Incentives Needed to Drive the Electric Vehicle Market

Jakarta, May 11,  2023 – Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, stated the Government of Indonesia provided electric vehicle incentives as one of the strategies to open or develop the electric vehicle industry itself. However, Fabby stressed that there are better solutions than incentivizing electric vehicles to overcome the congestion problem. This was said by Fabby Tumiwa when he was a guest speaker on the Mining Zone program, CNBC Indonesia TV, on Thursday (11/5/2023).

“We already have a downstream policy; we cannot export nickel ore. For this reason, nickel must be produced in Indonesia, and we already know that nickel is processed in smelters to become batteries. With this policy, several global companies are currently investing in Indonesia, including Korea and China. Well, the next stage is building an electric vehicle. For example, the type of battery is like Nickel-metal hydride (NiMH),” explained Fabby Tumiwa.

Furthermore, Fabby said to attract investment in electric vehicles, it is necessary to create market demand (demand). It is considering that the need for electric cars in Indonesia is still small. According to Fabby, sales of electric vehicles have remained within 25 thousand units since the issuance of Presidential Regulation (Perpes) No 55 of 2019. Reflecting on this, the government needs to set a strategy to grow demand for electric vehicles.

“With the demand, it is hoped that electric vehicle manufacturers can invest in Indonesia. However, it should be remembered that if we want to encourage investment on the upstream side, the incentives will differ. On the other hand, if we build a market from the product, the incentives are also different. Hence, the existing incentives cannot be wrong because we need to look at the context,” mentioned Fabby Tumiwa.

In addition, Fabby stated that in the context of energy use, there is a need to substitute fuel oil imports (BBM). As is known, Indonesia’s oil production continues to decline every year. Under these conditions, said Fabby, if there were no efforts to reduce fuel consumption, more than 60% of fuel needs would be imported. This is a severe problem because it threatens the security of the national energy supply.

“Under such conditions, incentives for electric vehicles are also part of a strategy to reduce growing demand for fuel by shifting vehicle technology. Remembering that electricity can come from anywhere, including renewable energy, “said Fabby Tumiwa.

Not only that, in the context of the energy transition, said Fabby, the automotive industry will sooner or later experience changes. If Indonesia is prosperous in electric vehicles, the production of conventional cars will decrease, which can impact reducing employment opportunities. As market interest in conventional vehicles declines, green jobs will be created.

Solar Energy Plays Key Role in Energy Transition of Power System

Alvin

Jakarta, April 15, 2023 –  A careful planning strategy is essential to encourage the use of solar energy in the electricity system.  The Government of Indonesia and PLN (the national power utility) released the new Electricity Business Plan (RUPTL) 2021-2030, which sets out Indonesia’s future power capacity by increasing the number of New Renewable Energy (EBT) generators. The target of the EBT mix in the National Electricity General Plan (RUKN) is around 23% in 2025. It was stated by Alvin Putra Sisdwinugraha, Researcher of Electricity Systems and Renewable Energy at the Institute for Essential Services Reform (IESR), in the Solar Energy Talk #3 events, the results of collaboration between Solar Scholars Indonesia (SSI), IESR, PPI Australia, Korean Indonesian Research Association (APIK), Insygnia, and Solarin.

“Referring to the RUPTL, solar energy will play an important role in Indonesia’s electricity to achieve net zero emission (NZE), while the utility-scale is still the biggest contributor. However, this is not enough for Indonesia to pursue its 2050 decarbonization target,” Alvin Putra Sisdwinugraha stated.

Several potential clusters within the RUPTL are the mining sector, the tourism sector, the fisheries sector, Solar Power Plants (rooftop solar PV), floating solar PV, and other sectors with a total capacity of up to 2.1 Giga Watt (GW). Regarding floating solar PV, Alvin said the issuance of Minister of Public Works Regulation No. 6 of 2020 is a breath of fresh air for developing renewable energy in Indonesia because it allows the use of space in reservoir/dam areas of around 5% at normal water levels. Regarding these regulations, The Ministry of Energy and Mineral Resources (ESDM) has mapped out the potential for floating PLTS of 28.4 GW, with 4.8 GW of existing hydropower.

“Although the potential is quite large, unfortunately, there are no specific technical regulations regarding the safety of the dam/reservoir. This can be reflected in the development of a floating Solar PV in Cirata, West Java, which a private developer is carrying out,” he explained.

On the other hand, to encourage the use of solar energy, the government has signed Presidential Regulation (Perpres) Number 112 of 2022 concerning accelerating the development of renewable energy for electricity supply. This regulation strengthens the government’s commitment to energy transition in achieving the NZE. One of the things discussed in the Presidential Decree, said Alvin, is that the price for electricity from PLTS is based on the highest benchmark price.

