Indonesia’s Commitment to Energy Transition is Impacting Financing Opportunities

press release

Jakarta, September 18, 2023 – An energy transition in the electricity sector that prioritizes equitable principles and is affordable for society requires a combination of strategic factors, long-term commitment, and policies that lead to investment opportunities for the development of renewable energy and technological innovation. This was stated by Deon Arinaldo, Program Manager of Energy Transformation, Institute for Essential Services Reform (IESR).

“All forms of investment, especially for energy infrastructure with a lifespan exceeding 20 years, it is essential to have long-term policies and legal certainty in place to ensure success. This is important for project developers and financial institutions to calculate the project risks. Moreover, renewable energy projects require relatively large initial investments compared to other energy sources. By committing to long-term targets and synergies from various existing policies and regulations, the level of investment risk can be reduced so that renewable energy projects remain bankable with low-interest funding,” explained Deon.

Febrio Nathan Kacaribu, Head of the Fiscal Policy Agency, Ministry of Finance of the Republic of Indonesia in the 2023 Indonesia Energy Transition Dialogue (IETD), said that energy transition carried out by a developing country like Indonesia must take place in just and affordably. He assessed that to achieve an Updated Nationally Determined Contribution (NDC) of 29% unconditionally (with its own efforts) in 2030 in the energy sector, it would reach IDR 3,900 trillion.  However, the financial requirements of an Enhanced NDC (ENDC) with an unconditional emission reduction target of 31.89% are still being estimated.

Febrio explained that his party had made several breakthroughs in efforts to finance the energy transition in Indonesia, including expanding investment through green sukuk, with the total investment mobilization from the issuance of green sukuk reaching USD 6.54 billion from the 2018-2022 period as well as implementing several regulatory frameworks in Energy Transition Mechanism (ETM) has been carried out. Febrio emphasized that collaboration for blended finance with the private sector has increasingly great opportunities.

“One of the obstacles for the private sector (to invest in the energy transition, ed) is the lack of a common understanding or taxonomy. This year, with Indonesia as chairman of ASEAN, one of the things agreed was that transition activities would also include the early termination of coal-fired power plant operations, which are included in the transition finance taxonomy. There are green provisions with certain limits that can be financed by the private sector; for example, if early retirement of coal fired power plants (CFPP) before 2040, then the private sector will join in (financing-ed),” said Febrio.

Dadan Kusdiana, Secretary General of the Ministry of Energy and Mineral Resources (MEMR) mentioned that the trend in the cost of renewable energy tends to decrease while fossil energy, such as coal, is increasing. Dadan mentioned, although the investment needs for the energy transition are very large, Indonesia has the potential for renewable energy and various forms of financing, which also come from various international organizations.

“Large investment (for the energy transition, red) is an opportunity to transition the energy sector. Indeed, there will be an increase in costs, but we will feel the benefits of reducing the costs of renewable energy in the long term,” explained Dadan.

Jonathan Habjan, Economic Counselor at the United States Embassy in Indonesia, said that the energy transition is a challenging process and involves many people over a long period, so it needs to be done correctly and efficiently.

“Of course, this will cost a lot of money, require a lot of effort, and change how business is done in many ways,” he said.

 

Jonathan added that to ensure that the energy transition somewhat takes place, it is necessary to involve people classified as vulnerable, including those who still work in the coal industry.

The Indonesia Clean Energy Forum (ICEF) and the Institute for Essential Services Reform (IESR), in collaboration with the Ministry of Energy and Mineral Resources (MEMR), held the 2023 Indonesia Energy Transition Dialogue (IETD) on 18-20 September 2023.

Transforming the Electricity Sector as a Strategic Step to Accelerate Emission Reduction

press release

Jakarta, September 18, 2023 – The Indonesia Clean Energy Forum (ICEF) and the Institute for Essential Services Reform (IESR) are urging Indonesia to accelerate the transformation of the electricity sector. This has been the focal point of discussion at the 2023 Indonesia Energy Transition Dialogue (IETD), organized by ICEF and IESR in collaboration with the Ministry of Energy and Mineral Resources (MEMR). IESR and ICEF view the energy transition in the electricity sector as a strategic step that will simultaneously reduce emissions in other sectors such as transportation and industry.

