Racing Against Time, Driving Deep Decarbonization of Indonesia’s Energy System

Deon Arinaldo

Jakarta, March 14, 2023 – The Government of Indonesia (GoI)  needs to set more ambitious targets to accelerate the transition to clean energy with decarbonization so that the increase in the earth’s temperature does not exceed 1.5°C. As a country that ratified the Paris Agreement, Indonesia is legally bound to integrate its policies to achieve carbon neutrality by 2050. Deon Arinaldo, Program Manager for Energy Transformation, Institute for Essential Services Reform (IESR), explained that to support the global target of 1.5°C, emissions of Indonesia’s energy system must peak before 2030 and reach zero by 2050.

“For this reason, the transition to the energy system needs to be planned and started from the beginning. The electricity sector is most ready to transition because renewable energy generators are available with abundant potential and are competitive with fossil energy,” said Deon at the Implementation of a Just Energy Transition in Indonesia event organized by the International Institute for Sustainable Development on Tuesday (14/3/2023). 

Quoting the IESR study entitled Deep Decarbonization of Indonesia Energy System, said Deon, the energy system transition in Indonesia needs to achieve three milestones, including 100 GW of solar panels, no new PLTU except for 11 GW included in the development plan, and 2 GW of prosumer solar panels in the first stage in the 2018-2030 period, then in the second stage, namely 100% renewable energy, utility-scale battery storage, starting to install a 2 GW electrolyzer and CO2 storage and direct air carbon capture (DAC) in the 2030-2045 period, then in the third stage, i.e., continuing to use 100% renewable energy after 2045.

“To achieve a transition to the energy system, renewable energy, especially solar, has a major role to play in Indonesia’s electricity generation in a carbon-neutral scenario,” said Deon.

In addition, Deon emphasized that the energy transition at least requires a transformative approach to all aspects, from policy, economic, and social to technical. For example, in the policy aspect, it is necessary to consider more apparent steps, not just BaU (business as usual). As a developing country, Indonesia can also take a role in the energy transition. Still, on the other hand, there is pressure for developed countries to provide technology, funds, and assistance.

“To support the 1.5°C target, we need to change our perspective, work, and energy system. For this reason, a stronger message is needed in energy planning and policy,” explained Deon.

On the same occasion, Satya Widya Yudha, a National Energy Council (DEN) member, emphasized the need for climate finance as the main driving force for achieving carbon neutrality. For this reason, Indonesia needs help from other countries to achieve carbon neutrality by 2060 or sooner. To achieve this target, said Satya, Indonesia also has a strategy for decarbonization in electricity generation.

“We still try to use fossil energy still but with clean energy technology. However, we also continue accelerating the use of renewable energy, such as electric vehicles and hydrogen development. Until renewable energy can be used entirely, “explained Satya.

Emission Reduction in Transportation

Kendaraan Listrik

Jakarta, February 20, 2023 – Decarbonizing the transportation sector is one of the key agendas to achieve Indonesia’s net zero emission target by 2060. The transportation sector is the second largest GHG emitter (23%), which road transport contributing 90% of the sector’s emissions, with total emissions in the energy sector closing to 600 MtCO2eq in 2021 (IESR, IEVO 2023).

In a low carbon scenario compatible with the Paris Agreement target (LCCP), emissions from transportation in Indonesia must decline to 100 MtCO2eq in 2050. Meanwhile, in the IESR’s calculation the entire energy sector, including transportation, must be near zero by 2050 to keep the global temperature rise below 1.5 °C. To achieve that, the electrification of transportation and utilization of other sustainable fuels should be prioritized.

One way to decarbonize road transport is by increasing the utilization of electric vehicles (EVs). The substitution of conventional internal combustion engine (ICE) vehicles with EVs is not only a solution to avoid direct GHG emissions from burning fossil fuels but will be a more economical choice given the high energy efficiency of EV technology. EVs are projected to represent more than 60% of vehicles sold globally by 2030. Hence, the supporting infrastructure for EVs in Indonesia, such as EV chargers, urgently needs to be prepared.

