National and Regional Low-Emission Transportation Policy Roadmap

press release

Jakarta, December 5, 2023 – A significant reduction in emissions from the transportation sector is a strategy to achieve zero emission by 2050 per the Paris Agreement, or net zero emission (NZE) by 2060, as the Government of Indonesia targets. To turn this commitment into an actionable strategy, developing a comprehensive roadmap for decarbonizing the transport sector is essential.

The Institute for Essential Services Reform (IESR) has developed a roadmap for transport sector decarbonization policy at the national and regional (Jabodetabek) levels. Based on IESR data, the transportation sector, particularly land transportation, is responsible for increasing greenhouse gas emissions in Indonesia. Land transportation passenger movement accounts for 73% or 110 mtCO2e of total transportation emissions in 2022.

“Indonesia has updated its emission reduction target in the Enhanced Nationally Determined Contribution (ENDC). However, emission reduction is not only based on percentage; it must be aligned with the Paris Agreement. To achieve this, IESR has conducted roadmap modeling of transportation sector decarbonization opportunities with national and Jabodetabek regional model structures. This modeling aims to find the optimal steps that can be taken to increase Indonesia’s climate change mitigation actions,” said IESR Executive Director Fabby Tumiwa. 

 

Rahmi Puspita Sari, IESR Sustainable Mobility Analyst, explained that the number of registered vehicles in 2021 has grown faster than the population rate across the country. Motorcycles make up the majority of registered vehicles, accounting for around 84.54% of the total number of cars in the country. This trend is also observed in the Jabodetabek region, where 75.8% of transportation modes used in 2019 were motorcycles, according to the Jabodetabek Urban Transportation Policy Integration (JUTPI) report. The reason for this dominance is the growth of the Indonesian economy, increased purchasing power, and the relatively low cost of motorcycles.

“Currently, we do not have public transportation that can compete with motorcycles in terms of price and time. This is concerning as motorcycles emit more pollutants than cars due to incomplete combustion. Additionally, two mobility phenomena contribute to the traffic in Jakarta. The first is commuter mobility, where people travel between zones from outside Jakarta to Jakarta for work or education, accounting for about 10% of trips in Jakarta. The second is circular mobility, where semi-permanent residents in the city return to their hometowns or travel for holidays on an annual basis,” Rahmi explained. 

IESR examined vehicle and passenger movement policies in the transportation decarbonization roadmap modeling. Nationally, based on the principles of avoid (avoid and reduce travel), shift (switch to low-carbon vehicles), and improve (increase energy efficiency), five policies were tested to reduce emissions in the transportation sector. The five policies are working from home, concentrating travel on public transportation, using biofuels, setting a minimum amount of motor fuel efficiency (fuel economy standard), and providing incentives for electric motor vehicles and cars.

Fauzan Ahmad, Tasrif Modeling Team, who was also involved in creating the transportation decarbonization roadmap, said that the results of the policy testing indicate that transportation emissions can be reduced by 15% to 75% until 2060. This can be achieved through work-from-home policies, electric vehicles, biofuel use, public transportation use, and fuel efficiency. However, it is important to note that these reductions are mainly driven by passenger vehicle policies and not yet freight vehicles and road logistics.

 

“Electric vehicle policies have the potential to reduce national emissions significantly. However, two key factors must be addressed to achieve this goal to have an impact at the national level, namely an increase in the sales share of electric vehicles (EV sales share) and policy support that encourages a reduction in the number of fuel vehicles (ICE) that are not eligible to operate (discard rate). In addition, shifting modes towards public transportation has a more sustainable impact on fuel and resource use but requires considerable investment,” Fauzan explained.

While in the Jabodetabek region, using the principles of avoid, shift and improve, there are seven policies tested on the transportation decarbonization road map, namely development planning around public transportation (Transit Oriented Development, TOD), work from home (WFH), imposing restrictions on high-emission vehicles (Low, Emission Zone, LEZ), concentrating on public transportation, using biofuels, setting a minimum amount of motorized fuel efficiency (fuel economy standard) and providing incentives for electric motor vehicles and cars.

