ISEW 2022: Unity of Action and Indonesia’s Energy Transition Strategy

Ambassadors joined the discussion in ISEW 2022 on the topic of International cooperation in advancing energy transition in Indonesia

Jakarta, 09 October 2022 – The government of Indonesia needs a strong commitment to implementing energy transition through strong political and policy support. It supports global efforts to keep the global average temperature rise below 1.5 C, achieve energy security, and focus investment on sustainable development, such as renewable energy development. In addition, the involvement and participation of all Indonesian people are crucial in the energy transition process. Unity of action and strategy in the energy transition is a discussion that will be explored further at Indonesia Sustainable Energy Week (ISEW) 2022.

“This event will create a common understanding, provide understanding, especially regarding the efforts that need to be done in pursuing the Net Zero Emissions (NZE) target by 2060 or sooner,” said Rachmat Mardiana, Director of Electricity, Telecommunications and Informatics, Ministry of National Development Planning/Bappenas in media briefing and virtual launch of ISEW 2022.

Rachmat added that the Indonesian government hopes to escape the middle-income trap and become a developed country before Indonesia’s 100th anniversary in 2045. He emphasized that internalizing energy transition efforts in preparing long-term development plans is more important.

Yusuf Suryanto, Coordinator of Electricity, Directorate of Electricity, Telecommunications and Information, Bappenas, explained that to become a developed country, Indonesia needs to increase economic growth and expand its financial growth center area.

“The point is, Indonesia’s economy is expected to grow more than 6%, and the role of the eastern part of Indonesia needs to be increased to 25% so that economic growth outside Java will dominate,” said Yusuf.

Furthermore, he emphasized that the outer Java region’s economic growth could align with the energy transition process in eastern Indonesia. 

Fabby Tumiwa, Executive Director of the Indonesia Clean Energy Forum (ICEF) & Institute for Essential Services Reform (IESR), said that Indonesia has an opportunity to increase energy consumption and supply while reducing the intensity of greenhouse gas emissions.

“The key in policies and regulations and proper planning to encourage low-carbon technologies to replace energy supplies of which 87%, according to government data, comes from fossil energy,” explained Fabby.

The Government of Indonesia’s commitment to the energy transition is demonstrated by the issuance of Presidential Regulation (Perpres) No 112/2022 concerning the Acceleration of Renewable Energy Development for the Provision of Electricity. This Presidential Regulation regulates the setting of tariffs for renewable energy, which has the potential to revitalize the renewable energy investment climate in Indonesia. Not only that, but this Presidential Decree also provides a mandate for the Ministry of Energy and Mineral Resources to prepare a roadmap for accelerating the termination of the PLTU operational period.

“Regarding the energy transition, the Minister of Energy and Mineral Resources compiled a roadmap to accelerate the termination of the PLTU operational period after coordinating with the Minister of Finance and the Minister of SOEs. Follow-up actions that it will carry out include consolidating and aligning perceptions with PLN and the relevant Ministries contained in this Presidential Regulation,” explained Andriah Feby Misna, Director of Various New Renewable Energy, Ministry of Energy and Mineral Resources.

Fabby added that to achieve Net Zero Emissions by the 2060 Scenario (NZE), new and renewable energy generation will be driven by 786.2 GW, with 60.2 GW coming from battery power.

 

The energy transition to renewable energy will have a social, economic, and environmental impact on the people of Indonesia. Indonesia, as a country that exports 75% of its coal production, the Indonesian economy will contract significantly if there is a decline in demand. We can see the strengthening climate commitment of Indonesia’s coal export destination countries such as China, India, Japan, and South Korea. Economically, constructing renewable energy plants is predicted to be cheaper than building a new PLTU in 2023 and more affordable than operating an existing PLTU in 2030. A production decline will have a negative impact based on an IESR study entitled Redefining Future Jobs. Employment along the coal value chain from production, processing, transportation, and end-use.

Widhyawan Prawiraatmadja, an Indonesia Clean Energy Forum (ICEF) member, emphasized that the energy transition must be carried out fairly. Anticipating the impacts, especially in the affected sectors, such as the coal industry, needs to be done.

“Workers, especially in sectors undergoing adjustment, such as in the coal sector, need to be prepared for their capacity and capability to switch to clean energy,” he explained.

Widhyawan said that energy transition needs to be ensured with the support of incentives from the government. Furthermore, he also encourages public awareness and contribution to energy efficiency, which is still far behind developed countries.

Indonesia’s energy transition process will be discussed at ISEW 2022, especially concerning accelerating the retirement of Indonesian PLTU. ISEW 2022 will discuss various aspects of support, inclusiveness, and mitigation strategies in detail on the implications of the energy transition that Indonesia needs to prepare for the energy transition process.

