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Racing in Indonesia’s Energy Transition Momentum

Launching IETO 2023

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Jakarta, 15 December 2022 – Various global geopolitical events throughout 2022 have affected the increase in the price of fossil energy commodities. As a sector that influences and drives other sectors, the energy sector plays an important role in various aspects ranging from socio-economic to political. The global energy crisis in 2022 can be an opportunity for Indonesia to take advantage to accelerate the energy transition.

Indonesia’s energy market, which still relies heavily on subsidies, has made Indonesia feel less impacted by the global energy crisis due to soaring fossil commodity prices. However, it cannot be denied that the government’s fiscal capacity is no longer as large as the past 2-3 years considering that so many energy subsidies have been issued.

This was conveyed by Dannif Danusaputro, President Director of PT Pertamina New & Renewable Energy at the launch of the Indonesia Energy Transition Outlook 2023 report, by the Institute for Essential Services Reform (IESR), Thursday 15 December 2022.

“The increasingly narrow fiscal space will inevitably force the government to adopt unpopular policies and this can be captured as a momentum for accelerating renewable energy,” explained Dannif.

It is not only the global energy crisis that can become a momentum for accelerating renewable energy, but also the commitment to finance the energy transition in Indonesia. At the G20 Summit in November 2022, Indonesia received US$20 billion in energy transition funding through the Just Energy Transition Partnership (JETP) scheme. This fund is disbursed by the International Partners Group which consists of the G7 countries plus Denmark and Norway.

Suzanty Sitorus, Executive Director of Viriya ENB, said that JETP’s funds are not sufficient to finance the energy transition process in Indonesia, but that does not mean that its role is not important.

“What is more important is what (these funds) are intended for. Will the USD 20 billion lay the foundations for us to have a faster transition or not,” said Suzanty.

She added that it is important for Indonesia to learn from South Africa (a previous recipient of JETP funding), about an investment plan that suits the needs of the recipient country.

Harris, Director of Geothermal, Directorate General of Electricity at the Ministry of Energy and Mineral Resources, stated that since the G20 Summit, the interest of entrepreneurs to invest in renewable energy, especially geothermal, has increased. This is a good thing for pursuing renewable energy targets in RUPTL.

“I don’t think the current RUPTL needs to increase the target, but we have to make sure that the existing target of 51% renewable (around 20.9 GW) is actually achieved,” said Harris.

He added that it was important to ensure that the RUPTL target was achieved because several times the government did not achieve the RUPTL target.

In addition to adding the installed capacity of renewable energy, energy efficiency is also one of the strategies to achieve net-zero emission status, especially in the industrial sector. Octavianus Bramantya, a member of the Net Zero Hub daily work team, KADIN, explained that the industrial sector is quite aware of the need to transition to cleaner energy sources, but they are still waiting for regulatory certainty.

“There has been an explosion of net-zero pledges from companies. Companies are no longer competing through price and product quality, but because there is a carbon footprint assessment for exports, companies have started to be motivated to think about their carbon footprint,” said Bramantya.

Companies engaged in foreign markets have considered this. Local companies still see this carbon calculation as an obstacle, so it is a challenge for KADIN Net-Zero Hub to help restructure capex values and show that low carbon development is actually profitable.

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