Indonesia Needs to Increase its Efforts to Transition Towards Green Economy to Achieve NZE

press release

Jakarta, 18 August 2023 – The President of the Republic of Indonesia (RI) Joko Widodo (Jokowi), in his state address for the 78th Indonesian Independence Day, which also served as an introduction to the 2024 state budget bill and 2024 financial note stated that the 2024 state budget is directed toward accelerating economic transformation that is inclusive and sustainable. In his speech, the president mentioned the potential crisis due to climate change. For this reason, the transformation of the economic sector that is sustainable and environmentally friendly is crucial. The president emphasized that the transition to the use of green energy needs to be carried out progressively but remains fair and affordable.

The Institute for Essential Services Reform (IESR) appreciates the direction of the 2024 state budget. It encourages the government to accelerate the development of a green economy and the utilization of renewable energy so that Indonesia can gradually reduce the portion of fossil energy while simultaneously reducing greenhouse gas emissions, which are the cause of global boiling. boiling) and climate change.

Fabby Tumiwa, Executive Director of IESR, stated that to achieve the 23% renewable energy target in 2025, the president must direct his staff to increase the renewable energy mix by 2024. This would require the construction of 11 GW of renewable energy generators in the next 2.5 years. The progressive penetration of renewable energy would necessitate the cessation of coal-fired power plant operations, which are old and inefficient, even under conditions where the PLN electricity system is still overcapacity.

The 2024 state budget should support renewable energy use outside Java-Bali, reform policies hindering its acceleration, prepare for the coal-fired power plant’s early retirement, and offer large-scale renewable energy projects to investors.

Indonesia needs to take more aggressive steps to avoid the climate crisis by showing a more substantial political commitment to reducing the use of coal and confirming the termination of coal-fired power plant operations in 2050. According to Fabby, amid Indonesia’s independence celebrations, the National Capital, Jakarta, was covered in severe air pollution. IESR notes that one of the sources of pollution comes from burning coal in power plants and industries around Jabodetabek.

“Last year, the government and IPG agreed on the Just Energy Transition Partnership (JETP). This agreement is Indonesia’s opportunity to accelerate the transition to increasing green energy before 2030, which is fair and affordable. For this reason, the 2024 State Budget must also be allocated to support the implementation of the Comprehensive Investment and Policy Plan (CIPP),” said Fabby.

During preparing the JETP Comprehensive Investment and Policy Plan (CIPP) until October, Deon Arinaldo, Manager of the Energy Transformation Program, IESR, emphasized the importance of identifying policy changes to accelerate the energy transition. He suggested that policy change should focus on integrating implementation between various ministries and agencies.

“There must be a priority in policy directions, for example ending fossil energy subsidies, especially the coal DMO price policy, building massive solar PV, and developing the solar manufacturing industry. Determining the main strategy is important so that execution can be carried out smoothly in the next 3-5 years or even faster with implementation support from various ministries and agencies. Implementation of this integrated strategy can support achieving the vision of Indonesia Gold 2045,” explained Deon.

IESR hopes that the preparation of state budget (APBN) spending will also include efforts to reduce fossil energy subsidies and anticipate the impact of the energy transition on society. The budget from reducing fossil energy can be used to develop renewable energy, early termination of coal-fired power plant operations, and structured programs to anticipate the impact of the energy transition on communities, workers, and coal-producing areas.

A Moment of Reflection on Ourselves and Our Climate Targets

Jakarta, 11 May 2023 – This year’s Earth Day is quite a unique one as it falls on the day of Eid ul-Fitr, an Islamic celebration that marks the end of the month-long fasting of Ramadhan. Theologically, those who are successful in withholding all kinds of worldly desires during the holy month would see their entire past sins being wiped out clean. Despite eating less, food waste in Indonesia is on the contrary increasing almost 20% higher during Ramadhan relative to other months, as hinted by the Ministry of Environment and Forestry (MoEF). In terms of GHG emissions, Food Loss and Waste (FLW) in 2000 – 2019 accounted for 1,702.9 million tons  of CO2 (MtCO2) or 7.29% per year of GHG emissions in Indonesia, according to a 2021’s report organized by Bappenas. Apart from that, electricity consumption is also increasing by 5% according to PLN, mainly driven by industrial activities and household electricity consumption. With almost 70% of Indonesia’s electricity still supplied by coal-fired power plants, such an increase would surely increase GHG emissions, particularly carbon dioxide. Sadly, all of these contradict the spirit of Eid ul-Fitr itself as we are not entirely cleansed per se, solely due to our activities during the holy month having instead contributed to the GHG emissions.