Despite the promises, people still doubt or even argue that EVs are not a truly GHG emission reduction solution. The reason is that the source of electricity for charging EVs still comes from fossil fuel power plants, particularly in Indonesia where about 67% of the electricity comes from coal-fired power plants (CFPPs). Moreover, EVs battery manufacturing processes are also highly energy-intensive and produce a high amount of GHG.

In this respect, the decarbonization of the transportation sector must be viewed from a long-term perspective with optimism. Concern regarding the source of electricity for EVs is indeed a great challenge to increasing EVs utilization. Therefore, EVs development plans should be integrated with the multi-sector decarbonization pathway because high EV adoption could potentially help another sector, namely the power sector.

The Bottleneck in Power Sector

One of the reasons for slow renewables development in Indonesia is the oversupply condition in the power system. Moreover, the system has a high reserve margin (power reserve), which is estimated to reach 56% in 2022 , while the typical reserve margin according to PLN’s RUPTL is in the range of 15-40%. The conditions are said due to the demand overestimation and the effect of the global pandemic. 

Unfortunately, most of the new operating power plants are CFPPs which cannot operate flexibly because they are constrained by take or pay agreements. Meanwhile, some CFPPs, especially older ones, are constrained to operate flexibly due to their limited technical abilities such as slow ramping rates, high minimum load, and long start-up time.

Based on these issues, there should be an increase in electricity demand or the retirement of fossil-fuel generators, with or without intervention, to allow higher renewables penetration. In this regard, EV utilization development, with the proper strategy, can be used as a tool that helps minimize problems in the power system. 

The high adoption rate of EVs could potentially absorb the excess electricity supply from the operating power generators. In IESR’s deep decarbonization scenario, the demand for transportation electrification will reach 136 by 2030 (approximately 28.6% of total electricity demand) [2]. In other words, the electrification of the transport sector can be a strategic approach to cut down the oversupply issue and make room for more renewables in the power system. Besides, electrification will significantly cut down the direct GHG emission and improve energy security through fuel import reduction.

Electric Vehicles Value in Power System

An electric vehicle is essentially a large battery connected to an electric motor and wheels. Simply, it is a moving energy storage asset. An EV car today has an average battery capacity of about 40 kWh which can be viewed as a valuable asset for the power grid. It is a fairly large capacity considering a home storage battery unit typically has a capacity of no more than half of the EVs’. Hence, any additional value of EVs should be enabled through vehicle-grid integration (VGI).

Various VGI schemes have been developed, namely, V1G (one-directional energy flow), V2G (bidirectional energy flow), V2B (vehicle to building), etc. Suitable integration strategies can benefit both EV owners and grid operators. Through V1G, for example, the grid operator may apply different charging tariffs at specific charging hours that would influence the charging behavior of EV owners. Grid operators can maintain the peak loads, avoiding additional operating costs or the need for capacity addition. In return, EV owners will get the incentive of low charging tariffs during off-peak hours.

In further implementations, VGI can be promoted to V2G. The EV fleets can collectively act like a stationary energy storage system (ESS) where the grid operator can buy electricity from EV’s battery to be supplied to the grid when needed. However, its implementation will require regulations related to interconnection.

In addition to regulations, VGI will require the development of supporting infrastructures relevant to the power sector development roadmap. Considering the penetration rate of renewables, the adoption rate of EVs, and today’s typical load profile, VGI may begin to be implemented through low tariff incentives at night so that EV owners do home charging overnight. However, once the power system has high solar PV penetration (as what the government plans for the future), there will be high electricity generation during the day. Don’t we need to prepare more public charging infrastructure? Or is there another strategy?

