IEVO 2023: Electrification of Transportation to Reduce GHG Emissions

February 19, 2023 – The Institute for Essential Services Reform (IESR) launched Indonesia Electric Vehicles Outlook 2023 for the first time. This report discusses the status of the development of electric vehicles for passengers and the supporting ecosystem for developing electric cars in Indonesia. IESR views that climate change mitigation with a significant reduction in emissions from the transportation sector can be carried out in a participatory way by the community to adopt electric vehicles.

The transportation sector is a source of pollution and contributes to greenhouse gas (GHG) emissions. There are 600 MtCO2-eq of Indonesia’s GHG emissions in the energy sector in 2021; 23% come from the transportation sector. Land transportation is the most significant contributor to GHG emissions in the transportation sector, with more than 90%. Emissions from the transportation sector are predicted to increase by 53% in 2030 compared to 2015 and almost double between 2030 and 2060. Decarbonization of the transportation system by accelerating the adoption of environmentally friendly and low-emission electric vehicles could be one solution, along with the transition to renewable energy in the power sector

“The government has included the use of electric vehicles as one of the mitigation action plans in the Nationally Determined Contribution (NDC). However, the target set still needs to be aligned with the Paris Agreement to limit the increase in the earth’s temperature below 1.5 degrees Celsius by 2050. According to the IESR study, to achieve zero emission by 2050, the number of electric two-wheelers and four-wheelers vehicles must reach 110 million units by 2030,” said Fabby Tumiwa, Executive Director of IESR.

To achieve the target, Indonesia should accelerate the adoption of electric vehicles by supporting fiscal and non-fiscal policies. Since 2019, the government has been intensively pushing for industrial development and the use of electric cars. However, at the same time, several pro-fossil energy policies are still implemented, making adopting electric vehicles less than optimal. For example, government policies continue to subsidize fuel oil (BBM) and extend fuel sales to Euro II standards. These policies have reduced the attractiveness of consumers to acquire electric vehicles and reduced the benefits of switching to electric cars in the form of reduced fuel cost savings.

“Dependence on fossil fuels in our energy system, especially the transportation sector, makes our energy sector vulnerable to price fluctuations. The government is trying to reduce dependence on fossil fuels in the transportation sector through battery-based electric motorized vehicles (KBLBB). However, it is still difficult to find electric charging infrastructure, expensive purchase prices, and limited performance and models are the main obstacles to consumer adoption of KBLBB. These various obstacles need to be resolved by the government,” explain Faris Adnan, IEVO writer who is also a researcher on Electricity Systems, IESR.

The IESR findings show that by 2022, the adoption of electric motorbikes increased five fold from 5,748 units in 2021 to 25,782 units. In addition, the adoption of electric cars has almost quadrupled from 2,012 units in 2021 to 7,679 units in 2022. The promotion of electric vehicles drove this increase through the G20 event, which made electric cars the official vehicle of the delegation.

“Even though there is an increase, the number is still far from the target set by the government. The population of new electric motorbikes is 0.2% of the total motorbikes in Indonesia. Meanwhile, new electric cars reached 0.4%. Therefore, for KBLBB to be more attractive and affordable to the public, several additional policy instruments that are right on target are needed,” said Faris.

One such policy instrument is a combination of incentives for producers and market creation to accelerate the economies of scale for electric vehicles, especially two-wheelers electric vehicles, which have significant market potential. For this reason, IESR recommends that the government encourage the implementation of the Presidential Instruction for the purchase of electric vehicles by government agencies and state-owned enterprises and encourage adoption by the ride-hailing business and logistics to accelerate the adoption of electric cars by the market in the next 2-3 years.

Furthermore, to get more significant GHG emission reduction and environmental benefits, an increase in the mix of new renewable energy generators in the electricity system is also needed so that the emissions produced by KBLBB are lower than those from internal combustion engines.

“The IESR study shows that it will obtain new emission benefits if the renewable energy mix in the PLN electricity system is above 20%,” continued Faris

IESR will launch and discuss the Indonesia Electric Vehicle Outlook (IEVO) 2023 on February 21, 2023, 09:30 – 12:00: 00 WIB online via Zoom Conference + Livestream Youtube (IESR). This event is an effort to encourage the acceleration of electric vehicles in Indonesia, bring together various relevant stakeholders, and accelerate Indonesia’s steps to make an energy transition. The event will be attended by the Chairperson of the Indonesian Transportation Society’s Environment and Energy Transportation Forum, Indira Darmoyono, Director of Business Development Strategy & Special Projects Grab Indonesia, Rivana Mezaya, and others.

JETP Secretariat Launched, Government Needs to Remove Barriers for Renewable Energy Development

Jakarta, 17 February 2023 – The Government of Indonesia has launched a secretariat for the Just Energy Transition Partnership (JETP) work team, which will work today. Some of the targeted work results planned to achieve within the next 6 (six) months include the availability of a road map for early retirement for coal-fired power plants (CFPP) and the completion of a comprehensive investment plan (CIP) which will also reflect support for communities affected by the energy transition process.

The Institute for Essential Services Reform (IESR) appreciates the progress made by the government and IPG towards implementing the JETP agreement. IESR encourages the JETP work team to compile beyond just a coal-fired power plant early retirement roadmap as targeted by JETP, but also more ambitious by aligning the target with the Paris Agreement.

