Energy Conservation Actions Still Become Homework for Indonesia’s Decarbonization

Jakarta, 12 October 2023 – Energy conservation is one of the decarbonization efforts that can be carried out with minimal costs and relatively less effort than building new power plants. Unfortunately, this effort is still the second priority in Indonesia’s decarbonization agenda.

In order to encourage the acceleration of energy conservation actions, the government issued Government Regulation no. 33 of 2023 which regulates energy conservation in various sectors. Tavip Rubiyanto, Head of ESDM Subdivision, Directorate of Synchronization of Regional Government Affairs I, Directorate General of Regional Development, Ministry of Home Affairs, explained that Indonesia’s energy needs will continue to increase along with the increase in population and per capita economic growth.

According to him, the Indonesian government has made an international commitment to limit the release of greenhouse gasses and continue to increase renewable energy capacity. However, this plan is still hampered by the large initial investment.

“In PP 33/2023, we give a mandate to local governments, business entities, communities and the private sector to take part in energy conservation actions,” said Tavip in a focused group discussion held by the Institute for Essential Services Reform (IESR) on Thursday, October 12th 2023.

Tavip added that the regulation of authority for regional governments is expected to provide sufficient space for regional governments to propose and implement energy conservation programs.

Coordinator of the Technical Guidance and Energy Conservation Cooperation Group, Ministry of Energy and Mineral Resources, Hendro Gunawan, explained that it is important for an entity to carry out energy management.

“For the private and industrial sectors, we have even reached certification such as ISO 50001 (industrial management) because apart from improving branding, it is also a kind of requirement to continue to exist in the industry,” said Hendro.

Regarding the basis for implementing energy management which is still voluntary, Iwan Prijanto, chairperson of the Green Building Council Indonesia (GBCI), emphasized the importance of incentive schemes for building owners who will carry out green building certification. Especially for office building owners as the highest contributors to greenhouse gas emissions.

“I actually feel sad, because the first building was certified in 2011, and additions are very slow. “The absence of incentives or disincentives for building owners is one of the reasons for the slow growth of green buildings,” explained Iwan.

Dyah Perwitasari, Junior Planner at the Ministry of Bappenas, who was present at the discussion, also highlighted the standards for successful energy conservation that need to be considered together.

“Apart from achieving standards that we need to think about again, communication or outreach about energy savings to the public is also very important, for example energy saving label indicators on electronic devices used in the household,” he said.

Calculating the Costs of Early Termination of Coal Power Plant and Other Decarbonization Measures

Jakarta, 11 October 2023 – Early termination of coal-fired power plant (CFPP) operation from the natural CFPP retirement year is a more cost-effective approach than extending the life of coal CFPP with the addition of carbon capture and storage (CCS) technology. It was stated by Fadhil Ahmad Qamar, Program Staff for the Clean, Affordable, and Secure Energy (CASE) project for Southeast Asia (SEA), Institute for Essential Services Reform (IESR), at Indonesia Sustainable Energy Week (ISEW) 2023.

Fadhil mentioned that adding CCS technology to power plants tends to be expensive due to the high procurement costs and initial capital expenditure (Capex) and operating expenditure (Opex). Moreover, shutting down coal power plants can result in similar reductions in emissions as implementing CCS but at a lower cost.

“Appropriate carbon pricing must be applied alongside innovative financing to attach economic value to the advantages of reducing emissions through the early termination of coal power plant operations and utilization of CCS technology. This will prevent any burden on the state budget,” said Fadhil.

On the same occasion, Raditya Wiranegara, Senior Analyst, IESR, also emphasized again the social and economic impacts of the early termination of coal power plant operations are crucial, primarily when the local communities rely heavily on these operations for their economic activities. Therefore, policymakers must adopt an approach to formulating policies for the cessation of coal power plant operations based on reliable data on the plants’ generating assets and their external costs. These external costs include social costs associated with local pollution produced by coal power plants.

“It is crucial to include the plan for early termination of coal-fired power plants in the RPJPN. This will enable us to prepare a social safety network and estimate the required budget to minimize the impact of ending coal-fired power plant operations on the communities around the plant and producing areas. Additionally, we should consider taking anticipatory measures such as preparing to shift workers from coal-fired power plants to renewable energy-based power plants. All of these steps can be included in the RPJPN,” explained Raditya.