The Increase of Emission Reduction Targets in Indonesia’s NDC is Still a Long Way to Mitigating a Climate Crisis

Jakarta, 6 December 2022- Indonesia has submitted Enhanced Nationally Determined Contributions (ENDCs) documents by increasing the target of reducing greenhouse gas (GHG) emissions by only around 2%. The Institute for Essential Services Reform (IESR), which is a member of the Climate Action Tracker (CAT), a consortium of three think tanks that conducts monitoring and assessment of climate change policies in 39 countries and the European Union, found that the slight increase in Indonesia’s NDC target was still insufficient to prevent a global temperature rise of 1.5°C.

In Enhanced NDC, the target of reducing emissions by own efforts (unconditional) increases from 29% in the Updated NDC document to 31.89% in 2030, and with international assistance (conditional) increases from 41% to 43.2%. IESR and CAT view that Indonesia should be able to set even more ambitious targets, especially after the issuance of Presidential Regulation (Perpres) No 112 of 2022 concerning the Acceleration of Renewable Energy Development for the Provision of Electricity.

“Indonesia is still hesitant to set ambitious emission reduction targets and play in the safe zone. The reduction target set in the Enhanced NDC (E-NDC) is too easy to achieve because the reference is the business-as-usual emission increase projection in 2030. The emission reduction target should be based on the absolute emission level based on a certain year. To be in line with the 1.5°C ambition, emissions from the energy sector in 2030 must be equivalent to the level of emissions from the energy sector in 2010,” said Fabby Tumiwa, Executive Director of IESR, at the launch of the results of the CAT assessment of Indonesia’s climate action and policies.

To achieve significant emission reductions, Indonesia needs to carry out more ambitious mitigation in the sectors with dominant emitters, such as the energy sector, and the forest and land sector. Having abundant renewable energy potential, even up to more than 7 TW, Indonesia can utilize it as a source of energy with minimal emissions.

However, until 2021, the renewable energy mix in the energy system in Indonesia is still 11.5%. IESR views that with several developments in international support and the government’s commitment to early retirement coal power plants will provide free space for the development of renewable energy so that it can achieve the target of 23% renewable energy in 2025, even reaching 40% in 2030. In the Deep Decarbonization of Indonesia Energy System study (2021), IESR concludes that by 2050, 100% utilization of renewable energy in Indonesia’s energy system is technically and economically feasible.

“Indonesia’s climate action status can be enhanced by ensuring that climate policies in this decade are implemented to fulfil a fair contribution based on global efforts (fair share). The NDC target with international assistance must also be consistent, at least with the optimal path with the lowest cost for the ambition of 1.5°C (global least cost pathways),” explained Delima Ramadhani, Coordinator of Climate Action Tracker, IESR.

According to her, the dominance of coal-fired power plants, which are currently around 61% of Indonesia’s energy system, needs to be significantly reduced to only 10% of coal-fired power plants that do not use carbon capture and storage technology (unabated coal-fired power plan) in 2030 and terminate their operations gradually until stop completely by 2040. For that, Indonesia must increase its climate commitments, and international assistance plays a major role in the implementation of the coal phase-out per the Paris Agreement.

Several funding mechanisms for ending coal operations have also been discussed and agreed upon by Indonesia, such as the Energy Transition Mechanism scheme and the Just Energy Transition Partnerships (JETP). IESR considers that, although it is still not aligned with the 1.5°C targets, the JETP agreement is a step forward in the energy transition in Indonesia. The funding commitment of USD 20 billion is not enough to achieve decarbonization of the energy sector which requires at least a total investment of USD 135 billion by 2030.

“The portion of grants in JETP funding needs to be enlarged, which can be used to accelerate the strengthening of the energy transition ecosystem and project preparation. In addition, the next step after JETP has been agreed upon is the preparation of an investment plan that is carried out transparently and mainstreams the principles of justice in the energy transition by involving the participation of the community, local government and affected groups,” concluded Fabby.