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). Previously, it routinely held discourse on energy transition in Indonesia at the Indonesia Energy Transition Dialogue (IETD), which this year participated in ISEW 2022. First maintained in 2022, ISEW will last five days from 10-14 October 2022 with the theme Reaching Indonesia’s Net Zero Energy System: Unite for Action and Strategy. All levels of society can participate in this activity free at isew.live.***

C20 Urges Utilities Companies in G20 to Implement Energy Transition

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From left to right: Vivian Lee (SFOC), Fabby Tumiwa (IESR), Federico Lopez De Alba (CFE), Dennis Volk (BNetza), Philippe Benoit (Columbia University) photo by IESR

Bali, 30 August 2022 – As the main contributor to GHG emissions in the energy sector, Civil of Twenty (C20) Indonesia urges power utility companies to set inevitable targets, and a clear climate mitigation roadmap to reach zero emission by 2050. Civil of Twenty (C20) Indonesia invited energy experts and representatives from G20 power utility companies to discuss and urge the long-term strategy proposed by these power utility companies to accelerate the clean energy transition in their respective countries so as to align with the 1.5C pathway.

Risnawati Utami, the Sous-Sherpa of C20 Indonesia, in her opening remarks emphasized the importance of Indonesia’s leadership to promote and engage all civil societies to influence the commitment and policy of the countries’ members to adopt the human rights principles and international cooperation in mitigating the climate risks.

“The role of international cooperation recognizes the government’s responsibility to work together internationally, to urge implementation plans and strategies to reduce climate risks,” said Utami in the webinar of C20 titled “Role of G20 Power Utilities in Climate Mitigation Efforts”.

The COP27 High-Level Champion, Mahmoud Mohieldin stated about 800 million people in the world are still living without electricity access. He said that solutions to overcome the energy problem and mitigate the climate crisis are the availability of adequate policy, effective implementation, localization and financing.

“The Paris Agreement needs to be aligned and integrated with the SDG framework, otherwise we are going to be suffering from a bad refabrication and partial approach,” said Moheildin.

He expected that in COP27 which will be held in Egypt, more countries will come up with a more holistic approach towards sustainability focusing on the implementation and projectization ideas and initiatives and more of emphasis on the regional dimension, localization, and finance.

Fabby Tumiwa, Co-chair of C20 Indonesia and Executive Director of the Institute for Essential Services Reform (IESR) stated that as Indonesia holds the G20 Presidency, it should take bold action in orchestrating its power utility to implement energy transition. 

“Every country has to find its own way to deal with energy transition. The utility is facing serious challenges, such as climate change impacting the operation of the energy system, customer demands more renewable electricity at an affordable price, the workforce needs to upgrade with the current skill of renewable energy, regulation to limit carbon emissions, new technology is coming up that creates uncertainty in current utility business model,” said Fabby.

Fabby added that utilities need to adapt faster since there is limited time left to combat the climate crisis. Learning and skill shares among G20 members are crucial for utilities able to implement the solution immediately.

Philippe Benoit from Global Energy Policy, Columbia University presented that as State-owned Power Companies (SPCs) play a significant role in reducing GHG emissions, the government needs to reform it by influencing SPCs with policy options and targeted interventions directly and indirectly.

“The government can support SPC low carbon action by making resources available to SPC and advocacy, external pressure. But I would say, the easiest for a government that is committed to climate policy is to exercise the government shareholder power. For example, formal directive through Board resolutions and instructions, senior management appointments and dismissals,” said Benoit.

He added that other reformations of SPC include resourcing SPC low carbon actions with clear, consistent government direction, financing, complimentary or associated infrastructure, administrative support and capacity building for SPCs.

“SPCs need to participate in low carbon transition, as partners, not adversaries, and as enablers, not just producers. Empowering SPC low carbon action is key to achieving national and global climate goals,” he said.

Joojin Kim, Managing Director of Solutions for Our Climate (SFOC) offered a G20 outlook on accommodating more renewables in the power system. 

“We are in a pivotal moment and state utilities in the G20 must show leadership to unite the international community around solutions to the climate crisis. Many G20 nations, especially in Asia, are experiencing significant curtailment of renewables. Amid the present global energy situation, curtailment poses further uncertainty and economic loss. To address such challenges, countries must establish a governance framework that will ensure fair access and compensation for technologies that contribute to grid flexibility in order to reduce fossil fuel expenditure and increase renewable energy in the power mix,” said Joojin.

Evy Haryadi, Director of Corporate Planning of Perusahaan Listrik Negara (PLN), Indonesia, stated that achieving Indonesia’s net-zero target by 2060 by phasing out coal and developing renewable energy needs enormous investment. 

“Indonesia needs around USD 600 billion investment for carbon neutrality by 2060. We need support from international funders. However, for early retirement initiatives, the energy transition financing scheme is not existing in the market but is green financing. Transition financing still needs some regulatory framework, especially in international financing,” said Evy Haryadi. 

This event is organized by the C20 working group of environment, climate justice, and energy transition (ECEWG). C20 is one of the engagement groups under the G20 which represents civil society voices and concerns.