The question then, why the concern about GHG emissions?

The Earth’s climate has significantly shifted compared to its pre-industrial state. According to IPCC AR6 Synthesis Report, global temperature has been recorded to be 1.09 °C higher in 2011 – 2020 than in 1850 – 1900. The figure indicates that heat being trapped within the sphere has exceeded what is required to keep the Earth’s climate warm enough for its inhabitants. Large concentrations of GHG emissions, including carbon dioxide, methane, and nitrous oxide, in the atmosphere have been traced to be higher than during prehistoric times, ranging between 800,000 to 2,000,000 years ago, as stipulated in the report. Human-induced GHG emissions have been thought with absolute certainty to cause the continuous emissions increase, inching closer to more prevalent extreme weather events.

So, what sort of human activities of prominent influence on the climate? The report further elaborates the GHG-emitting human activities and their contributions to global GHG emissions. 79% of global GHG emissions in 2019 came from the energy, industry, and building sectors, whilst the remaining came from agriculture, forestry, and land use (AFOLU). The former has been contributing to the large generation of carbon dioxide, particularly from fossil fuel combustion and industrial processes (CO2-FFI). Such conditions come as no surprise as most of the energy that we consume is still being sourced from fossil fuels. This is especially true for developing countries, whereby fossil fuels are perceived to be much cheaper than clean alternatives. For these countries, there is a balance that needs to be struck between reducing their GHG emissions and maintaining economic growth.

 Has Indonesia exerted enough effort in its commitment towards climate change?

Just last year, Indonesia submitted its enhanced NDC (ENDC) to the UNFCCC to demonstrate its continued commitment to the climate change issue. Within the new document, the bar has been slightly increased. The country pledged to reduce its GHG emissions reduction by 31.2% (unconditional) and 43.2% (conditional) relative to Business-as-Usual (BAU) in 2030. Despite its intention to meet Decision 1/CMA.3 line 29 of the Glasgow Pact, the enhanced target is still far from being aligned with the Paris Agreement temperature goal. Aligned with that, Climate Action Tracker has recently rated the country’s ENDC to be highly insufficient. It argued that the targets can be met with existing policy. With conceivable targets, the government does not require further efforts. The analysis further suggested that the electricity sector should be seeing a significant drop in emissions to be aligned with the 1.5°C pathways. This means phasing out unabated coal-fired power plants’ capacity down to 10% in 2030 and to be completely phased out in 2040. Presidential Regulation 112/2022 should have provided a legal basis for relevant stakeholders to take necessary actions. JETP’s joint commitment that would see 20 billion USD being mobilized by the International Partners Group (IPG) countries should further jumpstart the energy transition in Indonesia. In his latest speech during the Hannover Messe, President Jokowi further hinted that Indonesia will phase out its entire coal fleet by 2050.

Through the moment of Earth Day and Eid ul-Fitr, let’s try to reflect on whether we have done enough to help prevent further worsening of climate change. Have we cleansed ourselves in the entirety? Have our lifestyles reflected what we have been advocating so far?

Photo by Asia Chang on Unsplash

Defining Just and Ensuring JETP Commitment

Jakarta, 18 April 2023 – Addressing the climate change issue needs not only commitment but it requires a huge amount of resources. Financing has become one of the biggest challenges for countries like Indonesia which rely on coal plants and need to transform them into renewable-based power generation to cut emissions from the power sector. This definitely needs huge financing.

International Partnership has committed to distributing funding to several countries to accelerate the energy transition. The funding is called the Just Energy Transition Partnership. Until April 2023, two countries i.e., South Africa and Indonesia, received the funding commitment. 

Vietnam, one of the Asian countries that rapidly developed renewable energy in the past few years, is in intensive communication to receive the funding. Minh Ha Duong, chairman of the Member Council VIETSE, during the webinar “Between Vision and Reality: Navigating JETP in South Africa, Indonesia, and Vietnam” said that the JETP will “reheat” the development of renewables in Vietnam.

“For several years, we can say that the renewable development in Vietnam is booming until we can have several gigawatts of renewable energy online, but it’s frozen lately. Therefore, this JETP will reheat the development so that we can have more renewables online,” he said.

South Africa, which became the first country to receive JETP, noted points worth considering for other countries and the IPG members in replicating the project in other countries.

