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COP 27: Indonesia Needs to Attract International Support for Energy Transition with Ambitious CFPP Retirement Targets and Renewable Energy Development

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Jakarta, 8 November 2022- Indonesia delivered its national statement at the Conference of the Parties 27 Summit (COP27) in Sharm El-Sheikh, Egypt, through Vice President Ma’ruf Amin. He mentioned various climate commitments that Indonesia had made, including increasing climate ambition by submitting Enhanced Nationally Determined Contributions (NDCs) documents last September. Moreover, Ma’ruf emphasized that the climate agreement needs to be implemented immediately with clear international support at the national level in climate action funding, creating carbon markets and investing in the energy transition.

The Institute for Essential Services Reform (IESR) views that apart from needing to further increase Indonesia’s climate ambitions, to accelerate the implementation of the energy transition, Indonesia needs to encourage the inclusion of international financing support for climate change mitigation through strengthening renewable energy development plans, energy efficiency, strengthening clean energy systems, and preparation of bankable projects. This needs to be supported by policies and regulations that provide investment certainty with low risk and information transparency for the public and encourage community involvement.

In the Enhanced NDC, Indonesia has increased its GHG emission reduction target from 29% in the Updated NDC document to 31.89% in 2030 with its efforts (unconditional) and from 41% to 43.2% with international assistance (conditional). Although it is a step forward, IESR considers that this target is still not in line with the Paris Agreement, which encourages more ambitious efforts for countries to limit the earth’s temperature below 1.5 degrees Celsius.

One of the factors contributing to the increase in the emission reduction target is the increase in the emission reduction target in the energy sector from 11% in the Updated NDC to 12.5% ​​(unconditional) and from 13.9% to 15.5% (conditional).

“To be aligned with the targets of the Paris Agreement, Indonesia needs to increase its renewable energy mix target to 42% in 2030. Meanwhile, in the 2050 Long Term Low Carbon and Climate Resilience Strategy (LTS-LCCR), which is the basis for this Enhanced NDC, the renewable energy mix is ​​only 43 % in 2050,” said Fabby Tumiwa, Executive Director of IESR.

He said the opportunity to increase the renewable energy mix target is wide open with the implementation of the early retirement commitment of 9.2 GW of coal-fired power plants.

Through Presidential Decree 112/2022, the government opened up the opportunity to accelerate the termination of PLTU operations before 2050. At this COP, this commitment must be echoed, and the need for funding for early retirement for CFPP, which has an average age of 13 years, and financial support from developed countries must be met and delivered straightforwardly, followed by ambitious targets. Currently, the government has not agreed on the certainty of the CFPP early retirement target before 2030, and it still uses PT PLN’s target, which is different from the target of 9 GW set by the Ministry of Energy and Mineral Resources,” said Fabby.

Based on the IESR “Financing Indonesia’s Coal Phase-out” study with the University of Maryland, in 2030, it will cost around USD 4.6 billion to close 9.2 GW PLTU and USD 27.5 billion by 2045 for all CFPPs. Meanwhile, to decarbonize the energy system in Indonesia, at least a total investment of USD 135 billion is required by 2030. Even though the amount looks large, the benefits to be gained from the early retirement of CFPP are far greater in terms of economic, social and environmental aspects.

“The cost of generating electricity from renewable energy such as solar energy is already cheaper than building a new CFPP, and even in the next decade, it will be cheaper than operating an existing CFPP. Economically, the benefits of retiring a CFPP and replacing it with renewable energy can reduce the average electricity generation cost in the long run. In addition, health benefits are available, increasing the availability of green jobs on the social side, as well as on the environment, can avoid air pollution, control retrofit costs, improve air quality, save water and water quality, and reduce GHG emissions,” explained Deon Arinaldo, Manager of the Transformation Program. Energy, IESR.

Investment needs for decarbonizing Indonesia’s electricity system reaching USD 135 billion towards 2030 and increase to USD 455 billion and USD 633 billion in the following decades respectively. This investment is to build renewable energy to meet the growing demand for electricity, storage systems, energy efficiency investments, as well as the development of transmission and distribution networks. Therefore, the focus of public financing as well as international financing support must be directed towards creating a positive investment climate for clean energy systems.

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