Significant Roles of Subnational Governments to Lead the Decentralization of Energy Transition

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Bali, 30 August 2022The post-pandemic economic recovery by staying focused on making ambitious climate mitigation efforts through low-carbon development is a step that needs to be taken by local governments. The success of low-carbon development is also inseparable from planning for a just energy transition. The commitment of various parties, including local governments and communities to promoting the energy transition, is crucial considering that decentralization of the energy transition will have multiple impacts.

The Governor of Central Java, Ganjar Pranowo, said that through the Central Java Energy and Mineral Resources Office, he was actively pushing for energy transition efforts in his region. Energy transition policy instruments such as governor’s circular letters, regional secretaries, and various initiatives such as the declaration of Central Java to become a solar province in 2019, are ways to attract the private sector and the public to utilize renewable energy through the adoption of rooftop solar. Until Q2 2022, the total installed PLTS capacity in Central Java Province reached 22 MWp. The Central Java Provincial Government also supports the use of other renewable energy that is abundantly available, such as livestock manure biogas and micro hydro power plant(MHP), with government programs or encouraging community collaboration.

“Asymmetric decentralization by inclusion with (treatment-red) specifically in every location. With collective awareness, the potential for renewable energy in the area is checked and stimulated,” said Ganjar. This, according to Ganjar, will encourage a faster transformation.

Central Java’s climate commitment is also shown by starting to use electric vehicles as provincial government official vehicles.

Togap Simangunsong, Expert Staff of the Minister of Home Affairs for Social Affairs and Inter-Institutional Relations, Ministry of Home Affairs appreciated the good practices carried out by the Central Java Provincial government. He said that his party and the Ministry of Energy and Mineral Resources are currently drafting a Presidential Regulation that strengthens the authority of regional/provincial governments in the administration of government affairs in the field of energy, mineral resources, and sub-sector of new and renewable energy.

“Through this, it is hoped that local governments can provide support in efforts to achieve the target of the new renewable energy mix as an effort to reduce greenhouse gas emissions so that local government commitments are made to accelerate energy justice following their authority,” said Togap representing the Minister of Home Affairs, Tito Karnavian in a webinar entitled “Energy Transitional Decentralization: Increasing the role of communities and local government” organized by the Institute for Essential Services Reform (IESR) and the Central Java Provincial Government.

In addition, Chrisnawan Anditya, Head of the Planning Bureau, Ministry of Energy and Mineral Resources said that the utilization of renewable energy potential will open up opportunities in building a green national economy and as an effort to recover the economy after the pandemic under the G20 Presidency’s theme, “Recover Together, Recover Stronger”.

“Each region has a special new renewable energy potential that can be used to improve the welfare of local communities. The difference in the potential for new and renewable energy between regions is a technical challenge, as well as a great opportunity for our energy system. This condition allows the sharing of energy based on new and renewable energy when the area experiences energy abundance or scarcity. For this to happen, an integrated electric power system (smart grid and super grid) is needed,” explained Chrisnawan on the same occasion.

Furthermore, strong leadership at the regional level will be able to mobilize the community to make the cooperation of energy transition. This was stated by Fabby Tumiwa, Executive Director of IESR. He said the initiative and leadership of the local government will be able to answer the problem of access and security of energy supply by utilizing the abundant renewable energy potential in the area.

“Indonesia’s energy transition requires the construction of hundreds or even thousands of gigawatts, renewable energy generation, transmission and distribution infrastructure and energy storage systems. But by starting to divide it into small units, the big problems can be more easily solved and carried out by more parties,” said Fabby.

He added, based on the IESR study, that the decarbonization of the energy system in Indonesia will cost USD 1.3 trillion by 2050, with an average investment requirement of USD 30-50 billion per year. This amount is 150%-200% of the current total investment in the entire energy sector.

“This investment need is costly and cannot be borne solely by the government and SOEs. But this large investment can be met if we take into account the potential of the contribution and innovation power of the community as well as the capabilities of local governments. Citizens’ contributions and innovations can mobilize funding from the government, local government and village governments, as well as funding from the private sector and non-governmental institutions,” he added.

Bali is the first province in Indonesia to have a special governor regulation for clean energy and electric vehicles. In the Governor’s Regulation on Bali Clean Energy, the Governor of Bali encourages the use of renewable energy for various sectors, especially rooftop solar power plants. This effort is carried out to realize the vision of low carbon development in Bali and concrete steps for sustainable tourism.

“Due to the pandemic, Bali’s tourism has stumbled, after the pandemic, Bali has started to rise. Several tips have been implemented, such as the governor’s regulations and circulars regarding the adoption of rooftop solar power plants. Actually, the main target is tourism, but first, do a pilot in the government,” said Ida Ayu, Expert Staff to the Governor of Bali.

The plans and steps for achieving renewable energy targets in the Regional Energy General Plan (RUED) are also carried out by the Jambi Provincial government. The Governor of Jambi, Al Haris, through the Deputy Governor of Jambi, Abdullah Sani, emphasized his commitment to work together with the central and private parties to develop regional energy transitions because the resources they have are very sufficient, only to use and transform natural resources into energy that can be enjoyed by the Jambi community in particular.