Arij Ashari Nur Iman, Tasrif Modeling Team, mentioned that the results of policy testing at the regional level showed a decrease in transportation emissions of around 7%-43% annually from the baseline scenario in the 2010-2060 timeframe through a combination of WFH, LEZ, TOD, electric vehicles, biofuels, use of public transportation, and fuel efficiency policies.

   

“Establishing low-carbon policies can reduce emissions by up to 45%. The most significant policy is establishing a minimum motorized fuel efficiency, using biofuels, prioritizing public transportation, and promoting electric vehicles,” Arij explained.

Indonesia’s Emission Reduction Ambition Needs to Increase

press release

Jakarta, December 4, 2023 – The Institute for Essential Services Reform (IESR) hopes the United Nations Climate Summit (Conference of the Parties, COP-28) will strengthen the commitment of all countries, including Indonesia, to reducing greenhouse gas emissions by 2030. According to the results of the Global Stocktake, the promise and realization of emission reductions are still far from achieving the Paris Agreement target. Therefore, after COP-28, all countries must review their Nationally Determined Contribution (NDC) and set more ambitious targets for mitigating the climate crisis.

President Joko Widodo (Jokowi), in his remarks at COP-28, said that Indonesia is committed to achieving net zero emission (NZE) in 2060 or earlier. Jokowi hopes that COP-28 will foster inclusive cooperation and collaboration to support the achievement of Net Zero Emissions (NZE). He explained that Indonesia is accelerating the energy transition by developing renewable energy and reducing the use of coal-fired power plants. Achieving the 2060 NZE target requires more than USD 1 trillion in financing. He invited more collaboration and investment to support low-interest energy transition financing. He believes solving the energy transition financing problem is a way to solve the world’s problems.

The Institute for Essential Services Reform (IESR) believes having supportive policies to facilitate large investments in energy transition is crucial. As per the Paris Agreement, Indonesia needs to implement more ambitious policies and commitments as time is running out to limit the earth’s temperature rise below 1.5 degrees Celsius. 

Based on the UNFCCC Global Stocktake discussion report for 2023, the responsibilities of countries listed in their NDCs are not aligned with the Paris Agreement. This misalignment will make it difficult to achieve the goal of reducing global greenhouse gas emissions by 43 percent by 2030 from 2010 levels, 60 percent by 2035, and zero emissions by 2050. Moreover, the NDC target submitted at COP27 indicates that the earth’s temperature in 2050 will likely exceed the Paris Agreement target.

“Indonesia needs to submit a more ambitious target for reducing emissions and increasing its resilience to climate change in the Second NDC (SNDC), which is scheduled to be introduced in 2025. To align with the 1.5°C target, the maximum emission level for all sectors in 2030 should be 850 million tons. In the electricity sector, the energy transition is characterized by a target of 44% renewable energy mix in 2030. However, even if the renewable energy mix target is achieved, it will not be sufficient to bring electricity sector emissions below 200 million tons of CO2 by the 1.5°C pathway. Therefore, in addition to increasing the use of renewable energy, there is still a need to strengthen the power sector’s capacity,” said Fabby Tumiwa, the Executive Director of IESR. 

By 2025, Indonesia needs to increase its ambition in the Enhanced NDC, which currently only aims for an emission reduction target of 31.89% with its efforts (unconditional) and 43.2% with international assistance (conditional) by 2030. This target is made by comparing business as usual (BAU) 2010 projections. Meanwhile, IESR, using points from 2020 emissions data, found that Indonesia could set an unconditional NDC target of 26% by 2030. This increase is higher than the current target. It aims to keep the Indonesian government setting a more relevant climate ambition target in line with the Paris Agreement’s target of no more than 1.5°C of global warming.

 

“There are many opportunities for Indonesia to improve its renewable energy mix target by the Paris Agreement. For example, by aligning the preparation of the SNDC with the NDC principles in Article 4 Line 13 of the Paris Agreement, namely promoting environmental integrity, transparency, accuracy, wholeness, comparability, consistency, and ensuring avoidance of double counting, using feasible methods to achieve decarbonization efforts, and accelerating decarbonization out of fossil fuel use,” said Wira A Swadana, Green Economy Program Manager, IESR.

