At the Belt and Road Forum meeting on Wednesday (18/10/2023), China announced that BRI projects will be small but smart by funding small-scale but more environmentally friendly projects.
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Efforts to Strengthen Indonesia-China Energy Transition Commitment in BRI Cooperation
Jakarta, October 18, 2023 – President of the Republic of Indonesia (RI) Joko Widodo (Jokowi) in his speech at the opening ceremony of the 3rd Summit of the Belt Road Forum (BRF) at the Great Hall of the People, Beijing, emphasized that the synergy of the belt and road initiative (BRI) needs to be strengthened in conjunction with the industry’s decade of development. In his speech, the President mentioned that the BRI should be based on equal and mutually beneficial partnerships, transparent funding systems, utilization of local labor, and domestic products. President Jokowi also plans to coordinate the development of a new capital city, energy transition, and downstream industries as part of the BRI cooperation.
Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), also attended the event, said that the Chinese and Indonesian governments must emphasize their renewable energy development commitments to accelerate the energy transition through the Belt and Road Cooperation framework. These commitments should be outlined in medium- and long-term strategies and programs to attract additional technological support and funding for the energy transition.
“Indonesia’s energy transition requires funding of USD 100 billion by 2030 and USD 1 trillion by 2060. This involves building 35 to 40 GW of renewable energy capacity, shutting down 9 GW of existing power plants, and constructing thousands of kilometers of transmission lines, interconnections, and energy storage facilities by 2030. Therefore, the cooperation between Indonesia and China towards energy transition should primarily focus on achieving these targets. Another crucial area of focus should be greening the mineral extraction process within Indonesia’s downstream program, which involves several Chinese businesses. A comprehensive program covering these aspects would be highly appreciated,” Fabby said.
During the third BRI, IESR was invited by the Ministry of Ecology and Environment of the People’s Republic of China to support the launch of the Green Investment and Finance Partnership (GIFB) together with the Hong Kong Government, China National Development Bank, Sino Hydro Corporation, China International Capital Corp and Children’s Investment Fund Foundation. GIFP is a collaborative initiative to establish a project planning facility that helps improve the readiness of China’s overseas green development projects.
“Indonesia can utilize this GIFP to prepare a pipeline of renewable energy projects, structure funding, and lower project risks to accelerate the energy transition in Indonesia,” Fabby explained.
Furthermore, Fabby stated that BRI cooperation can be a strategy for developing large-scale renewable energy pilot projects. It also provides an opportunity to mobilize other renewable energy manufacturing industries.
The governments of Indonesia and China can discuss measures to address the coal-fired power plants in Indonesia that Chinese companies are developing. These plants have a total capacity of 7.6 GW, with 3.8 GW already operational, 2.9 GW under construction, and 0.9 GW for which Power Purchase Agreements (PPAs) have been signed. Along with promoting the use of renewable energy, the two governments can collaborate to intervene in these coal-fired power plants.
“According to the IESR study, at least 9.2 gigawatts of power plants will need to be retired during this decade to support the emission reduction goals set by the Paris Agreement. To replace them with renewable energy, Indonesia and China’s future partnership must find ways to facilitate asset owners of 7.6 GW of PLTU from China with PLN and Indonesian businesses. They need to discuss ways to retire PLTU assets and replace them directly with renewable energy,” said Deon Arinaldo, Energy Transformation Program Manager, IESR.
Indonesia – China need to Formulate an Energy Transition Financing Partnership at the Belt and Road Initiative Summit
Jakarta, October 17, 2023 – Marking the 10th anniversary of the Belt and Road Initiative (BRI) launch, China is hosting the third BRI International Cooperation Summit or Belt and Road Forum in Beijing on October 17-18, 2023. China’s theme is “High-quality BRI Cooperation: for Common Development and Prosperity” at this year’s summit. The Institute for Essential Services Reform (IESR), has been invited to the BRI Summit agenda and expects a breakthrough in the partnership between Indonesia and China regarding energy transition financing, including renewable energy, early termination of coal-fired power plant operations, green industry, and close collaboration in renewable energy technology to accelerate the energy transition.
The Executive Director of IESR, Fabby Tumiwa in his remarks at the High-Level Seminar Building a New Vision for the Green Silk Road in Beijing organized by the BRI International Green Development Coalition (BRIGC) and Foreign Environmental Cooperation Center (FECO), Ministry of Ecology and Environment of China, revealed that Indonesia needs considerable funding support, around USD 1 trillion, from developed countries and other countries, one of which is China, to achieve net-zero emissions by 2060.
“Financing is crucial to this transition. Accessible and affordable financing options can accelerate the global low-carbon transition, increase the adoption of green technologies, retire emission-intensive assets, and optimize energy asset portfolios,” Fabby said.