“The current focus should be on developing renewable energy to become the backbone of Indonesia’s primary energy. Technological innovation in energy generation from potential renewable sources such as biomass, geothermal, hydro, solar, wind, and others needs to be enhanced,” stated Bambang Brodjonegoro, Chairman of ICEF.

Bambang highlighted that the Indonesian government has demonstrated a clear commitment to energy transition, actively advocating for it in various international and diplomatic forums with the aim of promoting more environmentally friendly cooperation and investments for the energy transition.

Arifin Tasrif, Minister of Energy and Mineral Resources, stated in his remark at IETD 2023 that energy transition requires significant infrastructure transformation, especially for developing countries. He noted that this presents its own challenges in the energy transition process in Indonesia.

“The lack of supportive infrastructure, high investment costs with limited funding are some of the challenges of energy transition in Indonesia. Indonesia collaborates with other countries to address these challenges, providing competitive technologies, sustainable financing accessibility, and human resource capacity building,” explained Arifin.

Yudo Dwinanda Priaadi, Director General of New Renewable Energy and Energy Conservation at the Ministry Of Energy And Mineral Resources, also explained, “Our energy transition funding is obtained through trust; therefore, ongoing programs must align with global plans. Currently, funding for JETP (Just Energy Transition Partnership) is being pursued and refined through discussions between the Indonesian government and the International Partners Group (IPG) in New York, USA.”

Fabby Tumiwa, Executive Director of IESR and ICEF, mentioned that one of the remarkable aspects of IETD 2023 is that it is held in collaboration with MEMR for the first time. He also emphasized that for the energy transition to be fair, safe, and beneficial for all citizens, it requires careful planning and the involvement of all community groups. According to Fabby, the energy transition in the electricity sector is a strategic sector for emission reduction due to three factors: the feasibility of alternative technologies (renewable energy), planned electricity grid integration, and the economic benefits of increasingly affordable renewable energy.

“These technological factors encompass the integration of renewable energy, energy storage solutions, grid integration that can be planned, and the economic benefits of competitive renewable energy technologies compared to fossil fuels,” concluded Fabby.

IETD 2023: Empowering the Acceleration of the Electricity Sector Transformation in Indonesia

Jakarta, September 13, 2023 – The Indonesia Clean Energy Forum (ICEF) and the Institute for Essential Services Reform (IESR), in collaboration with the Ministry of Energy and Mineral Resources (ESDM), are once again organizing the Indonesia Energy Transition Dialogue (IETD) 2023 from September 18th to 20th, 2023, with the theme “Empowering the Acceleration of the Transformation of the Electricity Sector in Indonesia.” Both ICEF and IESR agree that the energy transition in Indonesia is inevitable, considering Indonesia’s commitment to contribute globally to emissions reduction through the ratification of the Paris Agreement under Law No. 16/2016.

Fabby Tumiwa, Executive Director of ICEF and IESR, stated during the Media Briefing on “Preparing for Indonesia’s Energy Transition and Anticipating Its Implications, and the Launch of the Indonesia Energy Transition Dialogue (IETD) 2023″, that the theme of IETD 2023 focuses on the electricity sector, which is a strategic sector for transitioning towards renewable energy. He mentioned that the energy transition in the electricity sector is currently supported by technology availability, international funding potential such as the Just Energy Transition Partnership (JETP), and supportive policy frameworks such as Presidential Regulation No. 112/2022.

He emphasized that the energy transition is a complex process with significant implications, requiring multi-stakeholder dialogue to anticipate and mitigate its impact in Indonesia, one of which is through the organization of IETD 2023.

“The Indonesian government is currently reviewing comprehensive planning documents and investment policies from the Just Energy Transition Partnership (JETP), which include several agreed-upon targets, such as a peak electricity emission of 290 million tons of CO2 and a 34% renewable energy mix by 2030, as well as achieving net-zero carbon emissions (NZE) in the electricity sector by 2050. Therefore, we need to ensure that all these plans and targets are achieved through a fair process with the support of all stakeholders,” explained Fabby Tumiwa.

