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NRE Bill is Ineffective in Supporting Energy Transition in Indonesia

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Jakarta, March 21, 2022 Entering the harmonization stage in the Indonesian House of Representatives (DPR RI), the New Renewable Energy Bill (NRE Bill) is seen as deviating from the goal of encouraging the energy transition to achieve carbon neutrality by 2060 or as soon as possible. At the plenary meeting of the harmonization of the RE Bill (17/03/2022), experts from the legislative strengthened the position of new energy by adding new energy sources to the bill, which is now referred to as New and Renewable Energy (NRE). 

The Institute for Essential Services Reform (IESR) views the NRE concept in one law as ineffective and ambiguous. Moreover, the inclusion of coal derivative products such as coal gasification, coal liquefaction, coal bed methane as a new energy source will potentially hamper the efforts to reduce greenhouse gasses (GHG).

GHG emissions resulting from the coal gasification process in new energy are much higher than renewable energy. The total emission from the conversion process of 1 kg of coal into Dimethyl Ether (DME) is around 3.2 Kg CO2eq or about 400 grams of CO2 eq/kWh (IRENA, 2021). It does not include the emissions caused when burning DME, which is equivalent to burning diesel oil that can reach 631 grams of CO2/kWh (assuming 40% DME stove efficiency). Therefore, the total emissions produced to get the same amount of energy reaches 1031 grams CO2/kWh. Meanwhile, the life cycle emissions generated from the use of renewable energy, such as solar power plants are only around 40 grams of CO2 eq/kWh (NREL, 2012).

“The NRE Bill draft shows the DPR RI’s lack of understanding of the need for energy development in the context of the energy transition. The DPR RI also accommodates the interests of the coal industry, which wants to continue to gain market share when the coal market for electricity generation declines. The entry of new energy technologies such as coal downstream will make Indonesia trapped with fossil energy infrastructure. Meanwhile, the inclusion of nuclear power plants will hinder the acceleration of the energy transition that requires the development of renewable energy on a large and fast scale,” said Fabby Tumiwa, Executive Director of IESR.

The utilization of technology that reduces carbon emissions in non-renewable energy (fossil energy) plants will expand the mechanism for using non-renewable energy, such as clean coal technology (ultra-supercritical power plant), carbon capture, and storage (CCS) technology, and biomass co-firing. IESR believes that maintaining coal-fired power plants with CCS technology is a relatively expensive option compared to developing renewable energy.

“The support for fossil energy or non-renewable energy in the NRE Bill will give a signal to maintain the steam power plant in the energy system for longer, instead of retiring the steam power plant earlier as has been discussed in recent months,” added Deon Arinaldo, Manager of Energy Transformation Program, IESR.

Deon added that the DPR RI should have reviewed the effective and economical use of energy in formulating the NRE Bill.

“To achieve carbon neutrality, the most cost-effective greenhouse gas mitigation should be considered, which according to our analysis is renewable energy. With regulatory support, renewable energy can be built and renewable energy funds can be used effectively to encourage the preparation of massive renewable energy projects,” he explained.

The latest draft also authorizes the central government to set prices for new and renewable energy if no agreement is reached between the parties/business entities (in this case PLN and the developer). In this case, of course, it will be related to the provision of incentive funds and compensation for new energy or renewable energy due to price-fixing by the central government. 

“The government should establish incentives and a scheduled renewable energy auction mechanism to provide certainty to business actors. Pricing should be done for technologies that are not yet commercial and are applied in remote areas to ensure access to clean energy for the community,” said Fabby Tumiwa.

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