Identify Funding Needs for the Just Transition

Jakarta, 30 April 2024 – The energy transition process is entering a new phase with the Just Energy Transition Partnership (JETP) funding which was agreed in 2022. The availability of affordable funding is a real challenge for the energy transition process. In the latest study, Identifying Finance Needs for a Just Transformation of Indonesia’s Power Sector, conducted by the Institute for Essential Services Reform (IESR) and the New Climate Institute (NCI), underscoring Indonesia’s funding needs for the energy transition reached USD 2.4 billion.

Wira Agung Swadana, Green Economy Program Manager, IESR, emphasized that without financing, transformation will not occur. It is also important to build community resilience at the site level so that communities do not experience negative impacts from the ongoing energy transition process.

“Transitional changes need to be made in society, apart from the fact that we will not be dependent on fossil energy, but we need to see the economic transformation in the area, especially coal producing area,” said Wira.

Reena Skribbe, Climate Policy Analyst, New Climate Institute, explained that based on this released report, ending coal operations according to the JETP target scenario would have the potential to avoid health costs of USD 150 billion, and the potential to avoid premature deaths due to air pollution of up to 240 thousand people in 2050.

“There are two scenarios that we use in this study. First, the JETP scenario is in line with the JETP emission reduction target of 290 metric tons of CO2, and JETP+ is in line with the Paris Agreement target,” explained Reena.

The results of the JETP+ scenario of ending coal operations will be able to secure health costs of around USD 230 billion and avoid a total of 360 thousand premature deaths from air pollution by mid-century.

Farah Vianda, Sustainable Finance Coordinator, IESR, added that the fate of workers currently working in the mining sector needs to be considered so that they do not lose their livelihood.

“To prepare for the transition process, especially in coal-producing areas, strong government institutional capacity is needed. So, it is important to increase government capacity and establish formal institutions that focus on managing a just transition,” said Farah.

Between Low Renewable Energy Target and High Economic Growth Ambitions

Jakarta, 20 February 2024 – Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) assesses the steps taken by the National Energy Council (DEN) to adjust the renewable energy mix target in the Draft of Government Regulation on National Energy Policy (RPP KEN)  from the original 23 percent to 17-19 percent 2030 is a backward step because it is not in line with the stated goal of reducing emissions and achieving Indonesia’s net-zero emissions target by 2060 or sooner.

Fabby also highlighted the energy transition agenda carried by each pair of presidential candidates in the 2024 election, which includes a number of renewable energy mix targets until 2030 in an interview with the Squawk Box program.

According to him, each candidate has an energy transition agenda, one of which is the desire to pursue the same renewable energy mix target as the current National Energy Policy, ranging from 27-30 percent by 2030. Apart from that, each candidate also has a commitment to limit the operation of coal power plants.

“For candidate number 02, what is clearly visible is the increase in the use of biofuel to replace or reduce fuel subsidies as stated during the campaign,” said Fabby. They (presidential and vice-presidential candidates’ number two) are targeting a biofuel blend percentage of 50 percent by 2029, as well as ethanol utilization of 10-20 percent.

Furthermore, Fabby emphasized that for the electricity sector, the aim of ending coal plant operations early must be accompanied by adding a larger portion of renewable energy. Apart from replacing the electrical power that was initially supplied by coal-fired power plants, renewable energy generation must also meet the projected electricity growth needs in the future. Moreover, Indonesia has the ambition to pursue economic growth of up to, for example, 6-7 percent, so electricity demand is projected to grow even greater.

“Based on IESR’s calculations, to achieve these various targets, the renewable energy mix in 2030 must reach 40 percent, this is somewhat different from the target adjustments made by DEN currently,” explained Fabby.

Fabby added that the new government’s homework related to the energy sector will be to accelerate the development of renewable energy, especially in the electricity and liquid fuel sub-sectors.

Kontan } There are Still Many Challenges to Lower Renewable Electricity Prices

Although electricity tariffs from new and renewable energy (EBT) plants continue to decline from year to year, currently the price remains more expensive than coal plants that dominate electricity sources in the country. Understandably, the price of CFPP electricity is helped by coal subsidies in the form of a domestic price obligation (DPO) of US$ 70 per ton.

Read more on Kontan.

Kontan | Here’s The Description of the Cirebon 1 CFPP Transaction will be Completed in the First Semester of 2024

The Cirebon 1 Coal Fired Power Plant (CFPP) will have its operational life shortened by seven years, and it is now expected to operate only until December 2035 instead of July 2042. The project has secured funding commitments from the Energy Transition Mechanism (ETM) scheme, and the transaction is expected to be finalized in the first half of 2024.

Read more on Kontan.

Exploring Early Termination of Coal Power Plant Operations

press release

Jakarta, November 15, 2023 – The government is taking steps on Presidential Regulation (Perpres) No. 112/2022 concerning the Acceleration of Renewable Energy Development for Electricity Supply by drafting a road map for the operational termination of coal-fired power plants. The Institute for Essential Services Reform (IESR) views preparing a road map for the early termination of coal power plant operations as a first step to encourage renewable energy development. Furthermore, after the road map is determined,  the government should prepare a regulatory framework that can support the implementation of a financing structure or scheme for the operational termination of coal-fired power plants in Indonesia.

Deon Arinaldo, Program Manager of Energy Transformation at IESR, mentioned that there have been several proposed structures for terminating coal-fired power plants (CFPP) operations, such as write-offs or deletion of CFPP assets from company records because they are considered no longer economical or for example, spin-offs, namely the sale of assets to a new company to manage these assets with a shorter operating period. In addition, according to him, the government needs to make several pilot projects for the termination of the ongoing CFPP operations, such as the Cirebon CFPP, as a proof of concept and provide certainty to PLN and Independent Power Producers (IPP) as CFPP asset owners.

“Apart from a clear scheme or structure in the early termination of coal-fired power plant operations, a mechanism is also needed to allocate the funding obtained from the early termination of the power plant to renewable energy plants. The current regulations in Indonesia do not allow this. Therefore, it is necessary to conduct a thorough study and propose changes to allow the use of renewable energy funding, which is cost-effective, for retiring CFPP assets,” Deon said at the Enlit Asia panel discussion entitled “Leapfrogging to NZE: Accessing ASEAN readiness to retrofit or early retire coal fleets” (15/11).

Deon sees that a significant amount of work still needs to be done concerning the early retirement of CFPP. Some of the tasks include ensuring a legal framework that explicitly states that the early termination of CFPP operations is part of the country’s energy transition policy aimed at reducing emissions. Additionally, there needs to be regulations that permit modification of the power purchase agreement (PJBL) and other related tasks.

“It is even better if the strategy at the CFPP is part of an energy transition effort that wants to integrate renewable energy on a large scale to reduce GHG emissions. If the goal is like that, CFPP assets will be optimized to ensure renewable energy can enter the electricity mix quickly and cheaply. For example, instead of waiting to be retired, CFPP can be operated flexibly to help maintain system stability and reliability as the mix of intermittent solar and wind power increases,” Deon added.