The Jambi Provincial Government through the Department of Energy and Mineral Resources has also collaborated with IESR for the implementation of RUED and energy conservation efforts within the local government. Currently, the Governor of Jambi is in the process of issuing a governor regulation for the use of PV mini-grid as a substitute for energy subsidies.

Green Recovery through Rooftop Solar Adoption

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Bali, August 9, 2022 – After the Covid-19 pandemic, economic growth in Indonesia is slowly recovering. Having contracted to minus 5.32% in the second quarter of 2020, Indonesia’s economic growth began to move positively at 5.02% in the fourth quarter of 2021. This momentum should be an impetus for the government to align the post-pandemic economic recovery with a sustainable green recovery, in line with long-term climate goals and contribute to the reduction of greenhouse gas emissions.

However, in developing a sustainable economy as part of the green recovery, we are still faced with harmonization in policies, including the policy of developing rooftop solar. Jadhie Judodiniar Ardajat (Main Expert Planner) of Bappenas said that the adoption of rooftop solar PV needs to be encouraged.

“Although the challenges, constraints and potential risks faced in the future are still relatively large, the development of solar rooftop is a chosen step, which is projected and believed to be one of the priorities and optimal steps in the framework of developing new renewable energy supply and is part of the national priority, within the framework of national energy transformation,” said Jadhie in his remarks at the “Sustainable Economic Recovery by Promoting Solar PV Development” webinar held in Bali by the Clean, Affordable and Secure Energy for Southeast Asia (CASE) project.

The Governor of Bali, I Wayan Koster stated that his party supports the adoption of rooftop solar by issuing various policy instruments, such as Circular Letter Number 5 of 2022 concerning the Utilization of Rooftop Solar PV.

“The community response has been very good. But when we want to increase it (rooftop PV adoption), there is a policy from PLN that limits the installation of rooftop solar to only 15 per cent,” he said.

While promising to discuss further with policymakers at the national level regarding the obstacles to installing rooftop PV, Koster said that the development of clean energy must be viewed as a whole, not partially.

“The use of clean energy will make the ecosystem better, including healthiness. If PLN feels a loss (on revenue), then it is better to change its business scheme,” he said.

Similarly, Fabby Tumiwa, Executive Director of IESR who is also the Chairperson of the Indonesian Solar Energy Association (AESI) encouraged PLN to review its policies to encourage massive rooftop PV penetration.

“The policy of limiting the capacity of rooftop PV installed in a building has made rooftop PV unattractive. In addition, this has made many EPCs in medium and small business scale who are members of the AESI lay off their employees due to the lack of demand to install rooftop solar,” he explained.

Daniel Kurniawan, Researcher Specialist in Photovoltaic Technology & Materials at the Institute for Essential Services Reform (IESR) and lead author of the CASE Indonesia report entitled Supporting National Economic Recovery through Power Sector Initiatives said that the Indonesian government has so far not prioritized green recovery in the context of national economic recovery post-pandemic. This can be seen from the allocation of the National Economic Recovery (PEN) budget which is still dominantly targeting the fossil energy sector which is the largest contributor to greenhouse gas emissions in Indonesia.

“Meanwhile, the budget allocation for this low-carbon development initiative is still very low, only under 1% or around Rp. 7.63 trillion of the 2021 PEN allocation of Rp. 747.7 trillion,” Daniel explained in his presentation.

Daniel identified several reasons why the government is still slow in aligning the economic recovery with the green recovery, including the assumption that the green recovery initiative is not urgent to be carried out due to its long-term nature, and the limited fiscal budget.

Responding to this, Daniel in the same report stated that the alignment of economic recovery with green recovery can be done by encouraging the adoption of rooftop PV. According to him, rooftop PV can be installed faster than utility-scale PV, plays an important role in decarbonizing the electricity sector, and creates more jobs.

“Installation of 2,000 units (9.1 MWp) of rooftop solar will create at least 270 direct jobs, 270 indirect jobs, and 170 new jobs,” he said.

For the adoption of rooftop PV, Daniel encouraged the government to, first, carry out general procurement for the installation of rooftop PV in government buildings. The cost of procuring rooftop solar can be reduced by using a long-term financing scheme that only pays for the operational costs of rooftop solar. Second, implementing a general procurement program for rooftop solar aimed at subsidized households or what IESR calls the Solar Archipelago (Surya Nusantara) program. The economic benefit is in the form of cutting electricity subsidies.

“The Solar Archipelago program will save electricity subsidies from the APBN amounting to Rp. 1.3 trillion per year or Rp. 32.5 trillion for 25 years of the economic life of rooftop PV. In addition, this program can also reduce greenhouse gas emissions by up to 1.05 million tCO2 per year for the installation of 1 GWp of rooftop solar,” he explained.

