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Preparing Human Capital for The Energy Transition


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Jakarta, May 2023 – The world is moving to a low-carbon economy. Consequently, the energy supply for the economy also shifts from fossil fuel to renewable energy. Last year, for the first time, global investment in low-carbon energy technologies (including non-energy production technologies such as electrified transportation, electrified heat, and sustainable materials) surpassed USD 1 trillion and matched the investment level in fossil fuel. The increased investment in low-carbon technologies resulted in rising employment in the field. Globally, employment in renewable energy production has been constantly growing from 7.3 million in 2012 to 12.7 million in 2021.

Although visibly slower than the global pace, Indonesia is no exception to this trend. Particularly over the past year, Indonesia has shown an improved energy transition commitment. The president issued a regulation that put a moratorium on coal-fired power plants (although with some exceptions) and overhaul the unattractive pricing regulation that had been hindering renewables investment since 2017. Two months later, a major landmark in Indonesia’s energy transition journey was announced in the form of the Just Energy Transition Partnership (JETP) during the G20 summit in Bali. The JETP commitment is not sufficient to keep the global temperature rise below 1.5oC, but significantly more ambitious than the NDC. It committed to mobilizing USD 20 billion worth of investment for the next 3-5 years to accelerate the energy transition in Indonesia.

All the investments made for energy transition will translate to human capital requirements. It is especially true for renewable energy investments that generally are more labor-intensive than the fossil industry. IESR estimated that investment for achieving net-zero emission by 2050 will bring about 800,000 new jobs in 2030 in the power sector only (excluding jobs in electric vehicles, sustainable materials, etc.). The employment will increase to 3.2 million jobs in 2050. These numbers are much higher compared to the current employment in the power sector that is around 270,000.

However, Indonesia seems to be rather unprepared for the transition in the workforce. The government has no clear strategy for developing the workforce capacity needed and research on renewable energy has been in a declining trend. The government agencies responsible for workforce planning, such as the Ministry of Manpower, have so far been excluded in the energy transition discussions. This unpreparedness is even more crucial for the hundred of thousands that currently are working in the fossil fuel supply industry. Not all of them have transferable skills that could be used in the renewable energy sectors, for example, the operators of heavy-duty equipment which comprise a large proportion of the employment in the fossil industry. A more comprehensive policy set and better coordination among the policymakers, especially to include the agencies responsible for workforce development, is indispensable. Otherwise, Indonesia might miss the economic (employment) benefits of the energy transition.

Photo by Verhalenhuys on Unsplash

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