Wira added that Indonesia needs to attract international support, collaborate on technology and knowledge, and encourage renewable energy development to implement the key findings of the Technical Dialogue of the first GST, particularly in climate mitigation. Notably, at COP-28, there is a call to triple the renewable energy target to 11 TW by 2030.

He mentioned that Indonesia has the opportunity to enhance collaboration and strengthen cooperation with the United Arab Emirates (UAE). Masdar, a company from the UAE, has played a significant role in constructing the Cirata floating solar power plant and has invested in the geothermal energy sector. Additionally, Masdar is a strategic investor in the initial public offering (IPO) of PT Pertamina Geothermal Tbk (PGEO) in February 2023.

“Cooperation between Indonesia and other countries, including the UAE, can help Indonesia’s decarbonization efforts to mitigate the adverse effects of climate change. Indonesia has established climate cooperation through mechanisms like JETP and various bilateral agreements. However, gaps still need to be addressed to encourage more ambitious climate mitigation and adaptation efforts. Specifically, there is a need for increased funding and capacity building,” Wira explained.

A Glimpse of Global Stocktake can be found here

Solar Energy Can Be a Strategy to Achieve Renewable Energy Targets in Jambi

press release

Jambi, November 28, 2023 – Local governments play a significant role in promoting the use of renewable energy in their respective regions. This is crucial in achieving the national target for renewable energy mix. Jambi is one region that aims to achieve a renewable energy mix target of 24 percent by 2025 and 40 percent by 2050. The Institute for Essential Services Reform (IESR), a leading think tank in Indonesia, underlines the importance of accelerating solar energy utilization in Jambi Province as a concrete step in achieving the regional renewable energy mix target and reducing greenhouse gas emissions contributing to the climate crisis.

Based on IESR’s study titled Beyond 443 GW: Indonesia’s Infinite Renewable Energy Potentials, Jambi has 281.5 GWp of solar energy potential. Meanwhile, based on the Regional Energy General Plan, Jambi has a solar potential of 8,847 MW. However, the installed capacity of solar power plants is only around 0.68 MW as of 2022.

 

Marlistya Citraningrum, Program Manager of Sustainable Energy Access, IESR, mentioned that solar energy is democratic energy available throughout Indonesia. In addition, solar energy technology is currently relatively easy to access, with increasingly affordable investment costs.

“We believe solar energy is a strategic solution to mitigate the climate crisis. Rooftop solar power plants offer several benefits, such as increasing the renewable energy mix and reducing greenhouse gas emissions through the cooperation of various parties. They provide a renewable source of electrical energy without the need to build large-scale power plants. This opens up business opportunities in the green jobs sector and encourages increased competitiveness of the solar industry in energy. We hope that Indonesia will not only become a market for the solar energy industry but also spark a green and circular economy,” Marlistya said at the Jambi Government Forum, Implementation of Solar Energy in Jambi Province held on Tuesday (28/11).

Marlistya invited all stakeholders to proactively participate in accelerating solar energy utilization in Jambi Province. She emphasized five things that can be done to spur the adoption of solar power at the regional level.  Firstly, clear rules, regulations, and policies should be implemented effectively. Secondly, there should be encouragement for rules, policies, and appeals. Thirdly, good practices in solar energy utilization should be shared and multiplied. Fourthly, access to information on renewable energy, particularly solar energy, should be improved. Lastly, incentives and facilitation, along with increased financing opportunities, should be provided to support the adoption of solar energy.

Nanang Kristanto, Sub-Coordinator of RUEN Implementation Monitoring, National Energy Council, explained that Indonesia is currently updating Government Regulation No. 79/2014, which pertains to the National Energy Policy (KEN). The purpose of this update is to ensure that energy policies are in line with climate change policies. It is predicted that by 2030, the energy sector will be the second largest contributor to emissions, following the forestry sector.

“The KEN Draft Government Regulation (RPP) has undergone updates, which include the consideration of achieving Net Zero Emission (NZE) by 2060. The primary energy mix in 2060 is planned to comprise 70-72% renewable energy and 28-30% non-renewable energy. The supporting policies for this goal are explained in detail in each article, which has increased the total number of articles in the KEN RPP,” said Nanang. 

