Jakarta, June 28, 2024 – The Draft Government Regulation (RPP) on the National Energy Policy (KEN) is targeted for completion in June 2024. The energy transition roadmap in the RPP KEN will change the previous mix target of 23 percent to 17-19 percent by 2025.
The Institute for Essential Services Reform (IESR) views the failure to achieve the renewable energy mix target in the last five years as an evaluation material to find the right strategy, not to reduce the target. In addition, this condition is unfortunate because renewable energy will become a cheap and clean energy source. Solar panel prices continued to experience a downward trend of 89 percent from 2010 to 2019, wind turbine prices fell by 59 percent, and battery storage prices decreased by 89 percent. The trend will continue and cement renewable energy as the least expensive energy source.
Wira A Swadana, Program Manager of Green Economy, IESR, revealed that maintaining the dominance of coal in Indonesia’s energy system will bring Indonesia economic vulnerability to the decline in demand for Indonesian export coal.
“Countries that become Indonesia’s coal export destinations currently have carbon neutral or net zero emission targets. For example, China is targeting NZE 2060 and is committed to reducing its coal consumption by 75 percent by 2050. Similarly, India aims to reduce its coal mix by 50 percent by 2031. If all countries fulfill their climate commitments, Indonesia’s coal demand is projected to decline periodically by more than 90 percent in 2050 compared to 2020,” Wira said at the Regional Energy Forum entitled “Regional Notes for Updating National Energy Policy” organized by the Institute for Essential Services Reform (IESR) on Thursday (27/6/2024).
IESR encourages at least two strategies to achieve the renewable energy mix target that aligns with efforts to limit the earth’s temperature rise below 1.5 degrees Celsius. First, a supporting law for the energy transition ecosystem must be created. Second, PLN’s sustainable finance framework should be improved to encourage more sources of financing.
Wira revealed that just as PLN’s business model must change in the face of this energy transition trend, regions must also comprehensively change their energy systems.
“The central and local governments need to have a comprehensive understanding of the energy transition that involves all elements of the energy system. This includes electricity, transportation, and other related sectors such as industry. In addition to looking at the technical side of the energy transition, the government also needs to pay attention to the social and economic impacts of the energy transition. For example, coal-producing regions will be affected economically due to the reduced use of coal both domestically and also for export. Therefore, the national energy policy needs to get comprehensive inputs that can accommodate the challenges arising from the energy transition,” said Wira.
On the other hand, Djoko Siswanto, Secretary General of the National Energy Council (DEN), revealed that the renewal of PP KEN was carried out based on macroeconomic considerations where previously it was designed based on economic growth of 7-8 percent, which was considered irrelevant to current conditions.
Furthermore, Djoko said that in the draft KEN RPP, the renewable energy mix until 2030 is targeted at 19-22 percent, will increase in 2040 to 36-40 percent and increase in 2060 to 70-72 percent. In 2060, the carbon emission level of the energy sector is expected to be 129 million tons of carbon dioxide equivalent, which the forestry sector and other sectors will absorb. The KEN RPP has completed harmonization at the Ministry of Law and Human Rights (Kemenkumham) through letter number PPE.PP.03.03-1186 and is awaiting approval from the president.
IESR’s study, Deep Decarbonization of Indonesia’s Energy System, shows that on a purely technical and economic basis, Indonesia can supply its energy needs with 100 percent renewable energy even in 2050 with competitive energy system costs. Investment needs and system costs will increase to help integrate renewable energy towards 2030, but between 2030 and 2050, it will become cheaper due to the decreasing cost of renewable energy technology. It is feared that the slower renewable energy integration process in KEN will prevent Indonesia from getting the maximum benefit from Indonesia’s abundant renewable energy potential.