Gigih Udi Atmo, Director of Conservation at the Directorate General of Renewable Energy and Energy Conversion (EBTKE), Ministry of Energy and Mineral Resources (ESDM), highlighted one of the efforts in energy transition, which is the development of renewable energy. According to him, the integration of renewable energy requires an expanded grid network to accommodate renewable energy sources.

“Connectivity through grid expansion that links load centers with renewable energy sources will be crucial in the future. The most feasible step in the near term is the interconnection between Sumatra and Java to enable the evacuation of solar, hydro, and geothermal-based renewable energy from Sumatra to supply the demand in Java. This way, power exchange and energy balance between the two largest grids in Indonesia can be optimized,” stated Gigih.

Gigih added that to achieve the net-zero carbon emissions (NZE) target, international support can accelerate the closure of coal-fired power plants. The type of international support, such as grant financing or soft loans, will determine the process of early cessation of coal-fired power plant operations by utilizing affordable financing to accelerate the investment recovery, allowing coal-fired power plant assets to cease operations earlier without violating existing cooperation agreements.

Deon Arinaldo, Energy Transformation Program Manager at IESR, mentioned that the government’s energy transition plans and strategies need to be supported and critiqued to expedite the process and make it smoother with better strategies and programs. Moreover, decarbonizing the electricity sector will serve as a driver for decarbonization in other sectors.

“In the energy transition process, it is also crucial to provide space for all actors to contribute meaningfully to the development of renewable energy. This means not only large industries but also local governments, small and medium-sized businesses, and communities need to play a role. In this regard, the strategy for ensuring access to renewable energy also deserves attention and should be part of a just transition,” Deon explained.

During the Media Discussion Forum on Indonesia’s Energy Transition, IESR and ICEF also announced the launch of the 6th Indonesia Energy Transition Dialogue (IETD), which will be held from September 18th to 20th. This event serves as a vital platform for discussing, sharing ideas, and generating real solutions to support the energy transition in Indonesia. IETD 2023 will bring together stakeholders, including the government, private sector, academia, and the general public, to discuss the challenges and opportunities in transitioning to cleaner and more sustainable energy.

Mitigate the Impact of the Energy Transition in Coal-Producing Regions with Economic Transformation

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Jakarta, September 1, 2023 – The Institute for Essential Services Reform (IESR), a leading energy and environmental think tank based in Jakarta, Indonesia, released a report on the potential impact of the energy transition on coal-producing regions in Indonesia. This report, entitled Just Transition in Indonesia’s Coal Producing Regions, Case Study Paser and Muara Enim, finds that economic diversification and transformation must be immediately planned to anticipate the social and economic impacts of the decline in the coal industry along with plans to end coal-fired power plants (CFPP) operations and increased commitments to energy transition and emissions mitigation, from countries that have become coal export destinations so far.

IESR recommends that the central and regional governments realize the potential impact of the energy transition on the economy and development of coal-producing areas and start planning for economic transformation as soon as possible in these coal-producing areas.

A recent study conducted in Paser Regency, East Kalimantan Province, and Muara Enim Regency, South Sumatra Province, has recommended the utilization of coal’s revenue sharing (dana bagi hasil, DBH) CFPP and corporate social responsibility (CSR) programs to plan and support economic transformation. The study also highlighted the importance of expanding public access and participation to ensure a just transition. In 2023, Coals’ revenue sharing fund (DBH) is projected to account for 20% of the total revenue budget of the Muara Enim government. Similarly, between 2013-2020, it accounted for 27% of the total revenue of the Paser government.

“The importance of prioritizing economic activities that benefit local communities and have a greater multiplier effect towards post-coal mining economic transformation. It is equally important to factor in the potential impact of a decrease in coal production on the informal economy sector, which has not yet been included in macroeconomic analysis,” mentioned Executive Director of IESR, Fabby Tumiwa.