The Importance of Terminating Coal Power Plant Operations to Pursue Emission Reduction Targets

press release

Jakarta, 20 June 2023 – The Institute for Essential Services Reform (IESR) urges the Indonesian government to transform the energy sector to achieve peak emissions in 2030 and carbon neutral in 2050. This align with President Joko Widodo’s commitment to achieve net-zero emissions in 2060 or earlier as a form of Indonesia’s responsibility to reduce the threat of global warming.

According to Climate Watch’s data, the energy sector is the largest contributor to greenhouse gas emissions. Globally, the sector produces 36.44 gigatons of carbon dioxide equivalent (Gt CO2e) or 71.5% of total emissions. Meanwhile, based on the Ember Climate report, Indonesia ranks as the 9th largest CO2 emitter from the electricity sector in the world, reaching 193 million tons of CO2 in 2021. For this reason, the government must reduce emissions significantly in the energy sector, especially in the electricity sector.

Fabby Tumiwa, Executive Director of IESR stated that as one of the world’s largest economies as well as the largest emitters, Indonesia is expected to show leadership and commitment to decarbonize its energy sector through energy transition policies and plans. President Joko Widodo’s (Jokowi) political commitment must be translated into a series of policies, regulations and plans that align with one another.

“There are signs that President Joko Widodo’s (Jokowi) political commitment is trying to be countered and hindered by a number of parties who are reluctant to make an energy transition, and ultimately want to maintain the status quo, which is to not reduce coal consumption to supply electricity. For this reason, the President must observe in detail which parties are reluctant to do energy transition or try to downgrade the government’s ambition and buy time until they can change the political decision,” Fabby added.

Deon Arinaldo, Manager of the Energy Transformation Program said that IESR views the termination of coal-fired power plants in Indonesia as an important matter. As one of the recipients of Just Energy Transition Partnership (JETP) funding, Indonesia is committed to achieving a peak emission of 290 million tons of CO2 by 2030, and increasing the renewable energy mix in the electricity sector to 34% by 2030,” said Deon.

“The target stated in the JETP commitment is higher than the policies and plans that have been set at this time. For example, the emission target covers the power sector as a whole as well as the renewable energy mix which is 10% higher than PLN’s RUPTL 2021-2030. This means that in order to achieve this target in approximately 7 years, transformation is needed not only in planning the electricity system, such as stopping the operation of coal-fired power plants,” said Deon.

Assuming that all power plants, including coal-fired power plants, planned in the 2021-2030 RUPTL are built, IESR calculates that to achieve the JETP target,  at least 8.6 GW coal-fired power plants must be retired before 2030 followed by the termination of 7.6 GW CFPP operations before 2040. On the policy side, accelerating  renewable energy development and investment disincentives for fossil energy generators also need to be continuously encouraged.

Based on the Delivering Power Sector Transition report, IESR found that of the 13.8 GW PLTU which is planned for development in the 2021-2030 RUPTL as many as 2.9 GW could be canceled, 10.6 GW needed to end operations early, and 220 MW to be replaced with renewable energy power plant such as biomass. The cancellation of the 2.9 GW PLTU is the cheapest option to avoid GHG emissions in the electricity sector.

“From the analysis we conducted in this report, canceling the construction of coal-fired power plants coupled with early retirement for power plants can help achieve the peak emission target agreed upon in the JETP. We estimate that a 5.6 GW PLTU must be retired before 2030 if the 2.9 GW PLTU can be canceled,” said Akbar Bagaskara, Researcher of the Electricity System.

Based on the IESR study entitled Financing Indonesia’s coal phase out: A just and accelerated retirement pathway to net-zero, the cessation of coal-fired power plants is beneficial from an economic and social perspective, such as avoiding the cost of subsidized electricity produced from coal-fired power plants and health costs, respectively. Amounted to $34.8 and $61.3 billion—2 times to 4 times as much—of the cost of stranded assets, decommissioning, job transition, and losses in coal revenues.

“Until 2050, it is estimated that investment costs will be required to develop renewable energy and supporting infrastructure, as a substitute for the retired coal power plants, amounting to $ 1.2 trillion. International funding support will certainly be needed to make this happen. However, by retiring PLTU early and accelerating the development of renewable energy in Indonesia, it is estimated that there will be 168,000 deaths that can be avoided by 2050,” said Raditya Wiranegara, IESR Senior Researcher.

Translator: Regina Felicia Larasati

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?