Jakarta, December 5, 2024 – The progress of Indonesia’s energy transition throughout 2024 has stalled. The government’s move to revise the National Energy Policy has actually lowered the target for achieving renewable energy from 23% to 17-19 percent in 2025. Indonesia’s energy transition status has not moved from the consolidation stage.
Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) in his remarks at the launch of the IESR annual flagship report, Indonesia Energy Transition Outlook (IETO) 2025, stated that amidst various pessimistic news about Indonesia’s energy transition, a bold step was taken by President Prabowo Subianto at the G20 Summit in Brazil. President Prabowo said that Indonesia would stop using fossil fuels in the next 15 years (2040).
“This can be read as a commitment because it was conveyed in an international forum. All ministers and government officials must help realize this ideal,” said Fabby.
Rachmat Kaimuddin, Deputy 3 of the Coordinating Ministry for Infrastructure and Regional Development, stated that Indonesia has great (economic) opportunities from its renewable energy sources.
“There are 3 strategic pillars to achieve Indonesia’s aspirations to escape the middle-income trap through downstreaming and a green industrial ecosystem. First, maximizing the value of existing raw materials through downstreaming; second, creating new value through local renewable supply chains; and third, using local renewable energy supplies for decarbonization and exports,” he explained.
Anindita Hapsari, Agriculture, Forestry, Land Use and Climate Change Analyst at IESR stated that one of the findings of IETO 2025 was that Indonesia had never succeeded in achieving its renewable energy targets for at least the past nine years. In the framework of energy transition readiness, the policy and political situation aspects are sectors that received low ratings.
“The low rating of the political commitment and regulation dimensions indicates a lack of documents that are in line with pathway 1.5, a lack of cross-sector coordination in the energy transition, and the government’s low readiness in preparing for the energy transition (no accountability mechanism),” she said.
Anindita added that the lack of political commitment and unsupportive regulations and governance are inhibiting factors in the energy transition in Indonesia, despite significant progress in the cost competitiveness of low-carbon technology and fuels.
Emission reduction strategies from each emission-producing sector must also be encouraged so that the amount of emissions reduced is significant. The demand sector is one of the sectors in the spotlight, because it contributes to 80 percent of energy consumption and produces significant greenhouse gas emissions. This was conveyed by Farid Wijaya, Senior Analyst for Materials and Renewable Energy at IESR.
“The demand side consists of 3 sectors, namely industry, transportation, and commercial and household buildings. These three sectors have an important role in running the economy. All three must be the focus in the sustainable energy transformation, towards a low carbon footprint. Without demand, supply will decrease, and the economy will weaken,” said Farid
The energy supply sector also needs to immediately decarbonize. Currently, Indonesia’s energy system is dominated by fossil fuels up to 80 percent, with the largest portion of coal at around 40 percent. This dependence on fossil fuels makes Indonesia quite vulnerable to the global geopolitical situation. Global coal demand is projected to peak in 2024, and will decline in the future along with global climate commitments.
Raditya Wiranegara, IESR Research Manager, sees this situation as needing to be anticipated comprehensively, one of which is by preparing a harmonious energy policy between institutions in Indonesia.
“Harmonization of policy documents that prioritize achieving a high portion of renewable energy will send a strong signal about Indonesia’s energy transition agenda,” he said.
Every year there is an average energy transition funding gap of USD 7 billion. If progressive steps are not taken immediately to close this gap, the financing burden behind will become even greater.
Putra Maswan, IESR Economic and Financial Analyst stated that the private sector is a potential partner to increase energy transition funding.
“There are two obstacles for the private sector to invest in the renewable energy sector, namely, first, the lack of regulatory certainty and second, the risk is still high in renewable energy projects which has an impact on low bankability,” said Putra.
Closing the series of presentation sessions of the IETO 2025 report, Alvin Sisdwinugraha, IESR’s Power System and Renewable Energy Analyst, emphasized the importance of immediately taking definite steps for the energy transition.
“In the demand sector, a reduction in emission intensity of 47-90 percent must be carried out to remain internationally competitive. In the supply sector, as many as 13.3 GW of renewable energy projects in the RUPTL draft must be implemented, and to create a supporting ecosystem (enablers) an average of IDR 1 trillion in provincial budget allocation is needed for programs related to renewable energy,” said Alvin.