Third, encourage adoption or small scale by providing financial incentives in the form of subsidies or installation of free kWh meters or fiscal incentives such as tax exemptions and other steps that can attract people to install rooftop solar power plants.***

The video on demand of the “Sustainable Economic Recovery by Promoting Solar PV Development” webinar can be accessed at the following link:

https://caseforsea.org/post_events/sustainable-economic-recovery-by-promoting-solar-pv-development/ 

Energy Transition Development in the Southeast Asia Region

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Jakarta, 1 August 2022 – Achieving the renewable energy mix target of 23% in 2025 in the Southeast Asian region needs strong collaboration among the countries to support the sustainable energy transition and shift the fossil fuel investment into renewable energy.

It was confirmed by Fabby Tumiwa, Executive Director Institute for Essential Services Reform (IESR) on the webinar ‘The State of Southeast Asia Energy Transition’ (29/7). According to him, Southeast Asia is growing to become a region that is entitled the second largest powerful economy in Asia after China so the energy demand will continually increase in the future.

“Many countries in the Southeast Asia region still relied on fossil energy such as coal, gas, and oil. Meanwhile, Southeast Asia is a region that is vulnerable to the impact of the climate crisis. Collaborative measures of transition from fossil into renewable energy in this region may give significant contributions toward global efforts to achieve the Paris Agreement target,” he said.

Indonesia itself has a 23% target for renewable energy mix in 2025 and 31% in 2030. Nonetheless, according to Handriyanti Puspitarini, the IESR study found that if there was no policy change, then Indonesia would only achieve 15% of the renewable energy mix in 2025 and 23% in 2030.

“If we look at the trend from 2013-2021, the renewable energy market has increased though in slow progress. In the meantime, according to the IESR study, Indonesia has technical potential in renewable energy for more than 7.000 GW. Meanwhile, the utilization only reaches 11,2 GW,” Handriyanti explained. 

She examined the duration of permission matters and the complexity of the mechanism for procuring renewable energy projects in Indonesia makes investors reluctant to invest in Indonesia.

“Indonesia needs to increase its political aspect, policy and financial regulation to encourage the massive development of renewable energy, especially based on the results of IESR study, public awareness of the energy transition and climate change begin to increase,” she said.

On the other hand, in 2021, the commitment to increase the renewable energy mix in Malaysia had been conveyed by the Ministry of Energy and Mineral Resources Malaysia through Malaysia’s Energy Transition Plan until 2040.

“Malaysia increased the renewable energy mix target from 20% in 2025 to 31% in 2025 and 40% in 2030. Malaysia’s commitment would no longer establish a new CFPP to achieve carbon neutrality as soon as possible by 2050,” explained Anthony Tan, Executive Officer (Sustainability & Finance), All Party Parliamentary Group Malaysia on Sustainable Development Goals (APPGM-SDG) at the same occasion.

However, according to him, the Malaysian government also needs to encourage energy efficiency and holistic sustainable transportation planning.

“Malaysia needs a holistic national energy policy. Besides, Malaysia must develop or change National Automotive Policy to become a holistic National Transport Policy to reduce the utilization of fossil energy in the transport sector,” said Antony.

Vietnam’s commitment to achieving zero emission in 2050 was also conveyed by Nguyen Thi Ha, Sustainable Energy Program Manager at Green Innovation and Development Centre (GREENID). She explained that Vietnam was committed to ceasing the 7-8 GW CFPP operation to support decarbonization in the energy system by increasing the renewable energy mix on offshore wind turbines by 11,7 GW (9,7%) in 2030 and 30 GW onshore wind turbines (10,5) in 2045. The Solar Park itself will achieve 8,7 GW (7,2%) in 2030 and will increase by 20,6% in 2045.

To achieve zero emission, it will need significant investment in the energy sector, transportation, agriculture, and industry.

“According to the World Bank study, the required total financing for decarbonization is approximately USD 114 million in 2022-2040,” Thi Ha explained.

Vietnam has also planned a new strategy to develop an environmentally friendly transportation system.

“Even from 2025, Vietnam will commit to replace 100% of its buses with electric buses and equip it with supportive infrastructure for Vietnam’s electrification of the transportation system,” said Thi Ha.

Power plants in Vietnam are dominated by 57% of coal in 2020, along with a renewable energy mix of 21% in 2020.

Bert Dalusung, Energy Transition Advisor Institute for Climate and Sustainable Cities (ICSC) said that for the first time the Philippines has a clear plan for renewable energy development.

“In this clean energy scenario, the Philippines is targeting a 30% and 50% share of renewable energy in the power generation mix by 2030 and 2040,” said Bert.

Bert added that the Philippines government realized that renewable energy would be a key element in the climate change agenda. Thus, citing President Ferdinand Marcos’ statement, the government will examine all transmission and distribution systems to accommodate the development of renewable energy and lower energy costs for consumers and industry. ***

The Webinar “The State of Southeast Asia’s Energy Transition” is available on the IESR Indonesia YouTube channel.