“JETP is an opportunity to accelerate the energy transition and reduce GHG emissions. Indonesia’s stakes must go even further, such as encouraging green economic growth and strengthening the renewable energy industry. Indonesia should not hesitate to accelerate the energy transition because through it we can grow our economy higher,” said Fabby Tumiwa, Executive Director of IESR.

IESR calculates that to reach peak emissions in the electricity sector in 2030, it is necessary to retire the CFPP and increase the capacity of renewable energy generators at the same time.

“In the IESR analysis, to achieve the renewable energy mix target in the electricity system of 34% in 2030 according to the JETP target, instead of the 20.9 GW of renewable energy projects that have been planned in the 2021-2030 RUPTL, an additional minimum of 5.4 GW of renewable energy capacity will be needed. The addition of this renewable energy needs to be planned along with the retirement of up to 8.6 GW of CFPP, therefore, the reliability of the electricity system can be maintained,” explained Deon Arinaldo, IESR Energy Transformation Program Manager.

Reflecting on the achievement of Indonesia’s renewable energy mix in primary energy, which only reaches 12.3%, the government must be able to overcome obstacles to the development of renewable energy, such as by providing support to local producers and industries to meet the Local Content Requirements (LCR), improve procurement procedures or renewable energy auctions and diverting fossil subsidies to the renewable energy sector and eliminating the DMO policy.

“In the last five years, investment in renewable energy has always been below the target, and the installed capacity of renewable energy has only grown 300-500 MW per year. Meanwhile, the need for additional renewable energy generators will reach 26 GW more in the next 8 years or around 3-4 GW per year. The large funding commitment from JETP, which will be outlined in this investment plan, can only be realized if obstacles to renewable energy investment, such as procurement procedures at PLN, LCR regulations for solar PV that are not aligned with industrial developments and coal price subsidies through the DMO price policy can be resolved immediately in this year,” said Fabby.

As the operation of coal-fired power plants is about to end, the government must also start preparing for proper management of electricity infrastructure such as networks and energy storage, planning economic diversification in coal-producing areas, and providing training and incentives to workers and communities affected by the CFPP closure. 

“Energy transition planning needs to provide clear direction in the long term, so that the negative impacts of the energy transition, for instance, on workers in CFPP & coal supply chain, reduction of regional and national revenues from coal, and others, can be identified clearly. From this, strategies can be developed to carry out the social and economic transformation, such as preparing new job opportunities, and relevant skills training for workers,” said Deon.

 

Indonesia Needs to Overhaul Strategy to Pursue 23% Renewable Energy Mix in 2025

Jakarta, 1 February 2023 – The Ministry of Energy and Mineral Resources (MEMR) has announced the performance achievements for 2022 and the 2023 program plans for the MEMR sector, the Electricity Subsector and New Renewable Energy and Energy Conservation. In contrast to coal, whose production increased by 3% from the target of reaching 687 million tons in 2022, the achievement of the renewable energy mix in primary energy and electricity generation increased only by around 0.1% and 0.45%, respectively, from the previous year. Moreover, investment in the renewable energy sector is still far from the target. The Institute for Essential Services Reform (IESR) views this development as a warning signal for the government to immediately overhaul its strategy in achieving the target of a 23% renewable energy mix in 2025 and achieving net zero emission (NZE) in 2060 or sooner.

The renewable energy mix in electricity generation was recorded at 14.5% with an installed renewable energy capacity of 12,542 MW. This installed capacity exceeds the 2022 target but is still far from the minimum target of 24 GW in 2025. The low mix of renewable energy in power generation reflects the achievement of the renewable energy mix in primary energy, which only reaches 12.3% (Ministry of Energy and Mineral Resources temporary data) in 2022.

“The underdevelopment of renewable energy in the electricity sector in the last three years shows that there has been a misstep and a lack of breakthroughs in the strategy for developing renewable energy. Since 2019, renewable energy generation capacity has only grown by 2 GW, only 25% of the capacity needed to reach the target of 23%, according to government regulation No. 79/2014 concerning National Energy Policy. Renewable energy development has been held hostage by the continued construction of coal-fired power plants (CFPP) in the 35 GW program even though the electricity demand growth target was not achieved and PLN’s reluctance to increase the renewable energy mix under the pretext of overcapacity,” said Fabby Tumiwa, Executive Director of IESR.

The massive use of solar energy and cooperation should be a strategic effort for the government to achieve the target of the renewable energy mix. In 2021, the rooftop solar PV became a National Strategic Project (PSN) with a target of 3.6 GW until 2025 but is hampered by PLN’s reluctance to implement MEMR Regulation No. 26/2021. From the target solar energy installed capacity of 893 MW in 2022, only 270 MW was achieved. Instead of being more ambitious, in 2023, the government will reduce the solar energy development target by half from 2022 to 430 MW. The government needs to show the firmness and clarity of the rules that encourage the adoption of solar PV.

“The development of renewable energy, particularly rooftop solar PV, is hindering PLN’s interest in pursuing growth in electricity sales to absorb excess supply. The plan to dieselize the 500 MW diesel power plants by 2024 is also constrained by the PLN auction process and the lack of investor interest. Therefore, the government must look for a breakthrough to accelerate rooftop solar PV. Direct support from President Jokowi is needed to firmly order PLN to accelerate the development of renewable energy with the remaining two years, pursue the 10 GW target in RUPTL and integrate rooftop solar to achieve the PSN target,” continued Fabby.

