clean, Affordable, and Secure Energy for Southeast Asia (CASE), a partnership project from several countries in Southeast Asia and funded by the Federal Government of Germany. Further information can be accessed at ietd.info.

Emission Reduction Target in the Indonesia Updated NDC Failed to Reflect the Urgency of Climate Crisis

Jakarta, 30 July 2021 – Despite targeting carbon neutrality by 2060 or earlier in the Nationally Determined Contribution (Updated NDC) and Long-term Strategy on Low Carbon and Climate Resilience (LTS-LCCR 2050) documents submitted to the UNFCCC, the Institute for Essential Services Reform (IESR) views that the emission reduction target is still not in line with the objectives of the Paris Agreement.

The Indonesian government has just released the NDC (Updated NDC) and LTS-LCCR 2050 update documents, which will be presented at the COP26 meeting in Glasgow on 31 October – 12 November 2021. The government, through the Ministry of Environment and Forestry, said that these two documents were prepared based on the conditions of the slumping economic reality due to the Covid-19 pandemic. It made the government focus more on economic recovery efforts to achieve Indonesia’s Vision 2045 to become an advanced economy country.

However, according to IESR, post-COVID-19 economic recovery can be carried out together with building strong climate resilience.

“To become a developed country, Indonesia must be able to have rapid economic growth and must be supported by solid climate resilience. The climate crisis needs serious attention because it can harm human development, economic progress, and social equity,” said Lisa Wijayani, Program Manager for the Green Economy.

Disasters due to the climate crisis are increasingly widespread throughout the world, including Indonesia. One of them is the increasing frequency and intensity of hydrometeorological disasters. BNPB analysis shows that 90-95% of disasters that have occurred since early 2021 are hydrometeorological disasters. These various disasters bring loss of life, social, and economic. The central government spent between US$90 million and US$500 million per year on disaster response and recovery from 2014 to 2018. Local governments are estimated to have spent US$250 million over the same period. This number is predicted to increase in line with the high intensity of natural disaster events. 3 The Ministry of Environment and Forestry also stated that the impact of climate change on the food, energy, water, and health sectors will decrease Indonesia’s GDP by 0.66% – 3.54% in 2030.

Furthermore, judging from the LTS-LCCR 2050 document, the government is still sticking with coal as a source of electricity. This can be seen from the still large portion of coal-fired power plants (CFPP), and relying on CCS/CCUS technology to reduce emissions. Particularly, this technology is still expensive with a capital expenditure greater than $4200/kW. Moreover, there are technical and economic factors so that its feasibility is questioned compared to renewable energy generation options. In addition, the use of CCS/CCUS technology in CFPP will make investment costs in CFPP increase by 74% which affects the increase in electricity generation costs.

The study of Deep decarbonization of Indonesia’s energy system: A pathway to zero emissions by IESR found that Indonesia could even achieve zero emissions in the electricity system by 2045 and the energy system by 2050 by utilizing 100 percent renewable energy.

“This decade is a critical phase to kickstart energy transformation and ensure the Paris Agreement targets are met. In the next 10 years, we must massively increase renewable energy, limit the addition of coal-fired power plants and reduce thermal generation, and promote energy efficiency. Unfortunately, Indonesia’s NDC, on the other hand, failed to adopt the vision of transforming the energy system so that the emission reduction target remains at the level of 29%-41%, lower than it should be” said IESR Executive Director, Fabby Tumiwa.

Coal power plants are also no longer competitive compared to renewable energy power plants. Some countries, such as South Korea and Japan, and more than 100 financial institutions in the world have decided to stop providing CFPP project funding. The IEA (International Energy Agency) projection in the World Energy Outlook 2020 study shows, in 2040 alone, the Levelized Cost Of Electricity (LCOE) of CFPP in the world will be 5.5 – 22.5 Cent/kWh, much larger than solar PV, which is only 1.3 – 3 Cent/kWh. This trend indicates a high risk for CFPPs to become stranded assets and high electricity prices.