According to a recent study, the coal mining industry has contributed 50% to 70% of GRDP in Muara Enim and Paser over the last ten years. However, despite this significant economic contribution, coal industry workers earn little. Only around 20% of the added value is allocated to workers, while as much as 78% becomes company surplus. This means that the enormous economic value generated by the coal mining industry contributes little to the income of its workers.

“The coal mining industry has also caused significant social and environmental impacts on the surrounding communities. These impacts include degradation of air and water quality, changes in people’s livelihoods, economic inequality, and increased consumerism and rent-seeking,” stated Julius Christian, the leading author of this study and also the Research Manager of IESR.

According to him,  different parties in the region are responding to the trend of energy transition in various ways based on their interests, knowledge, and access to information. Coal companies are more aware of the energy transition risks posed to their businesses than governments and ordinary citizens.

“Both companies and local governments are starting to carry out various economic transformation initiatives. However, local people are more skeptical about the potential decline in coal because they have seen increased production recently,” said Martha Jesica, Social and Economic Analyst at IESR.

However, according to her, changes in perspective are occurring in both society and coal industry companies. The local community has called for economic diversification, and coal companies have started branching into other fields. She hopes that various stakeholders and the government can work towards raising awareness and implementing structural changes to drive economic transformation efforts.

The report “Just Transition in Indonesia’s Coal Producing Regions: Case Studies Paser and Muara Enim” by IESR suggests that to achieve sustainable development in coal-producing regions, firstly, there needs to be a comprehensive plan for economic diversification and transformation that involves stakeholders and community participation. Secondly, utilizing DBH funds and CSR programs to finance the financial transformation process, which can attract more investment into sustainable economic sectors. Thirdly expanding access to education and training to prepare a competitive workforce in the sustainable industry and increasing financial literacy for the community. Fourthly, expanding the participation of all elements of society, especially vulnerable groups, in regional planning and development.

“All matters related to the transition in coal-producing areas should be included in the respective central and provincial governments’ Medium Term Development Plan (RPJM). This will provide clear support and direction for local governments,” said Ilham Surya, Environmental Policy Analyst IESR.

Advancing Strategies for Increased JETP Funding

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Jakarta, August 29, 2023 – The comprehensive investment and policy plan (CIPP), which was initially scheduled for August 2023 to be the end of same year, is considered necessary by the Institute for Essential Services Reform (IESR) to refine the CIPP document to meet the agreed targets and formulate a robust cooperative effort for a just energy transition (Just Energy Transition Partnership/JETP), as well as opening more comprehensive public consultations.

The Executive Director of IESR, Fabby Tumiwa, stated that to reach the goals outlined in the JETP, which include reducing peak greenhouse gas emissions by up to 290 million metric tons of CO2 by 2030 and achieving a renewable energy mix of 34% by the same year, as well as attaining Net Zero Emissions (NZE) by 2050, a minimum of 150 billion is required.

One strategy involves decreasing the capacity of coal-fired power plants (CFPP) before 2030 through either natural or early retirements. IESR  has estimated that a gradual reduction of up to 8.6 GW in CFPP capacity is necessary until 2030. It is important to note that this figure does not account for any reductions in off-grid CFPP capacity outside the PLN’s jurisdiction.

“Until now, IPG and GFANZ’s interest in providing CFPP early retirement funding is shallow, even though a reduction in CFPP is needed to increase penetration of renewable energy,” said Fabby.

IESR estimated the early retirement costs at USD 4 billion, which is lower than the amount assessed by PLN previously. Fabby suggests that IPG should provide funding for the early retirement of CFPP due to its involvement in maintaining the credibility of JETP.

In addition, IESR believes that improving the CIPP document will clarify the funds needed for priority projects, such as constructing renewable energy pipelines. Based on the IESR study, Indonesia must invest USD 1.3 trillion to meet the Paris Agreement objective for the energy transition until 2050, which averages USD 30 billion to USD 40 billion per year. Until 2030, a minimum of USD 130 billion is necessary.