Furthermore, the government needs to expedite the implementation of Presidential Decree No. 112 of 2022 concerning the Acceleration of the Development of Renewable Energy for the Provision of Electric Power, especially by releasing a roadmap for discontinuing the operation of coal-fired power plants and preparing an investment plan that is embodied in the Just Energy Transition Partnership (JETP).

Fabby Tumiwa added that from the results of the IESR study, there is a potential of 4.5 GW of PLTU capacity that can be retired before 2025, and an additional 3 GW from the list of PLTU projects in the 2021-2030 RUPTL, which have the possibility of being cancelled. Termination of the operation of old and inefficient power plants before 2025 allows for greater integration of renewable energy.

“In contrast to the government’s promise to reduce coal power plants before 2030, coal production is targeted to be 695 million tonnes this year. This increase in production came from an increase in domestic demand/DMO, which rose to 177 million tonnes. One of the factors driving this increase is domestic demand originating from electricity generation, including captive CFPP and CFPP integrated with industrial areas (PPU) outside the PLN system. This increase in demand is a steep road for the government to achieve the electricity sector’s peak emission target of 290 million tons of CO2 in 2030, as agreed at JETP,” explained Deon Arinaldo, IESR Energy Transformation Program Manager.

Likewise, the government plans to implement B35 in February 2023 with an allocation of biodiesel needs of 13 million kl. Meanwhile, to increase the blending ratio of biodiesel by 40%, it is estimated that the production of 15 million kl of biodiesel is required. IESR views that Indonesia can implement B40 at the end of 2023.

“Currently, biodiesel production capacity has reached 17.5 million kl and will continue to increase to close to 19.5 million kl at the end of 2023 in line with the addition of several new factories. So, biodiesel production can be optimized to increase the blend of biodiesel to B35, even up to B40. Especially if world oil prices tend to be as high as they are today. However, we must balance the sustainability of CPO production,” explained Deon.

IESR states that the government has to have more courage in leading the energy transition process and implementing the promises in the Bali Compact, the result of Indonesia’s presidency at the G20 2022, and showing its influence in leadership in ASEAN this year to attract more investment in the renewable energy sector. Renewable energy investment achievements, which are only USD 1.6 billion, are relatively small.

“Political will for the development of renewable energy needs to be increased and supported by consistent regulations (such as regulations for rooftop solar) that provide more support for renewable energy than fossil energy. As an example of political will, this can be reflected in the government’s renewable energy development target, which has fallen this year compared to the previous year. Others, such as the development of the New Energy and Renewable Energy Bill (EBET), which still provides support for fossil energy, so it does not give a clear signal to the market. Investor confidence in investing in renewable energy in Indonesia needs to be built because it is an absolute prerequisite for attracting investment,” added Deon.

Power Wheeling Scheme Needs to be Kept in the New and Renewable Energy Bill

press release

Jakarta, 12 January 2023- Ministry of Energy and Mineral Resource (MEMR) decides to repeal the proposed power wheeling scheme from the issues inventory list (DIM) of the New and Renewable Energy Bill (NERE Bill) that was submitted to the House of Representatives (DPR) in December 2022. Institute for Essential Services Reform (IESR) regrets such decision and implores the government and the House of Representatives to include renewable power wheeling in the RUU EBET review.

The power wheeling scheme is the joint utilization of the electricity network. Through this scheme, independent power producers (IPP)  could sell electricity directly to the public using the transmission and distribution network owned by the State Electricity Company (PLN). IESR views that power wheeling could increase the demand and supply of renewable energy by the public, thus accelerating the growth of renewable energy and reducing PLN’s burden in providing renewable energy.

“The joint utilization of electricity network or power wheeling will provide easier access for consumers to get renewable energy supply with a competitive price. This could then foster the interest to develop existing renewable energy sources, and not depend on PLN as the off-taker. Renewable energy power wheeling could also increase the utilization rate of PLN’s energy network, providing a new source of income for the company,” said Fabby Tumiwa, the Executive Director of the Institute for Essential Services Reform.

Fabby views the power wheeling scheme as a consequence of Indonesia’s electricity system, with PLN monopolizing rights for transmission network control. Through the power wheeling scheme, electricity networks could be used communally and allow renewable energy Independent Power Producers (IPP) to sell directly to the consumers using transmission and distribution networks belonging to PLN. 

Fabby adds that the Ministry of Finance’s assessment of power oversupply as the main reason for repealing power wheeling is inaccurate. The oversupply is mostly dominated by fossil energy, hence hindering the clean energy mix target. Fabby also explained that the oversupply situation is predicted not to last long, and could end as soon as 2025, supported by the gradual increase of power demand post-pandemic.

“EBET Bill, if passed, will be implemented for a long time and could even surpass the current oversupply situation. The government needs to push for renewable energy adoption quickly, especially if they plan to retire coal power plants by 2030. In the future, power wheeling could be one of the revenue sources for PLN, by leasing electric networks,” added Fabby.

Furthermore, Deon Arinaldo, Program Manager of Energy Transformation IESR, explains that it’s too premature to worry about the state and PLN’s loss if power wheeling is implemented. Deon added that if the power wheeling scheme is back in the EBET Bill, the law would still need to be expounded, and the points could then be used to manage the potential risks to PLN and the state.