Besides the power sector, the transportation sector is also important to decarbonize. Emissions from the transportation sector reached 157 million tons of CO2 in 2019, the second largest after the industrial sector. In the NDC document, the government encourages the implementation of biofuels (46%) and 30% electrification in the transportation sector. The IESR study shows there is a greater opportunity for decarbonizing the transportation sector by conducting more massive electrification of road passenger transport while rapidly increasing the renewable energy mix in the electricity sector to reduce emission intensity on the grid. For this reason, the development of clean fuels, namely hydrogen and synthetic fuels, needs to start soon.

Based on the results of IESR modeling in the Deep Decarbonization study with the best scenario, at least 49% of the transportation sector must have been electrified by 2050, said Deon Arinaldo, Program Manager of IESR Energy Transformation.

IESR appreciates the government’s inclusion of elements of a just energy transition by including issues of gender, equitable energy, and vulnerable groups. The updated NDC has also begun to

show the government’s awareness of the potential for stranded assets and migration to green jobs as a result of the energy transition.

“We urge the government to prepare a coal transition roadmap to anticipate the social and economic impacts that occur from declining coal demand in the future. The strategy of economic diversification in coal-producing areas must be immediately compiled and included in the national development plan,” said Fabby Tumiwa.**

1. World Bank, “Strengthening Indonesia’s Fiscal Resilience to Natural Disasters and Health-Related

2. Shocks”. KLHK (2020). Roadmap NDC Adaptasi Perubahan Iklim, Kementerian LHK, Jakarta.

Massive Utilization of Rooftop Solar Will be Beneficial to the Government and PLN

Jakarta, 28 July 2021- Revision of Ministerial Regulation Number 49 of 2018 concerning the Use of Rooftop Solar Power Generation Systems by Consumers of PT Perusahaan Listrik Negara (PLN), which aligns with the expectations of rooftop solar users will help the government achieve the target of 23% renewable energy mix by 2025 and have major economic, social and environmental impacts. This regulatory improvement can help Indonesia recover from the post-Covid-19 economy and fulfill its commitments to reduce greenhouse gas (GHG) emissions as stated in the Nationally Determined Contribution (NDC).

Until the end of 2020, Indonesia has only reached around 11.5% of the renewable energy mix. To catch up in the next 4 years, the Institute for Essential Services Reform (IESR) calculates that at least Indonesia must build 14-18 GW of renewable energy power plants.

“Observing the draft of the 2021-2030 Electric Power Supply Business Plan (RUPTL), we see that by 2025 the additional development of renewable energy is less than 14 GW. The government should involve the community and actors outside PLN to build renewable energy plants to achieve the 23 percent target,” said Fabby Tumiwa, Executive Director of IESR.

He stated that the communal works to realize the most potential use of renewable energy is by encouraging the adoption of rooftop solar panels on a large scale. Moreover, according to the results of the IESR market survey, there is a market potential of 9%-11% of households or about 7-8 million who are interested in installing solar rooftops. Furthermore, the price of solar PV technology is getting lower and more affordable by the public.

In the process of revising Permen No.49/2018, the government stated that it would improve several provisions, including changing the net-metering electricity export-import tariff to 1:1, extending the reset period from three months to six months, obligating a mechanism application-based services, expanding the licensing of solar rooftop installations to customers in non-PLN business areas, shortening the licensing process and building a Solar Roofing System Complaint Center.

IESR views that there is an effort to improve the economy of solar PV, which is better with the provision of a net-metering rate of 1:1 from the previous 1:0.65. From the market study conducted by IESR, the public’s interest in using rooftop solar PV is high, and they expect policies that will simplify the licensing and installation process as well as adequate economics. With a net-metering rate of 1:1, the payback period for PV mini-grid investments can be decreased from 10 years to less than 8 years.

This provision will affect the revenue of PLN but not significantly compared to the economic, environmental, and social impacts of the development of solar rooftops. The IESR simulation shows that if there is a total installation of 1 GWp of rooftop solar power, PLN’s income will only decrease by 0.58% with a net-metering rate of 1:1 and 0.52% at a rate of 1:0.65. On the other hand, PLN will take the benefit. With the addition of rooftop solar power plants, PLN does not need to invest more in new renewable energy plants to achieve the RUEN target and reduce the operating burden of gas-fired power plants for supply during the day – thereby reducing fuel costs.

The use of electricity from rooftop solar panels for industrial customers will also reduce the weight of government subsidies.