Nanang highlighted five important roles of regions in the energy transition towards NZE in the KEN changes. First, all activities related to the transition must be centered in provincial and district/city areas. Secondly, derivative activities for energy transition must be implemented according to the authority of the regions. Thirdly, the parts should receive funding from the central government or the private sector to aid in the transition. Fourthly, the areas must have available human resources to support the transition’s new technologies. Finally, it is important to socialize with the community as energy users to implement the transition effectively.

Anjas Bandarso, Energy Policy Analyst from the Directorate General of Regional Development of the Ministry of Home Affairs, explained the strengthening of provincial authority in utilizing renewable energy in the regions through Presidential Regulation (Perpres) Number 11 of 2023 concerning Additional Concurrent Government Affairs in the Energy and Mineral Resources (ESDM) Sector in the New Renewable Energy Sub-Sector. The regulation also optimizes coordination between the central government and regional governments.

“We provide new authority for provincial governments to manage biomass or biogas, both as energy and as a substitute fuel for liquefied petroleum gas (LPG). Then, the management of various renewable energies as well as the implementation, guidance, and supervision of energy conservation,” said Anjas. 

Anjas hopes that there will be mutual support between the central and regional governments, strong political commitment, and real concern at the regional level to encourage the achievement of renewable energy targets.

SE-Bali 2023 Event Invites Balinese People to Success Bali NZE 2045

Bali, November 25, 2023 – The Provincial Government of Bali has launched Bali towards Net Zero Emission 2045 or Bali NZE 2045 in August 2023. Strategy implementation and collaboration with various parties continue to be carried out to achieve the initiative’s target of net zero emissions. Supporting this initiative, the Institute for Essential Services Reform (IESR) in collaboration with some communities held Sustainable Energy Bali (SE-Bali) 2023 on Saturday and Sunday, November 25-26, 2023. In addition to promoting the use of renewable energy, the event also aims to encourage togetherness for the achievement of the Bali NZE 2045 target.

Fabby Tumiwa, the Executive Director of IESR, views that the achievement of the Bali NZE 2045 target will affect sustainable economic improvement, particularly in the tourism sector which is the backbone of Bali. He believes that Bali will be able to achieve the NZE target, which is 15 years ahead of the national target.

“There are three reasons that make Bali strategic to achieve this target. First, the Balinese culture is very close to maintaining harmony with nature. Second, the government has the spirit to make Bali sustainable with sustainable energy. Third, renewable energy will make Bali more attractive for tourists to visit along with increasing world awareness to overcome the climate crisis,” said Fabby.

Head of the Bali Manpower and Energy and Mineral Resources (ESDM) Office, Ida Bagus Setiawan, revealed that achieving Bali NZE 2045 is a joint work. 

“Bali NZE 2045 is not only about the Bali Provincial Government program but also about how we can be involved in protecting Bali’s nature. For this reason, in addition to accelerating the use of renewable energy, the Bali Provincial Government also encourages the improvement of human resources (HR) related to individual understanding of the importance of reducing emissions to increasing the ability of vocational students to be absorbed in green jobs,” said Ida Bagus Setiawan.

Prof. Ida Ayu Dwi Giriantari, Chairperson of the Center of Excellence Community of Based Renewable Energy (CORE) Udayana University, mentioned that Nusa Penida became an early area to achieve net zero in the Bali NZE 2045 program, with a target of 100% renewable energy by 2030. One of the concrete steps to support this vision is the operation of a hybrid solar PV in Nusa Penida with a capacity of 3.5 Megawatt peak (MWp). Located on 4.5 hectares of land, the solar PV is a clean and sustainable  energy, and it has the potential to become an attractive ecotourism destination in Bali.

“Achieving the 100% renewable energy target in Nusa Penida is a real step in supporting sustainability and ecosystem balance. We strongly believe that the potential of renewable energy, such as solar, wind, and hydro, can be maximized to achieve environmental sustainability,” explained Prof Ida Ayu.

Engaging the Youth Generation on Energy Transition Issues

press release

Jakarta, November 24, 2023 – The impact of the climate crisis is increasingly felt as the earth’s temperature rises. The latest Intergovernmental Panel on Climate Change (IPCC) report states that the earth’s temperature has increased by 1.1°C in 2011-2020 compared to 1850-1900. Serious mitigation and climate action efforts must be carried out to reduce greenhouse gas emissions and keep temperatures from exceeding 1.5 degrees Celsius. One is transitioning energy from carbon-intensive energy, such as coal-fired energy, to renewable energy.