“For example, in setting power wheeling tariffs, the government can manage the price based on comprehensive studies so it can balance between renewable energy development targets with the risk of decreasing electricity demand. On the other side, PLN could still also take part in the power wheeling scheme through its sub-holding generation company,” said Deon.***

The Amend of the MEMR Regulation on Rooftop Solar PV Has the Potential to Undermine the Interest of the Residential Market

Jakarta, 6 January 2023 – The Ministry of Energy and Mineral Resources (MEMR) is revising the Minister of Energy and Mineral Resources Regulation No. 26/2021 concerning rooftop solar PV connected to the power supply grid owned by the holders of power supply business licence for the public interest (Izin Usaha Penyediaan Tenaga Listrik untuk Kepentingan Umum) or commonly referred to as IUPTLU. This change is intended to address the difficulties with installing rooftop solar PV that has occurred in the last year since the ministerial regulation was officially issued.

In the public hearing that was held on Friday, January 6 2023, the Ministry of Energy and Mineral Resources presented substance changes, including there is no limit to the maximum capacity of 100% installed capacity of a rooftop solar power plant, but based on system quota, electricity exports are abolished (no longer counted as bill deduction), capacity costs for industrial customers is nullified (no longer 5 hours), and the transition rules for existing customers are enforced within a certain time.

“Since it was promulgated in August 2021, MEMR Reg No. 26/2021 practically does not work because PLN refuses to implement it. As a result, the government’s target of 450 MWp of additional solar PV capacity in 2022 was not achieved. This revision seems to be a meeting point between the government’s interests and PLN and accommodates PLN’s interests in reducing the potential for electricity exports from solar PV users due to net-metering regulations considering the overcapacity conditions. But AESI regrets that this accommodation has the potential to reduce the economy and interest in residential rooftop solar PV, which has the potential to grow,” said Fabby Tumiwa, Chairman of the Indonesian Solar Energy Association (AESI) in Jakarta.

Since January 2022, 10-15% rooftop solar PV capacity restrictions have occurred in various regions in Indonesia for customers, both residential on the kilowatt scale to industrial customers with capacities on the megawatt scale. This capacity limitation discombobulated the provisions of MEMR Reg No. 26/2021 (maximum 100% installed electric power) and reduced potential customers’ interest to adopt rooftop solar.

In the proposed changes to the substance of the Ministerial Regulation, the capacity limit of up to 100% will not be reinstated but will be based on a quota system with first come, first serve. This change directly responds to capacity restrictions occurring in the field. However, the technical determination of system quotas needs to be clarified, especially concerning renewable energy development plans in the regions. In addition, the period for setting quotas per 5 years is too long due to the dynamics of electricity supply technology.

AESI supports the determination of quotas by taking into account the reliability of the IUPTLU electricity network but proposes that capacity quotas be determined every 2 years, with a review conducted every six months.

Eradicating net metering by eliminating the export of electricity to the PLN grid, which applies to all customer categories without exception, will have major impacts on the residential (household) market. The current economic level of rooftop solar PV is still influenced by net metering because the household load profile is mostly at night. The absence of exports will lessen the reduction in household electricity bills and extend the payback period for purchasing a rooftop solar system, making rooftop solar unattractive for household customers.

“A market survey conducted by the Institute for Essential Services Reform (IESR) in 7 provinces in Indonesia in 2019 – 2021 shows that the economy of solar PV is an important and determining factor for residential customers to use rooftop solar. The majority of respondents also want to get savings of at least 50% and clear and fast installation procedures,” added Marlistya Citraningrum, Manager of the IESR Sustainable Energy Access Program.

The National Strategic Project (PSN) for rooftop solar PV with a target of 3.6 GW in 2025 and achieving the 23% renewable energy target requires community participation. With just a 20% market share for R2 and R3 class customers (3,500 VA and above), there is a potential of 400,000 households throughout Indonesia – equivalent to 1.2 GWp of rooftop solar if each instals a minimum of 3 kWp.

The impact on residential rooftop PV will reduce the benefits of creating green jobs through small-scale solar PV installation businesses targeting the household market segment, which has started to grow since 2018. With the potential for adoption spread across various cities in Indonesia, the residential rooftop solar PV market also contributes to the opening of green jobs, for example, technicians and installers, and the growth of MSME rooftop solar PV installers. If the latest revision of the MEMR regulation is passed with the currently proposed clauses, the growth and opportunities of these green businesses will certainly be hampered. AESI and IESR recommend that net metering be implemented for residential customers with export-import calculations which can be discussed later.

In the public hearing, there were many questions raised by solar energy developers (developers), installers (EPC companies), local governments, and rooftop PV users.

AESI assesses that instead of supporting the renewable energy transition, the revision of this regulation will hinder the addition of rooftop PV. For this reason, AESI proposes that the export of electricity from residential customers is still permitted on condition that the installed capacity is 100% of the customer’s power. This provision is reviewed within 5 years or after the residential rooftop PV reaches a cumulative 5% of the total installed capacity of generators in the system. 

The Ministry of Energy and Mineral Resources has opened a channel for submitting input for this process until January 13, 2023.

IESR: Electric Vehicle Incentives Need to Focus on Two-Wheeler Vehicles and Public Transportation Electrification

Jakarta, 20 December 2022 – The government plans to provide incentives for electric vehicles with details of Rp80 million for the purchase of electric cars, Rp40 million for the purchase of hybrid-based electric cars, Rp8 million for the purchase of new electric motorbikes, and Rp5 million for electric motorcycle conversion. The Institute for Essential Services Reform (IESR) views that providing electric vehicle incentives is better focused on purchasing two-wheeler electric vehicles, converting them into two-wheeler electric vehicles and electrifying public transportation.