“The JETP financing acts more like a catalyst during the energy transition process. Sure, it is not enough to cover the whole fund needed to transform the power sector and its social, and economic impact but it still can accelerate the transition,” Tracy Ledger, energy transition program lead at Public Affairs Research Institute (PARI) said. Tracy highlighted that public participation during the JETP negotiations was very limited. 

Securing the JETP commitment of USD 20 billion during the G20 meeting last November, Indonesia has established a dedicated task force for JETP under the Ministry of Energy and Mineral Resources. 

Institute for Essential Services Reform (IESR), which is actively involved in and reviews the energy sector in Indonesia and continuously gives input to definite policy makers, points out that the USD 20 billion is what is committed, but the disbursement can be dependent on many things. Therefore, Indonesia needs to prepare the ecosystem to welcome the funding.

The Indonesian government at least needs to work on the following issues: availability of bankable projects, a definite auction schedule for renewable plants, and an enabling environment for developers kicking their projects in Indonesia.

“We also need to define what is meant by ‘just’ in the JETP term. Our (IESR) context of ‘just’ involves labor and economic transition especially those who are in coal production provinces,” Fabby Tumiwa, executive director of IESR explained.

Indonesia’s JETP deals target emission reduction of 290 million tons of CO2 and a renewable mix of 34% by 2030. This target requires coal phase-out as a prerequisite for cutting down emissions from the power sector. As one of the impacts, coal production will drastically decrease and it will impact the coal-producing regions such as East Kalimantan, and South Sumatra.

Local economic activity will definitely shift as the mentioned provinces rely heavily on coal production for their gross domestic product. The quality of energy access that differs from one place to other challenges Indonesia’s JETP implementation. 

“The 34% target of renewables is not enough to decarbonize Indonesia’s energy system but it’s a good start to accelerate renewable energy utilization, nor the USD 20 billion. Yet, it can unlock more opportunities for energy transition,” Fabby said.

Fabby added that the establishment of renewable energy industries like battery and solar panel manufacturing become one of the keys to the success of the energy transition.

Inspiring the Youth: CASE Indonesia Teaches the Importance of Energy Transition in Sekolah Bogor Raya

Bogor, 4 April 2023 – Project Clean, Affordable and Secure Energy for Southeast Asia (CASE) together with Sekolah Bogor Raya kicked off the long-awaited Teaching for the Future (T4F) Program which focuses on the importance of energy transition as a subject in formal education.

CASE Teaching for the Future Program visited Sekolah Bogor Raya as we launched the T4F program, after our great and inspiring experience Sekolah Santa Ursula BSD in 2022. This year, T4F has a completely different agenda, as the students from grades 7, 8 and 11, totaling 150 participants, were involved in active learning, with 15 mentors facilitating, to increase the understanding and challenge them to find solutions towards problems faced by Indonesia in transitioning to clean energy. 

There were 5 different topics facilitated by the mentors, including sustainable energy access, energy efficiency, just energy transition, sustainable transportation and sustainable agriculture. By the end of the session, all students were given a task to create a campaign/project proposal on each specific topic. These ideas/proposals will be presented by the students on 14th April 2023 during Sekolah Bogor Raya Earth Day’s Exhibition.

Dominic, one of the participants of the program mentioned, “One thing that I learned from the session is about the drought in Danau Toba. I critically think of how the drought impacted the communities, especially in acquiring clean water. Education like this is very important for us, to raise awareness and improve our understanding about sustainable energy.”

Agus Tampubolon, CASE Indonesia Project Manager, emphasized the importance of energy transition as a subject in formal education. 

“Education about climate change and clean energy should be informed to the younger generations, as they are the ones who will make energy transition in Indonesia succeed in the future,” said Agus.

Aditya Rao, the Curriculum Coordinator of Sekolah Bogor Raya, told us that most subjects taught in SBR are integrated with the principles of Sustainable Development Goals (SDGs), and since elementary school, the students have already learned about climate change and energy transition. He further mentioned that through this project, SBR hopes its students will be able to understand the theoretical cases of energy transition and climate change in Indonesia in a more practical way and could be inspired to find solutions. 

Note: CASE for Southeast Asia is a collaboration project between the Institute of Essential Services Reform (IESR), GIZ Indonesia and the Ministry of Development Planning (Bappenas) with a mandate of shifting the narrative of energy transition in Indonesia that focuses on decarbonization on the power sector, upscaling renewable energy and energy efficiency, achieving just energy transition and sustainable finance. 