“Currently, PLN spends the basic cost of generating Rp 1,028/kWh. Meanwhile, the subsidized industrial tariff is Rp. 972/kWh. The use of rooftop solar power plants in the industry will substitute for electricity demand from PLN so that the load of subsidizing industrial customers will also be reduced, ” Fabby explained.

Although it has not been officially released, Fabby Tumiwa, who is also the Chairman of the Indonesian Solar Energy Association (AESI), appreciates the improvement and sees it as a breath of fresh air to encourage market development and the development of the PV mini-grid industry in the country.

“So far, the domestic solar PV industry has not developed because the market is still small, around 20-30 MW/year, so it still depends on imports. If Indonesia can reach 1-5 GW/year, it will be able to attract investment in the solar PV component supply chain, meaning that there is a new industry that absorbs workers,” said Fabby.

The cumulative installation of 1 GWp of solar rooftop can absorb direct labor of 20,000 – 30,000 people per year (conservative figure) and reduce GHG emissions to 1.05 million tons per year. The development of this rooftop solar power plant will be useful for the Indonesian government in recovering the economy after Covid-19. Also in 2021, the warranty period for the Energy Saving Solar Lamp (LTSHE) package for the 2018 program year will expire. This pre-electrification program is part of the calculation of the national electrification ratio, so the government needs to immediately continue efforts to provide access to energy, for example by using rooftop solar power plants with a minimum capacity of 0.5 kWp to 1 kWp – which can be used for productive community activities.

“The USAID study for the Ministry of Energy and Mineral Resources also found a large economic impact reaching USD 18 million in each installation of 2,000 rooftop solar panels for an average capacity of 4.5-5 kWp. Nationally, this will move the sluggish economic conditions back. The benefits are far greater for the community than the potential loss of PLN income,” he said.

The Ministry of Energy and Mineral Resources has reportedly also proposed rooftop solar become a National Strategic Project (PSN) with a target of 3.6 GW in 2025. Thus, the revision of Ministerial Regulation No. 49/2018 is crucial to support the achievement of this target.

Electricity Sector Can Achieve Zero Emissions in 2045

Jakarta, 15 July 2021- In the last two decades, renewable energy has developed very rapidly in terms of technology and economies of scale, therefore, many countries in the world are increasing the use of renewable energy. Between 2000 and 2020, the worldwide renewable power generation capacity increased 3.7 times, from 754 gigawatts (GW) to 2,799 GW. The rapid development in the last decade at the global level was mainly driven by the construction of solar power plants and wind power plants. In the same period, the cost of electricity from utility-scale photovoltaic (PV) fell by 85% (IRENA, 2020)..

Having diverse and abundant renewable energy sources, especially its solar technical potential of up to 20 thousand GWp, based on a recent report entitled “Deep decarbonization of Indonesia’s energy system: A pathway to zero emissions by 2050” by the Institute for Essential Services Reform (IESR) that Indonesia as a whole technically and economically able to achieve zero-emission in the electricity sector in 2045, much faster than the transportation and industrial sectors which will achieve the same condition in 2050.

“Compared to the transportation and industrial sectors, the electricity sector is the low hanging fruit in the effort to decarbonize Indonesia’s energy system. That’s why this one decade is very decisive. Four things need to happen in the next decade: (1) renewable energy acceleration, (2) stop the construction of new coal-fired power plants before 2025, (3) plan to accelerate the termination of steam power plants, especially subcritical types, and (4) modernize the grid,” said Fabby Tumiwa, Executive Director of IESR.

The electrification of the transportation sector (acceleration of the use of electric vehicles/EVs) and industry (electrification of industrial processes) also started along with a deep decarbonization process in the electricity sector. As a result, reducing GHG emissions in the power sector will contribute to significant emission reductions in the transportation and industrial sectors. Using the Best Policy Scenario (BPS), IESR shows that electricity demand from the transportation and industrial sectors will continue to increase towards 2050. Around 50% of electricity will be produced by renewable energy in 2030 from 140 GW of renewable energy power generation, before finally reaching 100% renewable energy in 2045. In this scenario, the Levelized cost of electricity (LCOE) can decrease from 79.52 USD/MWh in 2020 to 40.59 USD/MWh in 2050 so that the cost of electricity generation of renewable energy in Indonesia is becoming increasingly competitive.