IESR Executive Director, Fabby Tumiwa, thinks that this time is not proper to provide incentives for buying electric cars. He mentioned several reasons in the Energy Corner: Huge Electric Vehicle Incentives conducted by IESR (19/12), including limited fiscal capacity, as well as the need for a sizable budget for other activities to support a just energy transition, such as developing renewable energy and ensuring the quality of access to electricity in underdeveloped areas. Fabby said that with these considerations, the government should focus more on providing incentives for the purchase of two-wheeler electric vehicles to increase demand for electric vehicles and reach the target of 13 million electric motorbikes in 2030.

“Giving incentives for motorbikes is far more reasonable than cars. We also support the electrification of public transportation, such as electric buses. If this is realized, it will not only reduce fuel consumption but also reduce congestion and reduce emissions,” explained Fabby.

Fabby explained that providing incentives for the purchase of electric motorbikes would benefit the middle to lower-class people who use them not only as a means of transportation but also as earning incomes, especially in urban areas.

Meanwhile, incentives for the procurement of electricity-based buses for small transportation in urban areas will support the creation of low-emission public transportation. IESR Junior Researcher for Electricity Systems and Distributed Energy Resources, Faris Adnan, believes that the Indonesian government can learn from India’s experience in providing incentives for electric vehicles through the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. In this scheme, bus incentives are greater than private cars.

“When we discuss urban mobility, there is an Avoid, Shift, Improve framework. With this framework, in addition to using electric vehicles for private vehicles, the government can build transit-oriented cities and use electric-based public transportation. From existing experience, using only the avoid and shift frameworks can reduce emissions between 40-60%. For this reason, public transportation needs to be subsidized,” said Faris.

Moreover, IESR supports the government if incentives distribution is carried out for the conversion process from conventional motorbikes to electric motorbikes. The conversion process especially needs to be done on vehicles aged 6-7 years with good motor body conditions so that what needs to be replaced is only the engine and battery installation. Assuming the converted motorbikes are past the age of 10 years, it is estimated that there are 6 million motorbikes per year that are ready to be converted.

Based on a survey conducted by IESR, said Faris, the cheapest conversion rate for two-wheeler electric vehicles is Rp10 million, and the most expensive is Rp30 million, with an average range in the range of Rp15 million-Rp23 million. The IESR survey also shows the willingness to pay of Indonesians to convert conventional vehicles into electric motorbikes in the range of Rp5 million-Rp8 million per unit. For this reason, the government must think of additional schemes to make electric motorbike conversions cheaper.

“With incentives, assume we can cut Rp5 million so that the average price of converting electric vehicles from Rp15 million-Rp23 million to Rp10 million-Rp18 million for electric motorbikes without battery replacement system. With battery replacement, the price can be reduced by Rp6 million – Rp8 million. That way, the price of converting an electric motorbike with a battery system can be Rp4 million – Rp10 million, which means it is already under the willingness to pay,” said Faris.***

Opportunities are Increasingly Open for the Acceleration of Renewable Energy Development in 2023

The development of the energy transition in Indonesia

  • In general, based on the result of the transition readiness framework (TRF) made by IESR, Indonesia’s readiness for the energy transition is still low.
  • The share of renewable energy in Indonesia’s primary energy mix will decline from 11.5% in 2021 to 10.4% in 2022
  • The current share of renewable energy in the electricity mix is ​​12.8%, with a capacity of 8.5 GW.
  • In Q3 2022, investment realization was less than 35% of the target of USD 3.97 billion.
  • Energy intensity has decreased at a rate of 1.7% per year, according to the National Energy General Plan’s target of reducing by 1% per year.
  • Energy intensity in residential and commercial buildings also decreased at a rate of 1.38 % per year and 2.64 per year.
  • The government, through the Ministry of Energy and Mineral Resources, has identified that as many as 11 GW of coal-fired power plants (CFPP) can be retired early. It will be discussed further with other ministries.
  • There is increasing adoption of electric vehicles.
  • 8 out of 38 provinces in Indonesia set a renewable energy target of more than 31% by 2025
  • Financing from financial institutions for renewable energy development in Indonesia has increased but is still low compared to its portfolio.

Opportunities to accelerate the energy transition

  • Readiness for energy transition is high when viewed from the declining price of renewable energy technologies.
  • The issuance of Presidential Regulation 112/2022, if followed by the regulation that accommodates the interests of renewable energy developers, will increase energy transition readiness.
  • There will be higher installed capacity additions in geothermal, hydro and solar power plants. For example, increasing the capacity of 55 MW geothermal power plants, Peusangan and Asahan hydropower with capacities of 45 MW and 174 MW, and Cirata solar power at 145 MWac.
  • Indonesia received international funding through the Just Energy Transition Partnership (JETP), the Energy Transition Mechanism (ETM), and the Clean Investment Fund-Accelerated Coal Transition (CIF-ACT) for the energy transition in the amount of USD 24.05 billion.
  • 27 out of 38 provinces have issued local regulations on the Regional Energy General Plan (RUED).
  • The trend of biofuels is predicted to increase.