Clean Energy Acceleration to achieve NZE in the Energy Sector 2050

press release

Jakarta, 20 December 2021 – The Institute for Essential Services Reform (IESR) launched the Indonesia Energy Transition Outlook (IETO) 2022 report. IETO 2022 is an annual report that reviews the development of the energy transition in Indonesia and outlooks the challenges and opportunities of the energy sector in reducing greenhouse gas emissions for the following year. In the 5th year of the launch of the IETO report, IESR highlighted the government’s commitment to decarbonizing the energy sector, policy, and regulatory innovation to attract renewable energy investment and emphasize the role of the private sector and local governments in accelerating the energy transition in Indonesia.

IESR views that deep decarbonization of the energy sector is critical to be in line with the Paris Agreement target of limiting the increase in the earth’s temperature to 1.5 degrees Celsius. Generating as much as 34% of total emissions in 2019 makes the energy sector the second-largest emitter after Forest and Land Use (FOLU) in Indonesia. If there is no planned decarbonization effort, it is projected that the energy sector will become the largest emitter in Indonesia by 2030 and make it even difficult to achieve the Paris Agreement targets.

“In 2022, the government and all stakeholders must strive to increase the use of renewable energy and promote energy efficiency in buildings and industry. In 2025, the government must achieve the target of 23% of the renewable energy mix. Likewise, it must pursue the energy sector emissions to reach their peak before 2030. These two milestones are an indication of whether we can achieve decarbonization in the middle of this century,” said IESR Executive Director, Fabby Tumiwa.

The Indonesian government has set its commitment to making an energy transition by retaining a larger portion of renewable energy generation capacity, 51 percent or as much as 20,923 MW in 2030 in PLN’s RUPTL 2021-2030. However, to align with the 1.5℃ decarbonization target, based on the IESR study, at least 140 GW of renewable energy is needed, which is dominated by PLTS by 2030.

IESR believes that achieving this big target requires a serious evaluation of the quality of the current policies and regulations. In the last five years, since PP No. 79/2014 on KEN was passed, the growth rate of renewable energy tends to be slow. Data from IETO 2022 shows that in the last five years, renewable energy has only increased on average by 400 MW.

Meanwhile, the Indonesian government also puts coal in transition scenarios such as the CCS/CCUS program for coal-fired power plants, coal gasification, and even coal co-firing. IESR stated that using CCS/CCUS technology in steam power plants will result in higher electricity prices and an increased risk of potentially stranded assets due to non-competitive costs. Furthermore, the application of co-firing and clean coal technology such as coal-fired power plants (CFPP) Ultra-supercritical results in insignificant emission reductions, thus making the effectiveness of these technologies questionable.

“The cost of generating electricity from using CCS in CFPP will compete with renewable energy technology plus storage. So far in the world, CFPPs with CCS  still have problems in operating and achieving emission reductions. Even one of the CFPP projects with CCS, such as Petra Nova in Texas, was closed after only operating for approximately 4 years. So, the readiness of today’s technology, as well as the projected price of technology in the coming decades should be the main consideration. The priority must have been given to the technology with the most competitive costs, which are renewable energy,” explained Deon Arinaldo, Manager of Energy Transformation Program, IESR.

One of the authors of the IETO 2022, Handriyanti Diah Puspitarini said that although it had not yet reached the set target, the installed capacity of renewable energy, especially from solar PV, rose to 17.9 MWp, and electric vehicles such as electric motorcycles experienced a slight increase of 5,486 units and electric cars as much as 2,012 units. It needs more to be developed in 2022.

“The Indonesian government needs to encourage the development of locally produced technology to capture bigger opportunities such as decreasing the CAPEX of renewable energy projects. Therefore, it is easier for developers to get technology with high quality and low prices without imports. Thus, there will be a lot of investment not only in renewable energy projects themselves but into the industrial sector in Indonesia in general,” said Handriyanti Diah Puspitarini, Senior Researcher in Renewable Energy, IESR.

IESR realizes that decarbonization of the energy sector requires a large number of funds, around USD 20-25 billion per year, according to the IESR study on Deep Decarbonization of Indonesia’s energy system (IESR, 2021). IETO 2022 reviews some funding opportunities available from private or public entities for climate change mitigation and adaptation, which can be used to finance the energy transition. These funding opportunities include government incentives (fiscal and non-fiscal), international financing assistance, and more unconventional financing mechanisms such as green bonds/Sukuk, regional bonds, Islamic finance, and blended finance.

“Renewable energy financing should not be seen as a burden despite being an opportunity and strategy to shift investment from fossils to renewable energy. There are many sources of funding that can be a source of renewable energy investment. The government can use its APBN to attract investment from these funding sources, for instance by mapping renewable energy resources, conducting technological research, and pilot projects for new renewable energy projects that have not been developed such as marine energy, as well as providing de-risking instruments to attract investment,” closed Fabby.