The Institute for Essential Services Reform (IESR) believes that the energy transition process needs to involve future generations, especially children and young people. Young people have a crucial role in ensuring sustainable development can run amid the challenges of climate change. They will also build a future that prioritizes using more environmentally friendly resources and economic growth that prioritizes environmental sustainability.

Farah Vianda, Coordinator of Sustainable Financing, IESR, at the Road to Youth Climate Conference (23/11), said that reducing fossil energy use requires government policy. Still, young people can also take individual actions that impact reducing greenhouse gas emissions.

“Every individual, especially children and young people, can be involved in taking concrete steps to mitigate the climate crisis. One of the main steps is to change daily habits, from using electricity and freon more wisely to reducing dependence on motor vehicles and buying products wisely. With these simple steps, young people can make a significant positive impact in mitigating the climate crisis,” said Farah.

Farah explained that the energy transition involves a fundamental shift in how we produce and consume energy. According to her, a strong foundation for the earth’s sustainability will be formed by emphasizing the use of more environmentally friendly resources. It is about technology and involves understanding and active participation from children and young people as future agents of change.

Rahmat Jaya Eka Syahputra, Program Officer of Energy Transformation, IESR, highlighted energy efficiency in energy transition by reducing unnecessary energy consumption. According to him, a strong understanding of carbon emission reduction will form the habit of calculating emissions and lead to low-carbon daily activities.

“Energy efficiency not only provides environmental benefits by reducing greenhouse gas emissions but can also provide economic benefits by saving individual energy costs. By actively participating through energy efficiency measures, individuals have taken part in their portion in addressing climate issues,” Rahmat explained.

Encourage Just Energy Transition in Coal-Producing Regions

Jakarta, November 21, 2023 – The Institute for Essential Services Reform (IESR) believes that mitigating the impact of energy transition in coal-producing areas needs to be a concern of the central and regional governments. The involvement of affected communities by prioritizing justice in the energy transition process is crucial to moving from a fossil-intensive economic system to a sustainable economy.

IESR has conducted a study entitled Just Transition in Indonesia’s Coal Producing Regions, Case Studies Paser and Muara Enim, with research locations in Paser Regency, East Kalimantan Province, and Muara Enim Regency, South Sumatra Province. The study found that coal-producing regions can contribute to the economic transition to clean energy. Some factors that can potentially aid in this transition are the emergence of awareness to not solely rely on one source of regional income, such as the coal sector, a company’s initiative to diversify its business beyond coal, and the implementation of corporate social responsibility (CSR) which can act as a source of funding for community empowerment. However, several obstacles hinder the optimization of this potential, such as the limited authority of local government, lack of financial capacity, and inadequate health and education infrastructure.

“The government needs to pay attention to the energy transition phenomenon in coal-producing regions to mitigate its impact. Indonesia still has time to prepare for the energy transition process, but the time is insufficient. We cannot let the coal industry end abruptly, as the regions are not yet ready to transform. The central government needs to properly understand the context of energy transition in these regions so that it can make active interventions in coal-producing regions,” said Fabby Tumiwa, Executive Director of IESR at the media dialogue entitled “Equitable Transition in Coal Producing Regions in Indonesia: Case Study of Muara Enim Regency and Paser Regency.”

The study also found insufficient economic diversification and industrial development in coal-producing regions. Most of the coal produced in Paser and Muara Enim is exported to other regions, which has not led to any significant industrial development. Industrial development is also slow in both regions, particularly in Paser, where the manufacturing industry’s gross regional domestic product (GRDP) is still lower than agriculture. In Muara Enim, the lack of viable economic opportunities is also due to limited agricultural land, especially rubber plantations, due to land use change from plantations to mining concession areas.

“Therefore, we encourage the central and regional governments to focus on economic transformation by developing sectors of excellence in each coal-producing region. For instance, in Paser Regency, East Kalimantan, the education and financial services sectors have shown promising growth. Similarly, Muara Enim Regency, South Sumatra, has performed better in the accommodation and food services sector than its neighboring regions. Therefore, we suggest that the authorities prioritize these sectors of excellence to boost economic development in these areas,” explained Martha Jesica, Social and Economic Analyst at IESR. 