By relying on solar energy (photovoltaic), IESR modeling shows that electricity supply is guaranteed even though the variability of solar power generation is quite high. To balance the load requirements and solar power generation, it can be done by charging batteries & utilizing pumped hydro energy storage, utilizing electricity to produce clean fuel, utilizing electricity for transportation (EV charging), utilizing electricity to produce thermal energy, and exporting and importing electricity between regions. Hydroelectric power plants can also be operated flexibly during this period to help balance the system, while geothermal operate as baseload.

Integrating the transportation sector and the industrial sector through electrification, indeed, requires a massive expansion of the electricity network covering all regions in Indonesia. The BPS scenario shows that nearly 760 TWh of electricity is distributed throughout the country by 2050, with Java Island as the main energy consumer in Indonesia consuming 80% of the country’s total energy. To meet its energy needs, Java Island will import 4.6% of electricity in 2030, 45.5% in 2040, and 82.1% in 2050 from the islands of Sumatra and Nusa Tenggara.

IESR recommends to the government to increase the capacity of Indonesia’s electricity grid to support the inter-island power grid interconnection system and optimize renewable energy resources spread across various islands. The Java-Sumatra interconnection is important to supply electricity to Java by up to 50 percent by 2050. In addition, the interconnection between East Java and Bali needs to be expanded to Nusa Tenggara to meet the electricity needs of other small islands. The results of the IESR model even show that by 2050, a transmission capacity of 158 GW needs to be built to connect Indonesia from west to east.

“The government needs to make a decision today because it will affect the speed at which we transition and the costs we will incur. If we continue to develop coal-fired power plants even though there have been many studies that have revealed it will become a stranded asset, it will become an economic burden for Indonesia. Deep decarbonization of the energy system to achieve zero emissions is beneficial for Indonesia,” said Pamela, lead author of the report “Deep decarbonization of Indonesia’s energy system: A pathway to zero emissions by 2050”.

Planning for the construction of inter-island transmission and interconnection networks that can support Indonesia to achieve the zero-emission target in 2050 is very crucial to be carried out as soon as possible. It is because the construction of transmission network projects usually takes a long time. Undoubtedly, it takes a firm commitment from the government, policymakers, regulators, and the State Electricity Company (PLN) as the main operator of transmission and distribution lines.

However, at the Hearing Meeting in the House of Representatives, May 2021, PLN stated that it is currently preparing a strategic plan with the Ministry of Energy and Mineral Resources to achieve carbon neutrality by 2060. However, this is incompatible with the target of the Paris Agreement for net zero emissions by 2050.

“PLN’s plan is still not ambitious enough to achieve the target of the Paris Agreement. The IESR study shows that the electricity sector can achieve zero emissions by 2045 by utilizing renewable energy. The plan will risk causing an increase in the cost of providing electricity, stranded assets & lost opportunities for the use of cheaper renewable energy technologies,” said Fabby Tumiwa.

The report “Deep decarbonization of Indonesia energy system: A pathway to zero-emission by 2050” is a study by IESR in collaboration with Agora Energiewende, and Lappeenranta University of Technology (LUT). The report can be downloaded at the following link:

Deep decarbonization of Indonesia’s energy system: A Pathway to zero emissions by 2050

 

IESR launches a pathway to zero emissions by 2050

 

A pathway to zero emissions by 2050: Technologically and Economically Feasible, Indonesia Just Needs a Strong Political Will and Bold Plan to Reach Zero Emissions by 2050

The narrow time is running out to overcome the increasingly threatening climate crisis. In contrast, Indonesia’s NDC is lacking ambition in complying with the Paris Agreement to keep the earth’s temperature below 2 degrees, let alone the 1.5 degrees Celsius. It was evident in the 2050 Long-term Strategy on Low Carbon and Climate Resilience (LTS-LCCR) document in mitigating climate change which only targets carbon neutrality in 2070.

Institute for Essential Services Reform (IESR) new report “Deep decarbonization of Indonesia’s energy system: A pathway to zero emissions by 2050” shows that Indonesia’s energy sector is technologically and economically feasible to achieve zero carbon emissions by 2050.