 

Jakarta, 15 December 2022- 2022 will close with the primary mix target for renewable energy decrease compared to the previous year. However, the presence of international support, the increase and improvement of regulations related to incentives and the renewable energy procurement process, and the existence of project pipelines that are ready to be developed can be a driving force for the accelerated growth of renewable energy in 2023.

The Institute for Essential Services Reform (IESR), supported by Bloomberg Philanthropies, has released its main report Indonesia Energy Transition Outlook (IETO) 2023, which monitors, analyzes and projects the development of the energy transition in Indonesia. The IETO report noted that the share of renewable energy in Indonesia’s primary energy mix decreased from 11.5% in 2021 to 10.4% in 2022. It was due to the share of coal increasing to an all-time high of 43%, making a target of 23% by 2025 will be difficult to achieve if the government does not immediately strengthen its political commitment to the development of renewable energy.

“There is a contrast between the ambition and the realization of renewable energy development. There is a commitment to accelerate the use of renewable energy, but there are still different perceptions and priorities of various policymakers about how the transition process is carried out. It can be seen in the decision to abolish the feed-in tariff in Presidential Decree 112/2022, the rejection of the power wheeling clause in the formulation of the new and renewable energy (EBET) Bill, as well as the decision to maintain coal subsidies in the form of Domestic Market Obligation (DMO) prices. To carry out an effective energy transition, the government must have a unified position and set no-regress targets,” said Fabby Tumiwa, Executive Director of IESR.

IETO 2023 also highlights the achievement of renewable energy investment, which is still below the target set by the government of only USD 1.35 billion by Q3 2022, only 35% of this year’s target of USD 3.97 billion. According to IESR, the investment climate needs to be improved by increasing financial support for renewable energy developers, clearer procurement processes, clear tariff schemes, shorter and clearer licensing processes, reducing barriers to entry for foreign investors, and increasing access to capital with lower interest rates.

Moreover, providing a wider space for the integration of renewable energy into Indonesia’s energy system must be carried out immediately.

“What can be done to provide space for renewable energy penetration, aside from early retirement from the CFPP, is to operate the CFPP flexibly. Technically, this operation will require changes in the main components of the CFPP. However, no less important, the flexible operation will require flexibility in terms of power purchase agreements and fuel supply contracts. According to the IEA, by making these contracts more ‘flexible’ there will be savings of 5% of the total operating costs for a year or the equivalent of USD 0.8 billion. The Grid Code also needs to be made more detailed. This is also necessary so that operators have guidelines for operating regulations flexibly,” explained Raditya Wiranegara, one of the main authors of the IETO, who is also an IESR Senior Researcher.

On the other hand, the transportation and industrial sectors are crucial for rapid decarbonization. In the transportation sector, there is an interesting trend of increasing the adoption of electric vehicles. It can be seen from the number of two- and three-wheeler vehicles which has almost fivefold increased from 5,748 units in 2021 to 25,782 units in 2022. Even so, this number is still far from the Nationally Determined Contributions (NDCs) target, which stipulates 13 million two- and three-wheeler vehicles in Indonesia. 2030.

For the adoption of electric vehicles to become more massive, the government needs to build an electric vehicle ecosystem, including building adequate charging infrastructure, increasing consumer knowledge and awareness, and providing incentives or subsidies.

“The government needs to encourage the creation of an energy transition ecosystem in all energy sectors, one of which is to create a level playing field between fossil energy and alternative low-carbon & renewable energy technologies. The first step that needs to be studied is how current energy subsidies and compensation can be diverted to providing incentives for the development of renewable energy and the adoption of low-carbon technologies while at the same time still helping to maintain people’s welfare. An interesting example is subsidies for the purchase of electric motorbikes, as an effort to divert fuel subsidies,” said Deon Arinaldo, Manager of the Energy Transformation Program, IESR.

The use of fossil energy in the industrial sector has contributed to around 20% of Indonesia’s total energy sector greenhouse gas (GHG) emissions. Increasing process efficiency and energy efficiency as well as fuel substitution have been implemented by several energy-intensive industries to reduce their emissions.

“Implementation of CCUS could be an important short-term strategy in reducing process emissions in the cement, fertilizer and steel industries, but it has yet to start. The industrial sector also needs to develop alternative low-carbon technologies, such as electrolysis-based ammonia for fertilizers and a hydrogen-based direct reduction iron-electric arc furnace (DRI-EAF) process for iron production. Currently, most of the development of low-carbon technologies in the industrial sector is still in the early stages of an MoU and a joint study agreement,” explained Raditya.

IESR encourages the government to achieve a 100% renewable energy mix in the primary energy mix in 2050 and a renewable energy mix of more than 40% in the electricity sector by 2030. If the government can take advantage of the opportunities and support mentioned above, then the attractiveness and energy mix of renewables will increase.

Published in 2017 with the Indonesia Clean Energy Outlook (ICEO) which later transformed into the Indonesia Energy Transition Outlook (IETO) in 2019. Apart from IETO 2023, which has entered its sixth edition, IESR also published it separately. Indonesia Sustainable Finance Outlook or ISFO and Indonesia Solar Energy Outlook or ISEO in 2022. Meanwhile, the Indonesia Electric Vehicle Outlook or IEVO report will be published in early 2023. ***

IETO 2023: Anticipating the Energy Crisis by Utilizing Renewable Energy

Jakarta, 14 December 2022- The global energy crisis shows the vulnerability of fossil-based energy security, including Indonesia, where 67% of the energy mix comes from fossil energy. Facing the uncertainty of social, political, economic and environmental conditions regarding national energy security, the government needs to make a sustainable and just energy transition by optimizing the use of renewable energy sources to replace fossil energy sources. This is the main discussion of the Institute Essential Services Reform (IESR) flagship report entitled Indonesia Energy Transition Outlook (IETO) 2023.