Rusdian Noor, Secretary of the Regional Development Planning Agency (Bappeda) of Paser Regency, East Kalimantan, hopes that the acceleration of energy transition in coal-producing areas will be accompanied by support from the central government for investment and technological innovation.

“The Gross Regional Domestic Product (GRDP) of Paser Regency in 2022 is expected to fund around 75% of the regional development, and the primary contributor to this is the mining sector. To ensure sustainable development, the energy transition process must focus on diversifying the economic sector and generating at least 75% of the PDR. This will help the region maintain its power and progress towards sustainable development,” said Rusdian. 

Similarly, Mat Kasrun, Head of Bappeda Muara Enim Regency, expressed that his party should be involved in all policy-making related to energy transition and has the authority to develop new and renewable energy. He also hopes for support from the central government in granting discretion in authority or licensing for developing new economic sectors in the regions.

Exploring Early Termination of Coal Power Plant Operations

press release

Jakarta, November 15, 2023 – The government is taking steps on Presidential Regulation (Perpres) No. 112/2022 concerning the Acceleration of Renewable Energy Development for Electricity Supply by drafting a road map for the operational termination of coal-fired power plants. The Institute for Essential Services Reform (IESR) views preparing a road map for the early termination of coal power plant operations as a first step to encourage renewable energy development. Furthermore, after the road map is determined,  the government should prepare a regulatory framework that can support the implementation of a financing structure or scheme for the operational termination of coal-fired power plants in Indonesia.

Deon Arinaldo, Program Manager of Energy Transformation at IESR, mentioned that there have been several proposed structures for terminating coal-fired power plants (CFPP) operations, such as write-offs or deletion of CFPP assets from company records because they are considered no longer economical or for example, spin-offs, namely the sale of assets to a new company to manage these assets with a shorter operating period. In addition, according to him, the government needs to make several pilot projects for the termination of the ongoing CFPP operations, such as the Cirebon CFPP, as a proof of concept and provide certainty to PLN and Independent Power Producers (IPP) as CFPP asset owners.

“Apart from a clear scheme or structure in the early termination of coal-fired power plant operations, a mechanism is also needed to allocate the funding obtained from the early termination of the power plant to renewable energy plants. The current regulations in Indonesia do not allow this. Therefore, it is necessary to conduct a thorough study and propose changes to allow the use of renewable energy funding, which is cost-effective, for retiring CFPP assets,” Deon said at the Enlit Asia panel discussion entitled “Leapfrogging to NZE: Accessing ASEAN readiness to retrofit or early retire coal fleets” (15/11).

Deon sees that a significant amount of work still needs to be done concerning the early retirement of CFPP. Some of the tasks include ensuring a legal framework that explicitly states that the early termination of CFPP operations is part of the country’s energy transition policy aimed at reducing emissions. Additionally, there needs to be regulations that permit modification of the power purchase agreement (PJBL) and other related tasks.

“It is even better if the strategy at the CFPP is part of an energy transition effort that wants to integrate renewable energy on a large scale to reduce GHG emissions. If the goal is like that, CFPP assets will be optimized to ensure renewable energy can enter the electricity mix quickly and cheaply. For example, instead of waiting to be retired, CFPP can be operated flexibly to help maintain system stability and reliability as the mix of intermittent solar and wind power increases,” Deon added.

Cirata Floating Solar PV Plant Ready to Operate: Important Milestone for Accelerating Solar Energy Development to Decarbonize Electricity in Indonesia

Jakarta, November 9, 2023 – Cirata floating photovoltaic (PV) power plant located in Cirata Reservoir, West Java, with a capacity of 145 MW(ac) or 195 MW(p), has been inaugurated today. This event marks an important milestone for Indonesia as it is now home to the largest floating solar power plant in Southeast Asia, surpassing the Tengeh floating solar power plant in Singapore.