IESR believes that the allocation of the grant portion in the JETP scheme needs to be increased to support broad aspects of a just transition and the transformation of crucial actors so they can implement the ambitious CIPP soon. At least the portion of the grant required is around 10%-15% or USD 2 billion to USD 3 billion in the JETP scheme to execute the energy transition in Indonesia. IESR knows that increasing the grant allocation on the proposed scale requires intense cooperation and commitment from the Indonesian government and international partners in JETP. Through close collaboration, all parties involved can work together to meet this financial need and ensure the success of a sustainable energy transition in Indonesia.

“JETP needs to support the energy transition process in Indonesia, not just determine priority projects to achieve targets. Because JETP requires systemic changes, it requires increasing the capacity of key actors such as PLN and related ministries/agencies, grant funding to compile regulatory/policy changes, as well as supporting affected actors if JETP is implemented later, for example, workers in coal mines or the general public near the CFPP project,” explained Deon Arinaldo, Program Manager Energy Transformation, IESR.

IESR also emphasizes the importance of involving more comprehensive public consultations in the decision-making process related to JETP. Opening up opportunities for a wide range of stakeholders to provide input will ensure that the project accurately reflects community needs and aspirations. Increasing transparency and community involvement will enhance the legitimacy of JETP and lead to more enduring outcomes.

“The public, the primary beneficiary, should have the right to contribute to the CIPP document. Their participation will ensure that the aspects of a just transition, which is one of the spirits of JETP, are reflected accurately as they better understand the real conditions on the ground. The JETP secretariat only held one FGD session with the civil society community at the beginning of compiling this document. In the second leg of the document preparation process, it is hoped that the number of FGD sessions will be increased to more than once. Also, it is crucial to distribute this draft document in advance so that it can be studied before the FGD session,” said Raditya Wiranegara, Senior Analyst of IESR.

Indonesia Needs to Synergize Policy and Strategies to Accelerate Energy Transition

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Bali, August 29, 2023 –  Institute for Essential Services Reform (IESR) alongside the Energy Transition Policy Development Forum (ETP) hosted a discussion to bridge the gap between policy and practices in accelerating energy transition in Indonesia. This discussion was a side event at the ASEAN Energy Business Forum 2023, held on Friday (25/08).

Business representatives were from Quantum Power Asia, Suncable, PT TML Energy and the Indonesian Biofuel Producers Association. The policymakers included the Ministry of Investment/BKPM, Vice Ministry of Finance, Coordinating Minister of Maritime Affairs and Investments; The Regional Government of Bali  and Perusahaan Listrik Negara. 

Both businesses and policymakers representatives shared their challenges, expectations, plans, and collaborative strategies to make energy transition work in Indonesia. An underlying challenge faced with both stakeholders is financing. On one side, businesses face a lack of incentives while generating renewable energy projects and subsidies make it harder for renewables to compete with conventional energy sources. On the contrary, policymakers need investment to be able to generate projects. 

In its report titled “Indonesia Sustainable Finance Outlook (ISFO) 2023”, IESR observed that there are significant investment risks associated with renewable energy due to unattractive tariffs. The tariffs contribute to lower private investor confidence in renewable energy projects. Furthermore, the lack of transparency in the procurement process for renewable energy projects highlights the necessity for improving the investment environment and the bankability of renewable energy projects. This improvement would lead to increased confidence among private investors and greater trust from international funders.

Businesses are keen to support the development of renewable energy in Indonesia. However,regulations need to be settled first to shorten the negotiations process between government and private sectors. Furthermore, aligning the energy transition agenda between government bodies, harmonizing regional and national policies, and interconnectivity are the key points of the discussion between the two stakeholders.

Fabby Tumiwa, the Executive Director of Institute for Essential Services Reform, encourages the Indonesian government to learn from policies and best practices from other countries to accelerate energy transition. Although these said policies and strategies need to be adapted as “Indonesian-style” (the solutions should be based on national wisdom and situation) policies and practices to accommodate the complexity of the Indonesian energy sector.

“Indonesia needs an energy ecosystem to enable investment and partnerships. We need to be perceptive, we need innovations and a different approach from Perusahaan Listrik Negara (PLN) to boost energy transition. PLN needs to prepare for the ecosystem and it has to be supported by policies from the Ministry of Energy and Mineral Resources to foster public and private financing. Although there are different expectations from businesses and policymakers, we have to keep moving forward, despite our limitations,” stated Fabby. 