Climate Action Tracker is an independent scientific analysis initiative that tracks countries’ climate actions and measures them against the globally agreed Paris Agreement goal of holding warming well below 2°C and pursuing efforts to limit warming to 1.5°C. CAT has provided an independent analysis of around 40 countries since 2009. CAT members include Climate Analytics, the New Climate Institute, and the Institute for Essential Services Reform (IESR), which joined as partners in 2022.


Accelerate Decarbonization for a Sustainable Future

Makassar, 22 March 2022 – Accelerating the use of clean energy is a fundamental point in ensuring the future of the economy and other sectors is maintained in the context of sustainability. This was raised in the Sustainability Forum held by PT Vale Indonesia Tbk on Tuesday (22/03). The activity raised the theme “Decarbonization for a Sustainable Future.”

In this activity, the Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, said that the transition to fossil-based energy is necessary for the ambition of net-zero emission (NZE) can become a necessity, with an estimated realization in 2050. He emphasized that the step, which is often called decarbonization, must be in line with the target of the Paris Agreement, which is to limit the increase in the earth’s temperature to 1.5 degrees Celsius. 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 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. By 2025, the government must achieve the target of 23% of the renewable energy mix, and after that, it must pursue the energy sector’s emissions to reach their peak before 2030. So indeed, there must be an acceleration of the transition to clean energy with decarbonization. In the long term, this will have a multiplier effect on the competitiveness of our economy so that it is more optimal,” he said.

Fabby views South Sulawesi as one of the regions in the country that is already in an energy transition system with a significant mix of renewable energy. This is indicated by constructing renewable energy-based plants such as wind, water, and solar power. As a result, the clean energy mix is already at around 30% of the installed capacity in South Sulawesi. This achievement is considered inseparable from the collaboration of all elements, which have begun to be relatively aggressive in implementing decarbonization steps in the production process, including PT Vale Indonesia Tbk.

“I think this is excellent. PT Vale itself already has a 33 percent decarbonization roadmap for 2030 and targets net-zero in 2050. But for the 2050 stage, there is still a need for further assessments,” said Fabby.

On the same occasion, the Director-General of New Renewable Energy and Energy Conversion (EBTKE) of the Ministry of Energy and Mineral Resources, Dadan Kusdiana, said that the government had prepared a roadmap for the energy transition to carbon-neutral, which is projected to reach the optimal point in 2060.

“We are targeting energy decarbonization towards Net Zero Emission 2060 or even faster. This is because the new renewable energy mix (EBT) was already fully achieved, reducing 1,562 million tons of CO2 emissions,” he said.

To achieve the target of the EBT mix, Dadan explained, there are several acceleration efforts carried out by the government, starting from the completion of the Draft Presidential Regulation on EBT Prices, the application of the ESDM Regulation of PLTS Roof No. 26 of 2021, then mandatory biofuels to the provision of fiscal and non-fiscal incentives for NRE.

“Then, of course, the ease of licensing for the EBT segment to encourage demand for electrical energy in several primary activities even on a personal scale in the community,” said Dadan.

Meanwhile, President Director of PT Vale Indonesia, Febriany Eddy, explained the company, which operates in the mining sector, has also developed a road map to reduce carbon emissions for scopes 1 and 2 to a third in 2030 and net zero in 2050.

“For the plan for a new smelter in Central Sulawesi, we, with partners from China, have committed to using LNG instead of coal for power generation there,” he said.

The Governor of South Sulawesi, Andi Sudirman, through the Governor’s Expert Staff for Government Affairs, Andi Mappatoba, conveyed that the existence of PT Vale consistently practices sustainability and efforts to reduce the greenhouse effect through decarbonization steps helped the government in realizing low-carbon development.

“PT Vale has tried to contribute to the environmental, social, and economic sustainability of South Sulawesi with all its sustainability measures. In the future, hopefully, we will always be partners with the provincial government in developing the economy and carbon-neutral targets as announced by the government.”