The Institute for Essential Services Reform (IESR) considers the operation of the Cirata floating PV power plant as a significant achievement in accelerating the development of large-scale solar power plants in Indonesia. The country’s solar power development has been almost non-existent since 2020. However, the decreasing investment cost of solar PV has made it the cheapest renewable energy source. Therefore, Indonesia must optimize the technical potential of PLTS, which reaches 3.7 TWp to 20 TWp, to support its goal of achieving the electricity sector’s peak emission target by 2030 at the lowest possible cost.

IESR also encourages the government and PLN to take advantage of the technical potential of floating PV power plants, which reach 28.4 GW from 783 water body locations in Indonesia, to accelerate the utilization of solar power plants. Based on the data from the Ministry of Energy and Mineral Resources shows that there is potential for large-scale floating solar power plants that can be developed in at least 27 locations of water bodies that have hydropower plants (PLTA), with a total potential of 4.8 GW and an investment equivalent to USD 3.84 billion (IDR 55.15 trillion). Utilizing the potential of this floating solar power plant will accelerate the achievement of the renewable energy mix target and achieve the net zero emission (NZE) target sooner than 2060.

The government and State Electricity Company (PLN) must optimize the potential of floating solar power plants by creating a regulatory framework that attracts businesses to invest in these plants. One way to achieve this is by offering an attractive rate of return on investment that matches the risk profile but is attractive and reduces additional burdens.

One area of concern for the government is PLN’s assignment scheme to its subsidiaries, which has been a priority option for developing floating solar power plants. Through this scheme, the subsidiary seeks equity investors for minority ownership but must be willing to bear a larger portion of equity through shareholder loans.  

“This scheme benefits PLN but cuts the return on investment for investors and risks the bankability of the project and the interest of lenders. This scheme can also create unfair business competition among business players, as only those with large equity can partner with PLN, and most investors are foreign. This could impact overall investment interest,” said Executive Director of IESR, Fabby Tumiwa.  

The solution, according to Fabby, requires government support by strengthening the capital of PLN and its subsidiaries through special state capital participation (PMN) for renewable energy development and providing concession loans to PLN through PT SMI, which can then be converted into share ownership in floating PV power plants project. 

Indonesia can reap the potential for investment and low-emission electricity from floating solar power plants with the support of definitive and binding regulations from the government. In July 2023, the government issued Minister of Public Works and Public Housing Regulation Number 7 of 2023 on the Second Amendment to the Regulation of the Minister of Public Works and Public Housing Number 27/PRT/M/2015 on Dams, which no longer limits the area of water bodies in reservoirs that can be utilized for floating solar power plants at 5%. The regulation opens up opportunities for the development of floating solar power plants on a larger scale, provided that when using more than 20% of the water body area, it is necessary to obtain a recommendation from the Dam Safety Commission.

Marlistya Citraningrum, Program Manager for Sustainable Energy Access, IESR, sees this as an opportunity to overcome land issues in developing solar PV.

“Land availability is often an obstacle in the development of solar PV, especially in areas already dense with high land prices, as well as land cover that may not be suitable for solar PV, for example, too steep or productive agricultural land. Indonesia also has several dams, whether hydropower or not, that could be used as potential sites. The Hijaunesia 2023 project, for example, has offered the development of floating solar power plants in Gajah Mungkur, Kedung Ombo, and Jatigede with a capacity of 100 MW each,” Marlistya mentioned.

However, according to Marlistya, the overall planning, tendering, and construction of floating solar power plants in Indonesia still needs to be improved. Despite being a flagship project and a form of intergovernmental cooperation (G2G), the timeline for completion of the Cirata floating solar power plant is quite long – starting with a memorandum of understanding between Indonesia and the United Arab Emirates in 2017 and the formation of a joint venture between PJB Investasi and Masdar in the same year, the signing of the new PPA took place in 2020 and financial closing in 2021. This lengthy process reduces the attractiveness of floating solar power plant investment in Indonesia.

The development of supply chains for solar PV and floating PV components in Indonesia is also wide open, including for solar cells and modules. Not only for the domestic market, which has yet to reach 1 GW, solar cells and modules with tier 1 criteria produced in Indonesia are also intended for foreign markets. Chinese tier 1 solar cell and module manufacturer Trina Solar has collaborated with Sinarmas to build an integrated solar cell and module factory in Kendal Industrial Estate, Central Java, with a production capacity of 1 GW/year.