Bali NZE 2045: Bali’s Commitment for Sustainable Electricity

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Bali, August 28, 2023 – The Institute for Essential Services Reform encourages and supports the commitment of the Provincial Government of Bali to achieving the Bali Net Zero Emissions 2045 initiative. As a crucial part of this initiative, the electricity sector in Bali is being decarbonized, which is a strategic step towards achieving Bali’s carbon-neutral goal. This step will significantly reduce the carbon footprint and help preserve Bali’s natural beauty, which is increasingly vulnerable to the effects of climate change.

“Bali currently embraces an environmentally conscious low-carbon development plan strategy rooted in the Balinese principle of nangun sat kerthi loka complemented by various regulations that advocate decarbonization. Notably, the Bali Governor’s Regulation on Clean Energy and Battery-Based Electric Motorized Vehicles underscores this commitment. It serves as a cornerstone for Bali to manifest the NZE 2045 vision, fortified by collaborative support. The decarbonization of the electricity sector emerges as a critical facet, considering that the prime contributor to emissions in Bali comes from the energy sector, including electricity,” explained Marlistya Citraningrum, Program Manager for Sustainable Energy Access on Bali Job Fair and Education Expo organized by Department of Manpower and Department of Energy and Mineral Resources of the province of Bali. . 

On the same occasion, a special workshop was also held to garner multi-stakeholder support in achieving Bali NZE 2045. On the inaugural day of the seminar unveiled design for low-carbon regional development and a road map for decarbonizing the Bali electricity system, the second and third days of the workshop focused on preparing reliable resources and sustainable financing for Bali NZE 2045.

“To move towards decarbonization of the electricity sector, there are several strategies that have been actively propelled by IESR, including mapping the technical potential of rooftop solar power plants for government buildings, public facilities, hotels, restaurants and other business entities. The landscape further involves identifying innovative financing schemes for the adoption of renewable energy, market analysis to understand the behavior of potential rooftop solar PV users, including motivation and purchase choices, and analysis of hosting capacity to determine system reliability with large-scale and dispersed penetration of renewable energy,” said Marlistya Citraningrum.

IESR, which has been actively collaborating with the Provincial Government of Bali since 2019, has recorded that the technical potential for renewable energy in Bali is relatively large, reaching 143 GW, including the technical potential for solar PV installed on land of 26 GWp (20% potential) which can be developed with pumped hydroelectric power storage ( pump hydro energy storage, PHES) with a possibility of around 5.8 GWh. Furthermore, in collaborative endeavor, IESR and Udayana University’s Center of Excellence for Community-Based Renewable Energy (CORE)  have identified additional renewable energy potential on Nusa Penida, such as solar, biomass, wind, and biodiesel (CPO, jatropha, seaweed). There are also energy storage possibilities like batteries and pumped-hydro energy storage (seawater). Currently, IESR is partnering with CORE Udayana University for a case study on Nusa Penida towards securing its energy needs with a 100% renewable energy goal. At present, 30% of the energy sources in Nusa Penida come from renewable energy, mainly solar PV with batteries.

Previously, the Provincial Government of Bali had declared the Bali Action Plan Towards Bali Net Zero Emissions 2045, which was supported by the main partners of the Institute for Essential Services Reform (IESR), World Resources Institute (WRI) Indonesia, New Energy Nexus Indonesia. The event was also attended by supporting partners from global and national philanthropic institutions, namely Bloomberg Philanthropies, IKEA Foundation, Sequoia Climate Foundation, ClimateWorks Foundation, Tara Climate Foundation, and Viriya ENB.