This report is the first comprehensive study in Indonesia to present a path to achieving a zero emission energy sector by 2050. It is an important milestone as the current mitigation action in the energy sector is not ambitious enough. The emissions from the energy sector are predicted to increase to 58% by 2030, as indicated under the BAU scenario in Indonesia’s Nationally Determined Contribution (NDC), mainly driven by the increase in the final energy consumption.

“As one of the largest economies in the world and with its strategic position in Southeast Asia, Indonesia should take a lead in transforming its energy system now. Decarbonization of Indonesia’s energy system could bring significant impacts on the region and inspire other countries to accelerate energy transition. Making this happen will require strong political commitment and leadership by President Jokowi,” said Fabby Tumiwa, Executive Director of IESR.

He added that the first and crucial step of this journey is to reach an emission peak by 2030 at the latest. With strong policy support, renewable energy shall be deployed at large scale, accompanied by declining thermal power capacities.

Using the Energy System Transition Model developed by the Lappeenranta University of Technology (LUT), this report shows that it is achievable to use 100 percent of renewable energy in the power, heat, and transport sectors in Indonesia.

“The model used for the detailed scenario analyses for Indonesia is designed for hourly temporal resolution and interconnected regions, as this is of highest relevance for the energy transition of Indonesia for ensuring a stable energy supply for all hours and all regions,” said Christian Breyer, LUT Solar Economy Professor.

This decade will become a crucial time for decarbonization efforts in Indonesia. To bend the emission curve, Indonesia needs to install around 140 GW of renewable energy by 2030, of which about 80% is solar PV. Sales of electric cars and motorcycles should increase to 2.9 million and 94.5 million by 2030 respectively, a dramatic increase from nearly zero sales today. Meanwhile, electric heating should become the main heat producer in the industrial sector, accompanied by biomass energy. Most importantly, PLN needs to stop building new coal-fired power plants by 2025.

By 2045, renewable energy supplies 100 percent of the electricity in Indonesia. For the first time, the Indonesian power sector becomes carbon free. Solar PV is the largest contributor in power generation with 88% share, followed by hydropower at 6%, geothermal at 5%, and other renewable energy at 1%. To address the intermittency issue, energy storage technology is used, mainly batteries. Meanwhile, synthetic fuels, hydrogen, and electric heating will play a greater role in decarbonizing the transport and industry sectors. The importance of grid integration of Java, Sumatra, Kalimantan, and other islands will increase from 2030 onwards as renewable energy becomes the backbone of Indonesia’s energy system. The IESR model shows that by 2050, an overall transmission capacity of 158 GW is required to connect the archipelago from west to east.

By continuing the decarbonization efforts in the much-harder-to-abate transport and industry sectors to 2050, Indonesia will reach a point where the whole energy sector becomes carbon free through the use of 100% renewable energy. The decarbonized energy system would potentially reduce the annual system cost by 20% compared to a fossil-based energy system.

To reach such an ambitious target, Indonesia will need investment of USD 20-25 billion per year from now until 2030 and will increase to USD 60 billion per year between 2030 and 2040. Considering the big investment needs, the government should attract investment from the private sector and individuals. Improvement of the investment climate is therefore crucial in this endeavor.

“The size of the challenge should not obscure the fact that deep decarbonization will bring enormous benefits and opportunities to Indonesia’s economy,” said Pamela Simamora, Research Coordinator of IESR and author of this report.

Through deep decarbonization, Indonesia will see at least 3.2 millions of new, sustainable and quality jobs, the improvement of public health (which will also imply a substantial reduction in health costs), and the establishment of a modern economy, which enable the country to compete in the growing world market for carbon-neutral products. To get there, a strong political will is required. The Indonesian government also needs to put in place the right policies and regulations today and remove regulations and policies perceived as barriers to clean technology investments.

The report “Deep decarbonization of Indonesia’s energy system: A pathway to zero emissions by 2050” is a study by IESR in collaboration with Agora Energiewende, and Lappeenranta University of Technology (LUT). The launch of the report is held on May 28th, 2021. The report can be downloaded at the following link:

https://iesr.or.id/en/pustaka/deep-decarbonization-of-indonesias-energy-system-a-pathway-to-zero-emissions-by-2050