Draft CIPP Targets 44 Percent Renewable Energy Mix by 2030

Jakarta, November 2, 2023 – The government has released the draft of the Comprehensive Investment and Policy Plan (CIPP) in the Just Energy Transition Partnership (JETP) for public consultation on Wednesday (1/11/2023). 

The Institute for Essential Services Reform (IESR) has acknowledged some changes in the CIPP document, particularly the significant increase in the renewable energy mix target to around 44% by 2030, up from 34% in the JETP joint statement last year. However, the CIPP includes establishing a net zero emissions (NZE) target in the electricity sector by 2050. This does not align with the Paris Agreement, which calls for phasing out fossil generation by 2040.

Furthermore, the emission reduction target was focused solely on power plant emissions within the PLN grid, rather than addressing emissions from the overall power sector, to 250 million tons of carbon dioxide equivalent in 2030. This figure does not include the emission reduction target from captive power. If combined, the total peak emission target is much higher than projected during the JETP negotiation last year. Furthermore, the previous draft had a plan to end the operation of coal-fired power plants with a total capacity of 5 GW, but it was removed due to unclear funding sources from the IPG.

IESR assesses that eliminating the plan of early retirement of coal power plants will make it difficult for Indonesia to achieve its net-zero target in 2050 and increase the renewable energy mix after 2030. In the current JETP scenario, emission reductions are achieved by reducing the utilization of coal power plants. Therefore, to achieve the new target of 44% renewable energy mix in 2030, there should be an increase in the flexibility of PLN’s coal power plant operations, and a review of private coal power plant contracts, as well as regulatory support for accelerating the development of renewable energy in Indonesia. The renewable energy development plan, which gives a large portion to geothermal power plant (PLTP) and hydropower (PLTA) and adjusts PLN’s priorities, can pose a risk in achieving this target, considering the development period of geothermal power plant (PLTP) projects, which takes 8 to 12 years and hydropower, which can take 6 to 10 years.

“The elimination of the plan to early retire the operation of 5 GW of coal-fired power plants before 2030 due to the lack of funding support is regrettable. This makes Indonesia’s JETP even further away from the Paris Agreement target. Based on the results of the IESR study, to achieve the previous peak emission target of 290 million tons of carbon dioxide, it is necessary to end 8.6 GW of coal-fired power plants in PLN’s electricity network by 2030. For this reason, it is necessary to conduct further dialog with IPG to explore blended finance with a matching fund scheme where funding for early retirement of CFPP comes from additional funds above IPG’s commitment and is equalized with funds from State Budget and other sources,” explained Executive Director of IESR, Fabby Tumiwa.

IESR also highlighted the CIPP document that has not considered the termination of captive CFPP operations operated by utility companies outside PLN.

“The challenges of captive power plants vary depending on the industry they supply. However, there is already a basis for Presidential Regulation 112/2022, which requires a 35% reduction in emissions and an end of operations by 2050. Therefore, emission reduction strategies and early termination of operations for captive power plants and other business areas need to be reviewed immediately,” said Deon Arinaldo, Program Manager of Energy Transformation, IESR.

Policy reforms and increased commitment from policymakers and stakeholders are crucial in implementing CIPP, which aims for a 44% renewable energy mix by 2030. Indonesia’s renewable energy capacity of 12.6 GW needs to be increased by 62 GW to reach around 75 GW of renewable energy capacity in 2030.

“The procurement process of existing renewable energy plants is still constrained in several ways. Often, this is due to project preparation, including grid connectivity studies, land acquisition, and the completion of relevant permits before the auction process. In Indonesia, this is still a burden on developers, making renewable investment prospects accessible only to certain ‘players’. Policy reforms that emphasize efficiency and ease in the renewable energy plant procurement process are necessary if the capacity expansion target is to be achieved,” said Raditya Wiranegara, Senior Analyst IESR.

Emission reduction efforts listed in this CIPP document also need to emphasize justice aspects by including community participation. Based on IESR’s various studies on mitigating the impact of energy transition in coal-producing areas, the government needs to increase the capacity of national and local government institutions in implementing energy transition and diversifying the economy to a more sustainable economy.