IESR believes that China can assist Indonesia in fulfilling its financial requirements to expedite the transition towards cleaner and sustainable energy.
“Through this BRI, China and Indonesia can partner to finance their energy transition. This partnership needs to involve financial institutions, technology providers, and the government to unlock more domestic financing, spur innovation, and drive shared economic prosperity,” Fabby explained.
Fabby believes developing renewable energy is crucial to reducing global emissions and preventing a severe climate crisis. Not only that, massive utilization of renewable energy will also increase Indonesia’s energy security.
Regarding technology, China is currently at the forefront of developing renewable energy, particularly solar power. In the roadmap for decarbonizing Indonesia’s energy system to achieve the Paris Agreement’s target of zero emissions by 2050, IESR found that Indonesia needs to utilize solar energy through solar PV up to 80% of the energy system in Indonesia by 2050.
“According to IESR’s Deep Decarbonization study, by 2030, renewable energy capacity needs to reach 138 GW, with solar power being the dominant source. On the other hand, China currently controls about 90% of global solar panel manufacturing capacity and half of global wind turbine manufacturing capacity. Therefore, the massive renewable energy market potential in Indonesia can be fulfilled by Chinese companies. At the same time, there is a need to build renewable energy manufacturing capacity and transfer technology to Indonesia. Bilateral cooperation between the two countries can facilitate and accelerate this process,” said Deon Arinaldo, Energy Transformation Program Manager, IESR.
Deon added that China invests in Indonesia’s energy, industrial, and infrastructure sectors. This is an opportunity for both countries to strengthen their cooperation by shifting investment plans currently centered on supporting fossil energy to the development of the renewable energy industry.
China’s Belt and Road Initiative Opportunities in Accelerating the Energy Transition in Indonesia
Beijing, March 27, 2023 – The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, highlighted that the Belt and Road Initiative (BRI) allowed China to play a role in accelerating the energy transition in Indonesia. He mentioned this as a guest speaker promoting green and low carbon transition in BRI participating countries and CCICED particular policy study on green BRI workshop on Monday (27/3/2023).
“Indonesia must increase its ambition to make emission reductions compatible with the Paris Agreement. Under the current plan, Indonesia will achieve the energy sector’s net zero emission (NZE) after 2060, but the electricity sector will reach zero in 2050. For this reason, we need more efforts to decarbonize the transportation and industrial sectors,” explained Fabby.
He also underlined that Indonesia needs a cumulative investment of around USD 1.3 trillion spread across various technologies in the push for decarbonization. Under these conditions, Fabby said, China could play a role in supporting the energy transition in Indonesia through technology, manufacturing, and investment cooperation, considering that there is market potential in increasing demand for renewable energy in Indonesia.
“Solar power will play an important role in Indonesia’s energy transition. Based on the 2021-2030 Electricity Supply Business Plan (RUPTL), PLN plans to add 3.9 GW of solar energy in 2025. For this reason, BRI’s investment in 2023 needs to be focused on financially feasible projects, such as scalable solar and wind power plants, said Fabby Tumiwa.
On the other hand, the existence of BRI can enable investment in the renewable energy component industry. This can be done by considering the complexity of the supply chain. Fabby emphasized that industrialization in Southeast Asia accompanied the push for the energy transition, such as energy storage, electric vehicles, and solar panels.
“Currently, Indonesia has started to develop the battery and electric vehicle industry because of its great nickel content. Low production costs and availability of resources are several opportunities to develop the local solar module industry in Indonesia,” said Fabby.
On the same occasion, Deon Arinaldo, Energy Transformation Program Manager, Institute for Essential Services Reform (IESR), explained various power system plans and projections expected to accelerate the spread of renewable energy in Indonesia. For example, the latest power system energy planning stipulates around 20.9 GW of renewables to be built in 2030. This number will increase by at least 5-6 GW if Indonesia considers the Just Energy Transition Partnership (JETP) target of 34% renewable energy mix in 2030.
“To achieve the national policy target in 2025, the IEA projects an additional solar energy capacity of 17.7 GW above that planned in the RUPTL. Meanwhile, based on the IESR scenario, the power generation capacity based on renewable energy must be boosted to 140 GW to limit global warming to 1.5°C,” Deon explained.
However, said Deon, historically, the installed capacity of renewable energy has only grown around 500 MW per year. This happened because there were several main challenges, including excess capacity at the Java-Bali power plant. Moreover, the domination of coal power plant capacity with a take-or-pay mechanism needs to make room for the integration of renewable energy. Another challenge is the renewable energy procurement process and the requirements for using local content, which places unnecessary risks in developing renewable energy.