The impact of the energy crisis can be seen in energy prices such as coal, natural gas and crude oil, which have soared 2-4 times in mid-2022 compared to 2019. It has made domestic coal producers more interested in exporting overseas, which has led to a depletion of domestic coal supplies. To overcome the problem of the energy crisis in the short term, the Indonesian government made various decisions such as maintaining the Domestic Market Obligation (DMO) policy, disbursing fossil energy subsidies which reached 650 trillion and adjusting fuel prices to reduce subsidy burdens. However, coal, oil and gas reserves are decreasing every year, and the pressure to overcome the threat of the climate crisis demands a long-term solution so that Indonesia is free from an energy crisis in the future.

“To provide affordable and safe energy, increasing renewable energy for electricity supply, transportation and industry and reducing fossil energy must be accelerated. The energy transition needs to be carried out gradually following social, economic and political conditions that affect policy direction and people’s purchasing power. However, the faster we increase the renewable energy mix, the lower the vulnerability to energy security and the cheaper energy prices in Indonesia will be. It was shown in some IESR study results. The key word is ambitious but also flexible targets,” said Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), at the Media Conference for the launch of IETO 2023.

The condition of European countries and the UK, which are currently experiencing high energy prices, is an example of using transition fuels, such as natural gas, as a wrong strategy. When there is a gas shortage, they temporarily increase fossil energy which denies global efforts to reduce greenhouse gas (GHG) emissions which cause climate change due to rising earth temperatures exceeding 1.5 degrees Celsius.

IESR encourages the government to complete all homework to boost the development of renewable energy and energy efficiency quickly.

“There is still a lot of work to be done to make the energy transition truly happen and sustainable, for instance adjusting National Energy Policy (KEN) and National Energy General Plan (RUEN), phasing out coal and gas subsidies, reforming prices and electricity subsidies, accelerating the termination of coal-fired power plants, developing the domestic solar cell and module industry, adjusting the grid code, as well as integrating transportation and industrial decarbonization strategies according to the zero-emission path. The government must pursue all these reforms quickly, and the community must continue to push for the transition to occur,” explained Fabby.

IETO 2023 also highlights the high level of public awareness of the energy transition. However, in general, energy transition readiness in Indonesia is still low, although several policies, supporting regulations and renewable energy development plans have been issued, such as the enhanced NDC, RUPTL 2021-2030, which contains a 51.6% portion of renewable energy and Presidential Regulation 112/2022 concerning Acceleration Development of Renewable Energy for the Provision of Electric Power.

“Several things still need to be fixed, such as the capacity limit for installing PLTS roofs by 15%, which certainly reduces the public’s interest in utilizing this technology and contributing to the renewable energy mix on a national scale. Based on a public survey that we have conducted, more than 60% of the people we surveyed agree to accelerate the cessation of using coal as the main source in the electricity sector and support the government to start paying attention to other sources such as solar radiation, water and wind. With this huge public support, the government must begin to be able to prove its commitment to providing a cleaner source of electricity for the whole community,” said Handriyanti D Puspitarini, Main Author of IETO 2023 who is also a senior researcher at IESR.

All discussions regarding the status and analysis of the energy sector to accelerate the energy transition are summarized in the Indonesia Energy Transition Outlook (IETO) 2023. Published in 2017 with the Indonesia Clean Energy Outlook (ICEO), which later transformed into the IETO in 2019, the IETO presents several new chapters with analysis depth.

“IETO will consistently highlight, measure and provide recommendations for accelerating Indonesia’s energy transition from year to year. Several reports providing in-depth analysis on specific aspects related to the energy transition such as aspects of energy transition funding, solar energy, and electric vehicles were published in separate reports entitled Indonesia Sustainable Finance Outlook or ISFO, Indonesia Solar Energy Outlook or ISEO, and Indonesia Electric Vehicle Outlook or IEVO, which complements the IETO analysis and recommendations this year,” explained Deon Arinaldo, IESR Energy Transformation Program Manager.

Supported by Bloomberg Philanthropies, IESR will hold discussions and launch the Indonesia Energy Transition Outlook 2023 report on December 15, 2022. The IETO 2023 report can be accessed at s.id/IETO2023-IESR.

The Synergy of Central Java Provincial Government to Realize Low Carbon Development

Semarang, 8 December 2022 – The Provincial Government of Central Java has consistently strengthened their commitment, role and shared responsibility for implementing the energy transition to achieve sustainable and environmentally friendly development. Collaborating with the Institute for Essential Services Reform (IESR), the Central Java Provincial Government held the “Central Java Stakeholders’ Gathering: Energy Transition for Low Carbon Regional Development” to share developments and good practices that have been carried out in Central Java.

Taj Yasin Maimoen, Deputy Governor of Central Java, said in his remarks that the energy transition is crucial to reduce CO2 emissions that cause climate disasters. For this reason, he said, it is necessary to promote a green economy as one of the main parts of the energy transition by developing industries in the field of new and renewable energy, sustainable natural resource management, developing environmentally friendly production processes.

