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Signed the Global Declaration to Phase Out Coal, Indonesia Needs to Prepare a Coal Transition Roadmap

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Jakarta, 05 November 2021- At the 26th World Leaders Summit on Climate Change or COP-26, Indonesia signed the Global Coal to Clean Power Transition declaration. On the same day, the Minister of Energy and Mineral Resources, Arifin Tasrif, also stated that the government was reviewing the opportunity to early retire coal-fired power plants with a total capacity of 9.3 GW before 2030 (4/11/2021) which could be done with funding support reaching $48 billion.

Although Indonesia has decided to exclude the third point of the Global Coal to Clean Power Transition, which demands to cease the issuance of new permits and the construction of unabated coal-fired power plants, the Institute for Essential Services Reform (IESR) appreciates the steps taken by the Indonesian government, especially the leadership shown by the Minister of Energy and Mineral Resources at COP-26, to encourage a just energy transition through the development of renewable energy as widely as possible and to phase out coal-fired power plants as part of Indonesia’s action to prevent a global crisis.

“The openness of the Indonesian government to make an energy transition, through one of which is reducing the power plant in stages, should be appreciated. Post-Glasgow, the government, and the National Energy Council must accelerate the preparation of a comprehensive roadmap and strategy for the energy transition in Indonesia. Dependence on fossil energy will end if we do not rapidly increase the capacity of renewable energy. The policy focus is no longer coal as the first option, but renewable energy must be the main choice. So the energy transition needs to be carefully designed, with the priority of developing and utilizing renewable energy as much as possible and optimizing energy efficiency,” said Fabby Tumiwa, Executive Director of IESR.

Fabby emphasized that the decision to gradually stop fossil fuels, especially coal-fired power plants, is inevitable, not only from the perspective of the climate but also from the economic side of technology.

“Remarkably, with innovation and the price of renewable energy and storage technology is more competitive than fossil energy, the use of renewable energy to ensure the reliability of energy supply to achieve net-zero emission is becoming more feasible,” said Fabby.

The results of the IESR analysis from the study of Decarbonization of Energy Systems in Indonesia projected that renewable energy complemented with storage batteries will increase significantly by 2045. The share of batteries will reach 52% of the total storage system, followed by hydrogen at 37% and other storage systems around 11%. The share of electricity demand covered by energy storage increases significantly from around 2% in 2030 to 29% in 2045. The main users of battery storage will come from utility-scale systems, and to a lesser extent from commercial and industrial areas, and housing systems.

Concerning the early 9.3 GW of coal-fired power plants with details of 5.5 GW of early retirement without replacement to renewable energy power plants and 3.2 GW of early retirement with the replacement of renewable energy plants, Deon Arinaldo, Manager of the IESR Transformation Program, views this as a progressive step for decarbonization of energy system in Indonesian. However, according to IESR’s calculations, to implement the Paris Agreement targets and keep the global average temperature rise below 1.5C, there is around 10.5 GW of steam power plants that need to be retired before 2030.

“There is still a difference of 1.2 GW that needs to be retired and can be targeted for coal-fired power plants outside PLN’s business area,” said Deon.

Referring to the study of Indonesia’s Energy Decarbonization System, at least it requires investment in renewable energy and other clean energy of USD 20-25 billion per year until 2030 and increasing thereafter for the gradual financing of coal and the development of renewable energy for emission-free by 2050. However, phasing out coal-fired power plants will avoid the risk of financial loss from the stranded assets which reached USD 26 billion after 2040.

With large funding requirements for the gradual cessation of coal-fired power plants, Indonesia is working with ADB to launch the Energy Transition Mechanism (ETM) program, which is expected to raise around $3.5 billion to launch 2-3 coal-fired power plants per country.

“The existence of ETM, which will provide a financing platform, is expected to be able to provide a source of funds to retire the steam power plant and encourage the larger investment flows in renewable energy. This is crucial so that Indonesia can optimally plan the transformation of its energy system,” concluded Deon.***

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