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Preparing the Ecosystem to Support Electric Vehicle Penetration

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Jakarta, 23 September 2021 – As the second-highest emitter in the energy sector after the power generation sector, electrification of the transportation sector based on renewable energy will be one of the significant pillars to reduce carbon emissions and prevent global temperature rise exceeding 1.5 degrees Celsius. There are at least three main drivers of accelerating the adoption of electric vehicles, such as the availability of supporting regulations, adequate infrastructure, and affordability of prices.

These main driving factors were presented by Rahul Gupta, Senior Expert at McKinsey & Company, on the fourth day of the Indonesia Energy Transition Dialogue (IETD) 2021. In his opinion, there is a big economic opportunity for Indonesia if it can create an electric vehicle ecosystem because Indonesia has the potential to become the largest market after China and India.

“We project two-wheeled vehicles to be the main driver in terms of significantly higher penetration (electric vehicles),” he explained.

Comparing the electric vehicle ecosystem in Indonesia, Zainal Arifin, Vice President of Technology Development and Standardization, PT Perusahaan Listrik Negara (State Electric Company), admits that electric vehicle infrastructure in Indonesia is still limited.

“We have built 32 electric vehicle charging stations in 14 cities. Based on the roadmap, we will have more than 2400 units for electric vehicle charging stations throughout Indonesia in the next 5 years,” he said.

Zainal added that to meet the needs of electric vehicle infrastructure, the construction of charging stations will be fulfilled by 40 percent by State Electric Company (PLN) while the remaining will be built by private companies. Furthermore, Zainal also said that the disparity in price with conventional vehicles made the demand for electric vehicles less attractive.

The price issue was also highlighted by Sony Sulaksono, Director of Maritime Industry, Transportation and Defense Equipment, Ministry of Industry. He stated that the Indonesian government has set a target of 1.6 million two-wheelers and 400 thousand four-wheel electric vehicles by 2025. However, the adoption of electric vehicles in Indonesia is currently under 2000 units.

In his opinion, the government has tried to reduce the price by issuing Government Regulation (PP) NO. 74, which regulates incentives and disincentives for electric vehicles and conventional vehicles.

“For instance (the government) is giving a 0% luxury tax for electric vehicles,” he said.

Furthermore, Sony highlighted that the higher price of electric vehicles is also influenced by the cost of batteries which cover 40-50% of the total cost of electric vehicles.

Sony said that the battery swap stations area is the solution as the research and development of electric vehicle batteries is still being developed in order to reduce costs. He explained that using this approach, transportation companies will be able to rent out electric batteries to the public. The fees are charged based on kilometers traveled by electric vehicles.

On another occasion, Idoan Marciano, a Researcher and Specialist in Energy and Electric Vehicles, IESR, said that to bridge the the price gap of electric vehicles is increasing the tax incentives from the government, the usage of more affordable electric vehicles models and meet with the preferences of the Indonesian community, as well as parallely accelerate the development of the domestic battery industry.

“The development of the domestic battery industry is important to support efforts to achieve deep decarbonization targets. Its existence will support the penetration of electric vehicles and is necessary for the electricity grids simultaneously with the increase in the renewable energy mix,” explained Idoan.

Toto Nugroho Pranatyasto, President Director of the Indonesian Battery Company (IBC) said that IBC is in progress to produce and develop electric batteries. IBC is also developing battery recycling to anticipate battery waste.

“This development is not something that can be done quickly, we need a large amount of investment. To develop 140 GWh of battery capacity, we need an investment of around USD 15.3 billion for three to four years,” Toto said at the IETD 2021.

Toto added that besides the electric battery development process, IBC also involved various partners to design the supply chain and technology. It is to prepare the electric vehicle ecosystem chain.

“The government needs to encourage electric vehicles into the middle-cost segment. The range price of two-wheeled vehicles also needs to be affordable, “said Toto.

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