“In developing the energy sector, the government of Central Java has issued Local Regulation no. 12/2018 Concerning Regional Energy General Plans. As a follow-up to this regulation, Governor Regulation number 29 of 2021 was stipulated, which contains instructions for its implementation. The governor’s regulation emphasizes community participation in the implementation of new renewable energy, for example, community participation in the development of new renewable energy in Central Java through the Energy Independent Village program,” said Taj Yasin. He added that the availability of energy on a community scale, if supported, would leverage economic growth.

Fabby Tumiwa, Executive Director of IESR, added that leadership, regional innovation and collaboration are the keys to driving green economic growth and energy transition.

“The community can be involved in driving their energy transition with their efforts and support from the government. This is called energy transition cooperation. The energy transition requires a large amount of effort and investment, so contributions from the community must also be accommodated. The practice so far carried out in Central Java can become a reference in many regions in developing renewable energy and encouraging low-carbon development,” said Fabby.

Furthermore, the Head of the Central Java Provincial Energy and Mineral Resources (EMR) Office, Sujarwanto Dwiatmoko, explained that the Regional Energy General Plan (RUED) would later be integrated into the Low Carbon Development Action Plan (RAPRK) and the Regional Medium Term Development Plan (RPJMD). Thus, the Central Java RPJMD already contains a commitment to building environmentally friendly energy to achieve the goals of food and energy sovereignty. The office of EMR Central Java builds cooperation with various parties to achieve this goal, one of which is with IESR.

“In collaboration with IESR, in 2019, the Central Java Provincial Government has made a big commitment to the Central Java Solar Province. Since then, the capacity of rooftop PLTS in Central Java has increased from 0.1 MWp in 2019 to 22 MWp in 2022,” said Sujarwanto.

This progress has made other agencies such as the Environment and Forestry Service of Central Java Province, the Office of Industry and Trade (Disperindag) of Central Java Province, and the Regional Owned Enterprise (BUMD) PT Jateng Petro Energi (JPEN) join hands with IESR in glossing the energy transition and development low carbon in Central Java Province.

Widi Hartanto, Head of the Environment and Forestry Service for Central Java Province, said that waste generated by industry and society can be processed into an energy source. For this reason, his party is working with IESR, among others, to carry out studies on reducing emissions through managing waste and waste into renewable energy, building capacity for stakeholders regarding reducing greenhouse gas emissions through waste and waste management and utilizing renewable energy.

“We have fostered the climate village program (Proklim), around 525 Proklim have received certificates from the Ministry of Environment and Forestry, and we are trying to collaborate with Energy Independent Village,” added Widi.

As a contributor to 34% of economic growth in Central Java, the Head of the Central Java Provincial Office of Industry and Trade, M. Arif Sambodo, acknowledged that the industrial sector is also responsible for producing carbon emissions. In collaboration with IESR, the Department of Industry and Trade is preparing a Map for the Development of Renewable Energy Utilization in the Industrial Sector and Industrial Areas. Moreover, his party will initiate a Partnership Network between Metal Small and Medium Industries (IKM) in Central Java and the Solar Panel Industry so that they can become part of the supply chain and increase Local content requirements (TKDN).

“Regarding the substitution of imported products, we need to increase domestic components. Central Java has metal potential, which has become tier 2 as a major automotive supply chain supplier in Indonesia,” Arif explained.

PT Jateng Petro Energi, through M. Iqbal, Main Director of JPEN, in collaboration with IESR and other partners, will carry out three big strategies to encourage energy transition efforts with solar power and clean mobility, namely strengthening ecosystem institutions, solopreneurship or creating green jobs and capacity building.

“We will socialize solar panels for Regional Apparatus Work Unit (SKPD) in Central Java province and provide Public Electric Vehicle Charging Stations (SPKLU) to support the acceleration of the use of battery-based electric vehicles,” he said.

Questioning the relatively small regional authority over the renewable energy sub-affairs related to the energy transition Tavip Rubiyanto, Head of Sub-department of ESDM Directorate of Synchronization of Regional Government Affairs I, Directorate General of Development and Development, Ministry of Home Affairs, said that his party was preparing a Presidential Decree as a follow-up to Law No. 23/2014 on Regional Government. This is done so that the authority of the local government in carrying out the energy transition is more flexible. 

“Anticipating the dynamics of development at the national and regional levels, it can be further regulated in a Presidential Decree for the division of functions so that it can strengthen regional authority so that it can play a bigger role in achieving the energy transition target,” Tavip explained.

In addition to presentations from the four institutions, the “Central Java Stakeholders’ Gathering: Energy Transition for Low Carbon Regional Development” also presented a dialogue with Achmad Husein, Banyumas Regent, Djoko Siswanto, Secretary General of the National Energy Council (DEN), Tavip Rubiyanto, Head of Sub-department of ESDM Directorate of Synchronization of Regional Government Affairs I, Directorate General of Development, Ministry of Home Affairs, M. Firdauz Muttaqin, Deputy Head of Bank Indonesia Representative for Central Java Province, and Ignatius Iswanto Santoso, General Manager Engineering, PT Djarum OASIS Kretek Factory.

In the dialogue, generally, the speakers underlined the need to carry out an energy transition in cooperation with the community, accompanied by support from the local government by issuing regional regulations which can become the basis for investors in the development of renewable energy in the regions, the application of green financing from financial institutions and implementation of sustainable practices in the industrial and commercial sectors.