“Although it depends on the bidding scheme that will be implemented by the Government and PLN, pricing for PLTS based on the highest price benchmark is expected to provide room for more small-capacity PLTS to develop,” he remarked.

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.

Electric Vehicle Incentive Effectiveness Needs Government Support to Reform Other Policies

press release

Jakarta, 8 March 2023 – On 6 March 2023, the government established incentives for Battery-Based Electric Motorized Vehicles (KBLBB) in the form of assistance in purchasing KBLBB of IDR 7 million per unit for 200,000 units of new electric motorbikes and IDR 7 million per unit for conversion to electric motorbikes for 50,000 units petrol motorbike. Meanwhile, the exact amount of incentives for electric cars has not been determined, but the government plans to support purchasing 35,900 units of electric cars, and 138 electric buses. The government has also prepared an incentive mechanism that is only intended for manufacturers who have registered the type of electric vehicle that meets the 40% Local Content Requirement (LCR). This incentive is planned to be implemented from 20 March 2023 to 30 December 2023.

The Institute for Essential Services Reform (IESR) welcomes the provision of this incentive to encourage the adoption of electric vehicles and grow the domestic electric vehicle industry to encourage more sustainable economic growth in Indonesia and reduce the demand rate for fuel. However, to encourage more aggressive adoption of electric vehicles and ensure the effectiveness of incentives, some policy reforms are needed, including reducing fuel subsidies and a policy to phase out fuel-fueled vehicles, starting from passenger cars before 2045, and Internal Combustion Engine (ICE) motorcycles. IESR views that although the policy reform is not a populist policy, it needs to be taken by the government with deep consideration.

The use of electric vehicles is also a strategy to achieve the target of reducing greenhouse gas emissions stipulated in the Nationally Determined Contribution (NDC), with the target of adopting 13 million units of two-wheeled and three-wheeled electric vehicles and 2 million units of four-wheeled electric vehicles by 2030.

“Providing this incentive is a good first step to increase demand for electric vehicles. With the 40% LCR requirement, it can encourage investment in the manufacture and supply chain of electric vehicle components. It is hoped that with it, we can achieve economies of scale for electric vehicle production and encourage competition which can have an impact on reducing the price of electric vehicles to boost the adoption of even more electric vehicles,” said Fabby Tumiwa, Executive Director of IESR.

Fabby added that the conversion incentives to electric motors were expected to build the capacity of conversion technicians and workshops, as well as attract business actors to pursue a larger-scale conversion process.

“IESR found that there will be 6 million units of conventional motors per year that can be converted to electric motors by 2030. For this reason, hundreds of certified conversion workshops and skilled technicians are needed. Supply chain support for batteries, electric motors and other components is necessary so that conversion costs are more affordable for the public,” explained Fabby.

Moreover, to the LCR requirements for electric vehicle manufacturers, IESR suggested that the government could add electric vehicle performance requirements in providing incentives next year.

“The government can add additional requirements related to electric vehicle performance to encourage increased reliability of electric vehicles, as well as, the research and development ecosystem of the electric vehicle industry in Indonesia. These standards include vehicle mileage, minimum battery capacity, and conversion efficiency,” said Faris. Adnan, IESR Researcher.

Furthermore, Faris added that another interesting thing about this electric vehicle incentive is the priority of giving incentives for Micro, Small, and Medium Enterprises (MSMEs), especially recipients of Small Business Credit (KUR) and Micro Business Productive Assistance (BPUM), including 450-900VA electricity customers. However, according to him, motorists who provide online transportation or logistics service providers also need to be set as a priority.

“Online motorbike transportation or logistics drivers need to be prioritized in providing this assistance because they have long distances to travel per day so that the economic benefits for users and the government will be greater. The amount of assistance offered also needs to be pushed higher than the current amount, which is above Rp. 7 million,” explained Faris.

He also highlighted the installed power capacity of priority prospective buyers. The electric motorbike battery charger itself requires up to 400W of power. This means that to charge the electric vehicle battery, there will be a lot of electronic equipment that cannot be used at the same time.

“This can be anticipated by providing additional power increases when priority buyers buy electric vehicles that receive government assistance,” said Faris.

IESR views the adoption of electric vehicles as a strategy to reach zero emissions if the charging source comes from renewable energy. Based on the IESR analysis in the 2023 Indonesia Electric Vehicle Outlook (IEVO) report, the emissions emitted by electric motorbikes and electric cars are 18% and 25% lower than by petrol motorbikes and cars. However, if the development of renewable energy only refers to the 2021-2030 PLN Business Plan, then the reduction in emissions from electric motorbikes and electric cars is projected to be insignificant, only around 6% and 8% in 2030.