The complete development of the energy transition will be discussed at IETO 2022.

Book Discussion “Jejak dan Langkah Energi Terbarukan Indonesia” or “Indonesia’s Renewable Energy Trails and Steps”

Book Discussion “Jejak dan Langkah Energi Terbarukan Indonesia” or “Indonesia’s Renewable Energy Trails and Steps”. This dynamic of renewables development in Indonesia has been covered by the media. Kompas, as one of the biggest media in Indonesia, has created many in-depth coverage writings on this topic. These daily in-depth reports are compiled in a book called “Jejak dan Langkah Energi Terbarukan Indonesia”, written together with the Institute for Essential Services Reform (IESR). This book aims to describe the actual conditions of energy transition in the field.

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COP26: A “Soundless” Recital by Jokowi

Many parties are waiting for President Joko Widodo’s speech at COP26. Jokowi is expected to declare more ambitious commitments to reduce emissions and deal with climate change as well as to outline concrete steps towards net-zero emissions. Indonesia’s strategic position as the leader of the G20 countries in 2022 should make Indonesia take one step ahead to lead efforts to reduce emissions for G20 member countries.

Unfortunately, in his speech at the High Level Segment for Heads of State and Government COP26 session, President Jokowi did not announce a higher climate ambition target nor a concrete commitment to support the Paris Agreement target to limit the increase in the average temperature of the earth below 1.5 degrees Celsius and achieve carbon neutral by the middle of the century. The IPCC AR6 report has stated clearly that we have less than a decade left to keep the earth’s temperature rise at 1.5 degrees Celsius. The opportunity to increase Indonesia’s climate ambitions is still open and of course the Government must take it and make the best use of it to save the earth from the damage caused by climate change.

Efforts to reduce emissions and address climate change must be seen as both a responsibility and an opportunity to transform Indonesia’s economic system from a carbon-intensive one to a more sustainable low-carbon economic system. According to the IESR Deep Decarbonization study, the transformation of the energy system will create 3.2 million new jobs in the renewable energy sector. An ambitious commitment by setting targets for reducing ambitions that are larger than the current NDC and building a comprehensive energy transition roadmap will send a good signal for investors to invest in Indonesia. This will encourage Indonesia’s economic strength to become more globally competitive.

Previously at the G20 Summit which took place on October 30-31 2021, the leaders of the G20 countries agreed to achieve net-zero emissions by the mid of this century. However, this commitment has not yet been accompanied by a target for the phase-out of coal-fired power plants. Holding a strategic role in the G20 leadership, Jokowi could actually take the opportunity to encourage G20 countries to stop operating coal-fired power plants and switch to renewable energy. Of course, in this case, Indonesia also needs to implement a policy of abandoning coal so that it can set an example for other G20 countries.

In addition, there is a difference between actions and facts on the ground in Jokowi’s speech at COP 26. He mentioned that he would build the largest PLTS in Southeast Asia and encourage the use of renewable energy to reduce emissions in the energy sector. However, until COP 26 took place, supportive policy support for the PV mini-grid ecosystem, such as the Revised Regulation of Ministerial Regulation 49/2018 concerning the Use of Rooftop Solar Power Generation Systems by Consumers of PT Perusahaan Listrik Negara (Persero) as well as Presidential Regulations concerning new and renewable energy, had not been officially issued.

More ambitious climate action is urgently needed now as the effects of climate change are becoming more frequent as La Nina returns. The Climate Transparency report 2021 states that changes in La Nina and El Nino patterns will have an impact on the onset and duration of the rainy season in Indonesia. This affects the agricultural sector such as rice production. The World Bank’s global risk analysis places Indonesia in the twelfth of 35 countries that face a relatively high risk of death from exposure to floods and extreme heat. Ranked as the fifth country with a population that lives in areas lower than the coastal zone, Indonesia is also vulnerable to sea-level rise.

Indonesia is able to make a significant contribution to tackling climate change and preventing worse impacts from the climate crisis. Utilizing vast forests as carbon sinks, having renewable energy potential reaching 7879.4 GW, and playing a strategic role in the G20 Indonesia should be able to achieve and exceed the current NDC target of reducing emissions by 29% on its own and up to 41% with international support from business as usual in 2030. By doing this, Indonesia will not only save the environment but also transform the economic system, as well as demonstrate leadership innovation to the members of the G20 countries.