Seize the Energy Transition Funding Opportunity

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Jakarta, 28 July 2022- Indonesia’s energy transition requires significant investment to develop renewable energy generation, clean fuels, power grids, and energy storage. However, Indonesia also has a huge opportunity to attract investment in the renewable energy sector while developing innovative financing instruments

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One out of three panel sessions at the G20 seminar series that discuss sustainable financing opportunities for energy transition in Indonesia (27/07/2022). (Doc. Seminar Secretariat )

“Indonesia at least needs investment for the energy transition of around USD 1 trillion by 2060”, said Minister of Energy and Mineral Resources, Arifin Tasrif in his speech at the G20 seminar series entitled “Unlocking Innovative Financing Schemes and Islamic Finance to Accelerate a Just Energy Transition In Emerging Economies”

Based on a study by the Institute for Essential Services Reform (IESR), investment needs for decarbonization of the energy sector range from USD 20–25 billion per year between 2020 and 2030 and around USD 40–60 billion per year from 2030 to 2050. 

“Indonesia owns renewable energy potential and energy needs that will continuously grow. In many ways, Indonesia should become a main investment target. Unfortunately, inconsistency on policy, regulation and lack of integrated coordination across sectors makes investors perceive Indonesia as a high risk investment market,” explained Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR).

According to the IISD (International Institute for Sustainable Development) report in 2020, only 7.8% of total investment was allocated for renewable energy in Indonesia. The rest is still focusing on fossil fuel. Peter Wooders, Senior Director Energy of IISD emphasized that the G20 should set a clear direction towards clean energy – which gradually includes a move away from supporting fossil fuels. 

“While public finance is not enough on its own, its role is essential – and many mechanisms can help”, he added. 

Therefore, in this G20 Seminar Series, the discussion about Islamic financing was elevated such as waqf, sukuk and green bonds to enrich the perspective of energy transition financing potential. 

Islamic finance also plays an important role in funding various sustainable projects, including renewable energy. According to Indonesia Islamic Economic Masterplan 2019–2024, renewable energy has received some support through the Murabaha (the principle of buying and selling) scheme, as well as donations through zakat. 

Anna Skarbek, CEO Climateworks Centre stated that investment opportunities in climate transition and innovations in investment models across ASEAN region are profound. 

Yet, Kuki Soejachmoen, Executive Director of Indonesia Research Institute for Decarbonization (IRID) as well as the seminar’s moderator reminded that any financing mechanism must pay attention to inclusivity and just/ fairness for everyone. Energy transition impact will gradually meet the end of fossil fuel and its relevant supply chain business, early retirement, new job opportunity, new skill, new industry – hence, it must be addressed in a good manner. 

$200 million Grant Commitment from Australia to Indonesia  

In his opening remarks, Andrew Hudson, CEO Centre for Policy Development, specifically raised the recent grant commitment dialogue between President Joko Widodo and Prime Minister Anthony Albanese, as a real example of the importance of cross-border dialogue. 

“It is crucial that we engage in a dialogue that shares experiences of the action required for effective,scalable and impactful cross-border investment in climate transition by both public and private-sector investors. We need to use the ambition and momentum of the $200 million climate and infrastructure partnership announced between Australia and Indonesia at the recent leaders’ meeting”

On the road to G20 Summit, this seminar series was held by Energy Transition Working Group (ETWG) Indonesia G20 2022 and T20 Indonesia, in collaboration with the Centre For Policy Development (CPD) Australia, Climateworks Centre, International Institute for Sustainable Development (IISD), Indonesia Research Institute for Decarbonization (IRID), and the Institute for Essential Services Reform (IESR), supported by Asia Investor Group on Climate Change (AIGCC). 

Strengthening a Just Energy Transition with Sustainable Finance

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Jakarta, 28 July 2022– The energy transition is crucial and urgent to be implemented to reduce greenhouse gas (GHG) emissions and limit the earth’s temperature below 1.5 degrees Celsius by 2050, according to the Paris Agreement. Strengthening the just energy transition requires sustainable and innovative funding.

IESR - Wapres - Meneteri Keuangan - Menteri ESDM
Vice President Ma’ruf Amin took a picture with keynote speakers and representatives from each partner organization at the G20 seminar series hosted by the Ministry of Energy and Mineral Resources (Doc. Seminar Secretariat)

Minister of Energy and Mineral Resources, Arifin Tasrif in his speech at the G20 seminar series entitled “Unlocking Innovative Financing Schemes and Islamic Finance to Accelerate a Just Energy Transition In Emerging Economies” said Indonesia already has an energy transition roadmap to achieve carbon neutrality by 2060 or earlier.

“PLN through its national energy supply business plan (RUPTL) by 2021-2023, has also targeted the cleaner business plan by adding power plants generated from renewable energy up to 51.6%. Indonesia has planned to build an archipelago super grid to ramp up renewable energy development and maintain electrical stability and security,” said Arifin.

Arifin added that at least Indonesia needs investment for the energy transition of around USD 1 trillion by 2060.

“Therefore, Indonesia continues to create strengthened relations with cooperation with partner countries and international financial institutions to find innovative funding mechanisms,” he said.