About Institute for Essential Services Reform

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

About Bali Net Zero Emission 2045

The Bali Net Zero Emissions 2045 Initiative consists of various efforts aimed at low carbon development in Bali through the transition to renewable energy, electric mobility, and climate entrepreneurship, all geared towards achieving Bali Net Zero Emissions by 2045. This initiative encourages collaborative action and work cooperation between the Provincial Government of Bali, various partners, communities, and stakeholders in Bali to accelerate the adoption of clean energy and encourage the active participation of the Balinese people in the low carbon development agenda. The parties involved include international institutions, non-profit organizations, independent research institutions, the private sector, entrepreneurship and start-up businesses, academic institutions, associations, and local communities. The main partners of this initiative are the Institute for Essential Services Reform (IESR), World Resources Institute (WRI) Indonesia, and New Energy Nexus Indonesia.

IESR: Indonesia Must Lead ASEAN Member Countries to Collaborate Towards the Development of Solar Energy in Southeast Asia

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Jakarta, August 24, 2023 – During the upcoming 41st ASEAN Ministers on Energy Meeting (AMEM) in August 2023 and the 43rd ASEAN Summit in September 2023, The Institute for Essential Services Reform (IESR) hopes Indonesia, as the chair of ASEAN 2023, to use this opportunity to encourage ASEAN member countries to work together and commit to transitioning their energy source in line with the Paris Agreement targets. Additionally, the IESR is encouraging the development of industrial hubs and the use of solar energy in the region.

IESR believes that Indonesia can build collaborations to make ASEAN a manufacturing center for PLTS components that will create industrial development and green economic opportunities and contribute to reducing global greenhouse gas emissions. Fabby Tumiwa, Executive Director of IESR, explained that solar energy currently stands as the primary source for achieving each ASEAN member country’s net-zero emission (NZE) goal. This is due to the abundant resources and affordable technology prices. Among the ASEAN countries, Vietnam has the highest installed capacity of PLTS, over 20 GW. Thailand follows with around 3 GW, Malaysia with about 2.2 GW, and the Philippines with roughly 1.7 GW. As for Indonesia, its PLTS installed capacity has only reached 0.2 GW until the middle of 2023.

“The industrial potential and supply chain for solar PV components in ASEAN have also started to develop. In terms of  material availability, Indonesia and Malaysia have the potential to meet the polysilicon needed for producing wafers, ingots, and solar cells,” said Fabby Tumiwa.

The energy transition under the Paris Agreement target requires the ASEAN region to build renewable energy capacity of up to 39% – 41% of the primary energy mix in 2030. The solar PV capacity must reach 142 GW to 241 GW. The most significant need for solar PV is in Indonesia, the country’s largest economy, with a target of reaching 34% of the renewable energy mix in the electricity sector by 2030. Indonesia needs solar PV technology with good quality, stable supply, and affordable prices.

Besides market potential, Indonesia possesses significant silica resources that can be processed into polysilicon, the critical component of solar cells. Indonesia can reap economic benefits by establishing a solar industry hub in ASEAN. Furthermore, ASEAN nations can benefit from a more reliable supply of essential raw materials to manufacture solar cells and modules.

Moreover, IESR assesses that the Indonesian government should lead by example in establishing and implementing policies that support industrial and supply chain development in Indonesia. It will encourage the adoption of large-scale solar PV and bring Indonesia on par with other ASEAN member countries that prioritize solar energy. Based on IESR’s observations, even though throughout 2022 and until the middle of 2023 there are several obstacles to the installation of solar PV, such as limiting the installation capacity and revision of Minister of Energy and Mineral Resources number 26 of 2021, there are at least 186.5 MW of contracted solar PV capacity from the 655 MWp project pipeline solar PV roof alone to April 2023.

“Indonesia needs to build up to 100 GW of utility-scale solar PV by 2030 to achieve zero-emission 2050 based on the IESR Deep Decarbonization study. This requires alignment of policies and implementation in the field and clarity of procedures that can encourage active community participation, a good investment climate, and support in the form of incentives or other innovative financing. At the ASEAN level, strategic collaboration and the parallel development of the regional solar industry is expected to make the growth of solar PV more massive in the coming years,” said Marlistya Citraningrum, Program Manager for Sustainable Energy Access, IESR.