“With several government commitments and support for energy transitions, such as the Just Energy Transition Partnership (JETP), this momentum can also be used to accelerate the transition to the electricity system by developing renewable energy and stopping coal-fired power plants earlier. The result is a lower network emission factor so that the benefits of electric vehicles for decarbonization are maximized,” explained Deon Arinaldo, Manager of the Energy Transformation Program, IESR.

Deon added that the IESR study even showed that with a combination of transportation electrification and accelerated development of renewable energy, Indonesia’s renewable energy mix could even exceed 34% of the RE mix target announced at JETP. ***

Carbon Trading Implementation Needs to be Followed by Tighter Emission Limits

press release

Jakarta, March 1, 2023 – The Ministry of Energy and Mineral Resources (ESDM) began implementing a carbon trading mechanism in the coal-fired power plant (CFPP) sector on Wednesday, February 22, 2023. The Institute for Essential Services Reform (IESR) stated the implementation of carbon trading as a step forward, noting the need for tightening emission caps in the future. In addition, the results of carbon trading can be a source of Non-Tax State Revenue (PNBP), which, if appropriately allocated, can encourage investment in renewable energy and increase energy efficiency.

Carbon trading is finally implemented after being tested in several coal-fired power plants in 2021. The government has also established Technical Approval for Emission Limits (PTBAE) starting from the non-mine mouth (MM)/MM CFPPs with a capacity of 25 MW to 100 MW of 1,297 tons CO2e/MWh, up to Non-MM CFPP with a significant degree of 400 MW is 0.911 tons CO2e/MWh.

“Even though the carbon trading scheme has been implemented appropriately in Indonesia, the ceiling for carbon emissions set by the government is currently still relatively high, and no effort is required for CFPP owners to fulfill it. As an illustration, the intensity of carbon emissions in power plants in neighboring countries is 20% -40% lower than in Indonesia. This opens up opportunities to tighten emission limits for CFPP in the future,” said Executive Director of IESR, Fabby Tumiwa.

IESR believes that determining quota restrictions for CFPP will increase business actors’ awareness of the emissions produced and regulate CFP operations more efficiently.

Furthermore, this carbon trade regulates the replacement or carbon offsets if the generating unit produces emissions exceeding the Technical Agreement for the Upper Emission Limit of Business Actors (PTBAE-PU). This plant must purchase emissions from the PLTU unit that has emissions under PTBAE-PU and or purchase an Emission Reduction Certificate (SPE GRK).

“To increase the integrity of the offset mechanism and the real impact of reducing emissions by using the SPE instrument, the government must ensure normal emission reduction activities that can be traded on the carbon market. It is recommended that SPEs be prioritized from renewable energy generation to align this instrument with energy transition efforts to reach NZE 2060 or earlier. This SPE instrument can be an incentive for businesses and the public to build renewable energy generators,” explained Fabby.

IESR proposes that SPE be carried out to accelerate the installation of rooftop solar PV by consumers. The electricity generated by the rooftop solar PV and exported to the grid can become SPE and be used for carbon offsets. Revenue from SPE sales can increase consumer interest in installing rooftop solar power plants.

The Minister of Energy and Mineral Resources will give a written warning, and the allocation of PTBAE-PU for the subsequent carbon trading is around 75%. This applies to business actors who should refrain from participating in carbon trading by not submitting a plan for monitoring greenhouse gas emissions and revisions to reporting on greenhouse gas emissions.

“The existence of quota restrictions imposed by the government on business actors who violate the rules is a clear form that the government is committed to trading carbon as an instrument to reduce emissions. However, in practice, it requires strict monitoring,” mentioned Farah Vianda, Coordinator of the Sustainable Financing Project, IESR Green Economy.

The government has set the value of PTBAE-PU to 99 units of coal-fired power plants from 42 companies that will become carbon trading participants, with a total installed capacity of 33,569 MW. The price of carbon traded between CFP units in the country is estimated to be from US$ 2 to US$ 18 per ton.

“Ministry of Finance regulations governing carbon prices can be issued immediately to provide certainty for carbon trading activities. It is hoped that the carbon price applied will not be too far from the global average price,” Farah added.

Public oversight of the implementation of carbon trading also needs to be developed. Efforts to include a carbon trading mechanism in stock trading, which the Indonesia Stock Exchange is currently reviewing, will make carbon prices more competitive and promote transparency to attract investors and mainstream sustainable financing principles.***

Power Wheeling Scheme Has Potential Create Renewable Energy Market

Fabby Tumiwa

Jakarta, February 28, 2023 – Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, highlighted the power-wheeling scheme contained in discussions on the New Energy and Renewable Energy Bill (RUU EBET). However, the scheme has been removed from the problem inventory list (DIM) preparation in the New and Renewable Energy Bill (RUU EBET). Power wheeling is a mechanism that allows private companies or independent power producers (IPP) to build power plants and sell electricity to household and industrial customers. Fabby explained power wheeling is needed to align with Indonesia’s efforts to increase renewable energy.