Adding up, Yudo D. Priaadi, Chair of the Energy Transition Working Group (ETWG) G20 2022, said that innovative financing and Islamic (Islamic) financing have the potential to open opportunities to increase accessibility and inclusiveness toward sustainable financing.

“We must deploy an effective and proven platform as well as securing the investment,” he said.

Mahendra Siregar, Chairman of the Board of Commissioners of the Indonesia Financial Services Authority, stressed that besides using sustainable financing to fund the energy transition, it should also be aligned with poverty alleviation efforts. He stated that the energy transition plan with sustainable financing also needs to provide profit.

“OJK plans to balance the transition and green economy, social stability, and alleviate poverty. OJK convinces the banks and public credit companies to address climate change,” he explained on the same webinar.

Kuki Soejachmoen, Executive Director of the Indonesia Research Institute for Decarbonization (IRID), said that the energy transition does not only focus on the gradual transformation of the GHG emitting sectors, but also on new jobs, new industries, new skills, new investments and other opportunities to create a resilient society.

“The inclusiveness and fairness in the energy transition process are significant for society, the economy, industry and the environment,” said Kuki.

A just energy transition also needs to ensure access to quality energy for all, especially for the poor.

“The energy transition, one of which is by retiring coal-fired power plants, as is being reviewed by the Ministry of Energy and Mineral Resources of 9.2 GW. According to the IESR study, it requires about USD 4.3 billion. But it will provide long-term benefits for the people of Indonesia,” explained Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR).

He believed that managing energy transition with a people-centered approach will ensure the benefits and costs involved in the transformation of the energy system are distributed fairly and protect the most vulnerable in society.

Energy Transition Working Group (ETWG) Indonesia G20 2022 and T20 Indonesia, in collaboration with Australia’s Center for Policy Development (CPD), Climateworks Centre, International Institute for Sustainable Development (IISD), Indonesia Research Institute for Decarbonization (IRID), and the Institute for Essential Services Reform (IESR), and supported by the Asia Investor Group on Climate Change (AIGCC), organized the G20 seminar series entitled “Unlocking Innovative Financing Schemes and Islamic Finance to Accelerate a Just Energy Transition In Emerging Economies.”

First-ever just transition plan for coal retirement in Indonesia finds a feasible pathway for a 2045 phase-out

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An accelerated plant-by-plant retirement strategy makes solidifying a 2045 coal phase-out target possible. 

Internationally assisted phase-out and a coordinated national approach will support Indonesia’s 2050 net-zero goal and a 1.5ºC global pathway.

Jakarta, Indonesia; Maryland, United States, August 2, 2022—A new first-ever analysis released today by the Center for Global Sustainability (CGS) at the University of Maryland and the Institute for Essential Services Reform (IESR) shows Indonesia can accomplish an accelerated coal phase-out by 2045 with international financial support. The analysis finds that Indonesia must decrease coal power generation by 11% over the next eight years and then ramp up retirement by over 90% before 2040 to retire the country’s 72 coal-fired plants. 

“Our analysis finds that through a just coal transition, Indonesia can take critical actions now that will set the country up for both an accelerated retirement and stronger international climate commitments before COP27,” says Ryna Cui from the Center for Global Sustainability, University of Maryland. “Meanwhile, the financing needed to implement a just coal power phase-out is estimated at 27.5 billion US dollars, which requires strong domestic effort and international support.”

Though Indonesia has committed to ambitious goals of reaching net-zero by 2060 or earlier, and phasing out coal in the 2040s with international assistance, their continued reliance on coal for both domestic energy and foreign exports presents challenges. But with the structured plant-by-plant retirement schedule showcased in this report, Indonesia can head to COP27 this November and signal to the world its commitment by setting a strong and feasible target to phase out coal power by 2045. 

The framework developed in this paper starts with developing pathways for national 2050 net-zero emissions and then structuring clear plant-by-plant retirement pathways through an integrated modeling approach. The retirement schedule is constructed based on an individual plant’s technical, economic, and environmental performance. 

“This analysis offers a detailed plant-by-plant retirement timeline that is financially feasible based on our systematic assessment of the benefits and costs of implementing a just, rapid coal-to-clean energy transition,” says Fabby Tumiwa, Executive Director of IESR. “First, we find that Indonesia can rapidly phase out coal and meet domestic and international goals, but importantly we find that they can do so in a way that benefits the public health and economy.”  

An accelerated retirement will cost over $32 billion through 2050, but the positive benefits from avoided coal power subsidies and health impacts amount to $34.8 and $61.3 billion—2-4 times larger—than the costs of stranded assets, decommissioning of plants, employment transitions, and state coal revenue losses. 

“Indonesia has adopted climate targets in line with international commitments. Today’s paper presents a pathway to help reduce over 2,600 MtCO2 emissions through a coal phase-out,” says Nathan Hultman, Director, Center for Global Sustainability at the University of Maryland. “This contribution will reap significant benefits for not only the Indonesian people but the world; new approaches to international financial support will likely be a critical component to achieve the most rapid transition possible.”