IESR urges the Indonesian government at the 41st AMEM and 43rd ASEAN Summit to offer initiatives and realize monumental agreements in terms of collaboration between countries in ASEAN to make this region a manufacturing center for solar PV components and other supporting components by focusing on the comparative advantages of each country. As a manufacturing center for solar PV components, ASEAN can encourage economic, industrial, and trade cooperation and is in line with Indonesia’s goal of becoming the chair of ASEAN 2023. In addition, this vision aligns with Indonesia’s downstream policy and can be a driving force for the growth of Indonesia’s renewable energy technology manufacturing industry.

Electrification Ratio Doesn’t Address the Reliability of Electricity Quality in Indonesia

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Jakarta, August 22, 2023 – The electrification ratio in Indonesia is recorded to have reached 99.63 percent, and the ratio of electrified villages reached 99.79 percent at the end of 2022, based on the 2022 Performance Achievement report and the 2023 Work Plan of the Renewable Energy and Energy Conservation Subsector. However, the Institute for Essential Services Reform (IESR) encourages the government to evaluate and update the definition of the electrification ratio in Indonesia to include meeting the needs of the Indonesian people for quality electricity. Currently, the definition of the electrification ratio is still limited to the ratio of the number of electrified households to total households.

Deon Arinaldo, Energy Transformation Program Manager at IESR, stated in the webinar “Energy Transition in National Electrification Equity” that access to quality electricity will impact the improvement of people’s quality of life.

“Access to electricity should not only provide the availability of electricity but also the opportunity for recipients to enhance their quality of life and the economy,” he said.

Alvin P. Sisdwinugraha, an Electricity System and Renewable Energy Analyst at IESR, mentioned in his presentation that the high electrification ratio in Indonesia hasn’t been able to ensure the accessibility, reliability, capacity, and quality of electricity received by the community. According to him, new indicators are required to provide an overview of the quality of electricity access in Indonesia, such as the Multi-Tier Framework (MTF), which can assess the spectrum of service quality from the perspective of electricity users.

“IESR attempted to measure the quality of electricity access using MTF in NTB and NTT in 2019. As a result, electricity was not available 24 hours a day and was limited to electronic devices and low-power lighting,” he explained.

He encouraged the government to adopt evaluation methods that incorporate the quality of electricity services as a key indicator of achievement related to energy access. Alvin stated that a comprehensive evaluation of the electrification ratio, considering the necessity for quality electricity, requires coordination among relevant ministries and institutions such as the Ministry of Energy and Mineral Resources, PLN, Ministry of Villages, and local/provincial governments.

Moreover, IESR also urges the government to provide dedicated and consistent support for ensuring quality electricity access. This involves addressing diverse challenges, including hard-to-reach geographical locations, limited financing, and local capacity in maintaining electricity facilities through the utilization of renewable energy. Furthermore, the indicators employed to determine electrification ratios and electrified villages need expansion to encompass the quality of electricity received by the households or villages in question.

Marlistya Citraningrum, IESR’s Sustainability Energy Access Program Manager, elaborated on the current policy landscape. She highlighted the Presidential Regulation Number 11 of 2023, which grants increased authority to regional governments, particularly in the development of renewable energy.

“This added authority should be complemented by local government initiatives aimed at devising programs aligned with the goal of providing energy access, particularly through local renewable energy solutions. The principle of energy decentralization enables the pursuit of self-reliant energy solutions with the involvement of various stakeholders, contributing to enhanced community welfare through sustainable energy access,” she added.

Marlistya emphasized that energy decentralization utilizing renewable energy sources will create opportunities for broader and participatory exploration of utilization. This approach is expected to facilitate enhanced electricity access and bolster the reliability and quality of electricity.

The discussion regarding the acceleration of renewable energy utilization through energy transition will be further explored during the Indonesia Energy Transition Dialogue (IETD) 2023, taking place from September 18 to 20, 2023. The event will be conducted in a hybrid format in Jakarta. IETD 2023 is organized by IESR and the Indonesia Clean Energy Forum (ICEF), and it will engage numerous experts to delve deeper into strategies for transforming electricity system operations, thereby enhancing the renewable energy mix. Registration for IETD 2023 is available at www.ietd.info.