“To realize a 2045 coal phase-out and its economic and societal benefits, the Indonesian government must adopt strong policies that build on political and social momentum towards a clean energy transition,” says Raditya Wiranegara, Senior Researcher, Institute for Essential Services Reform (IESR). “But it is not on Indonesia alone to implement such an accelerated plan. As we head into COP27 in Egypt, where all eyes will be on finance, adaptation, and loss and damages, the international finance community must step up to help deliver on these goals.” 

Responding to this study, Andriah Feby Misna, Director of Various of New and Renewable Energy, said that early retirement of coal phaseout has become the government’s concern towards net zero emissions 2060.

“According to government modeling, the coal phase out will still last until 2056, while encouraging early retirement of coal phaseout outside PLN could be in 2050. If we want to speed it up in 2045, more in-depth calculations are needed,” she says.

Feby said that the government is currently designing a roadmap for early retirement for coal-fired power plants. According to her, the IESR and CGS studies at the University of Maryland can be harmonized with studies currently being carried out by the government. She continues, if there is international assistance, it is hoped that the early retirement of the coal-fired power plants can be accelerated.

To hear from authors, global experts, and policymakers about this new analysis, tune into CGS and IESR’s webinars on Wednesday, August 10, 2022: Financing a Just Coal Phase-Out in Indonesia.

Download the report to learn more about a financing strategy for Indonesia’s coal phase-out.

The research behind this report was funded by Bloomberg Philanthropies. ***

Coal Funding Discontinued, Southeast Asian Countries Must Plan the Energy Transition Measures

press release

Jakarta, 1 August 2022 –Climate mitigation actions by encouraging the use of renewable energy have led countries that fund coal-fired power plants (CFPP) to shift their investment to renewable energy. This transformation will bring implications and challenges that need to be worked on by the countries that have been the destination for fossil energy investment in Southeast Asia.

China, Japan, and South Korea are the top three countries that fund fossil energy projects in Southeast Asia. As much as 123 GW CFPP operated outside China gained financial support or even Engineering, Procurement, and Construction (EPC) support from China. Those fossil energy projects were developed within the last two decades. In September 2021, President Xi pledged to support the developing countries that carry out an energy transition to renewable energy. He also said that China would no longer fund CFPP overseas. Ever since it was declared, as much as 12,8 GW of coal that had been planned to develop was canceled.

Moreover, several companies and domestic financial institutions in China also ended funding coal projects, such as the Bank of China (BOC) which gave up on funding coal mining and new CFPP overseas, except for the projects that had signed the loan agreement, or Tsingshan Holding Group, a major player in the industrial zone overseas, especially in the steel industry, announced that it would not establish new CFPP abroad.

Isabella Suarez, an analyst, at the Center for Research on Energy and Clean Air at the webinar ‘The State of Southeast Asia Energy Transition’ held by the Institute for Essential Services Reform (IESR), explained that for the first time, President Xi’s statement was formulated within China domestic policy. Besides, there is also a progressing narrative to develop together the green development implementation within Belt and Road Initiatives framework.

According to Isabella, what China needs to do to ensure the implementation of its promise is to determine the period and its achievement target. 

“On the other hand, the countries that have received fossil energy project funding need to begin the cancellation of CFPP development and infrastructure & network efficiency, and implement the green development within Belt and Road Initiatives,” said Isabella.

Aside from China and Japan, Dongjae Oh, Program Lead for Climate Finance Solutions for Our Climate (SFOC) explained that South Korea has also become the third largest country in the world that funds CFPP projects. As much as 87% (USD 8,6 million) of the coal downstream funding from South Korea was allocated to Southeast Asia (2011-2020).

In April 2022, the South Korean President declared to stop the new funding for CFPP projects overseas. However, according to Dongjae, South Korea still relied on other fossil energy such as oil and gas.

“If we compare the coal funding that only reaches USD 10 million, oil and gas funding can reach USD 127 million within 10 years,” said Dongjae.

Indonesia becomes one of the largest beneficiaries of oil and gas industries from South Korea. This investment will make the Southeast Asia region shift its energy into oil and gas.

Dongjae added that if it is the case, the Southeast Asia region will fail to achieve the Paris Agreement target as the gas emits a significant amount of greenhouse gas emissions. Besides, sustaining fossil energy using CCS will only increase the energy price.

“The South Korean government and Southeast Asia have to cooperate in intensifying the termination of coal operations and accelerate the transition into renewable energy. On the other side, South Korea must stop coal and gas funding or investment, considering renewable energy prices are getting cheaper,” Dongjae asserted.

Lisa Wijayani, Program Manager Green Economy IESR said that the funding ending in fossil energy from China and South Korea was a concrete step to supporting energy transition globally.

“Indonesia is supposed to benefit from this chance to expand renewable energy development. A clear policy of green taxonomy and green investments should be able to attract investors to shift their funding into the green sector such as renewable energy,” she said. ***

The Webinar “The State of Southeast Asia’s Energy Transition” is available on the IESR Indonesia YouTube channel.