“The Government has set a target of achieving a 23% New Renewable Energy (EBT) mix in 2025, both for electricity and liquid fuels. Then, in 2021, President Jokowi set an NZE target of 2060 or earlier. This target is driving the energy transition to decarbonize the energy sector. As a consequence of this, renewable energy needs to be developed on a large scale,” explain Fabby Tumiwa in the webinar “New Energy and Renewable Energy for the Prosperity of All” organized by the Center of Economic and Law Studies (CELIOS), on Tuesday (28/2/ 2023).

Unfortunately, Fabby mentioned, the growth of renewable energy tends to be slow. This can be seen from the achievement of the new renewable energy (EBT) mix of around 14.11% in 2022. Fabby assesses that it is best when the combination of new and renewable energy in the electricity sector reaches 30%. Achievements in 2022, said Fabby, were only half of the 2025 target that the Government had set.

“Reflecting on these conditions, the gap with the primary renewable energy mix target of 23% in 2025 is widening. Strategic innovation is needed to encourage the implementation of renewable energy. Moreover, Indonesia’s massive renewable energy potential has not been utilized. On the other hand, the cost of generating electricity from renewable energy is very competitive. Eliminating incentives for fossil energy is enough to make renewable energy the cheapest option,” said Fabby.

Along with this, Fabby emphasized that the concept of power wheeling is familiar because previously the Government had regulated it based on the ESDM Ministerial Regulation (Permen) No 1/2015 and ESDM Ministerial Regulation (Permen) No 11/2021. Still, these regulations need to be implemented. Thus, Fabby stated that power wheeling has the potential to create a renewable energy market while maintaining industry/company investment in Indonesia. One of them is the industrial group that joined RE100.

“Power wheeling can encourage renewable energy because it provides incentives from the supply and demand side. However, power wheeling requires further adjustment. Regulatory regulations regulate tariffs for power-wheeling schemes in other countries, at least in their formulation. At the same time, the commercial aspect is taken care of by business-to-business between those who wish to use it and the transmission owner. Not only that, power wheeling needs to be included in the law because the implications of implementing the scheme will involve several ministries/agencies. For that, it’s not enough to get ministerial regulations,” stated Fabby.

Developing Indonesia’s Geothermal Power for Energy Transition

FT

Jakarta, February 24, 2023 – PT Pertamina Geothermal Energy Tbk (PGE) is ready to hold an initial public offering (IPO) worth Rp9.8 trillion on the Indonesia Stock Exchange on Friday (24/2/2023). With these funds, PGE will develop a geothermal power plant (PLTP) with a capacity of 600 megawatts until 2027. Responding to this, the Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, explained two urgencies in the IPO process for PGE shares. First, Indonesia’s target is to develop renewable energy and make an energy transition. Therefore, Indonesia needs to take advantage of all its renewable energy sources. Moreover, Indonesia also needs to gradually reduce the operation of coal-fired power plants until 2050.

“The second urgency is that PGE has a business strategy, and this company will transform from an oil and gas company to an energy company. One of them will be encouraged by the development of renewable energy, such as geothermal,” explained Fabby.

Fabby said that Pertamina has large geothermal reserves, and the quality of the resources is quite good because Pertamina has been exploring since the 1980s. Thus, Fabby assessed that it could not be developed optimally due to several factors. One of the factors is funding. Bearing in mind the development of geothermal resources requires a sizable investment because they have to carry out exploration (drilling) and ascertain what percentage of these reserves can be used for electricity operations.

“In Indonesia, the cost of drilling just one well requires funds of around USD 3-5 million. With a success rate of 30% and when we drill three wells, we can get one well that is successful at generating around 30-50 megawatts (MW) of electricity, and we have to spend USD 15 million for the drilling. It envolves infrastructure and so on. This process takes a long time from drilling to turning it into a power plant,” said Fabby.

Fabby mentioned that Pertamina needs to optimize the potential of existing geothermal reserves. For that, Pertamina needs funds. One way to get these funds is through an IPO of shares. The IPO is the right step for Pertamina’s future development.

“Indonesia has the largest geothermal potential in the world, a total of around 28 gigawatts (GW) or 28 thousand megawatts (MW), of which less than 10% has been utilized until today. If we can develop this, it is hoped that renewable energy will be more competitive, especially electricity from geothermal, which can be cheaper,” stated Fabby.

Indonesia’s Energy Transition from Journalist’s Perspective

Peneliti Senior IESR,

The energy transition towards renewable energy is roaring in the momentum of the G20 2022. It’s because the Indonesian Government places the energy transition as one of the priority issues under its leadership at the G20. Furthermore, its coverage in the mass media, using the keyword “energy transition” on Brandwatch.com, increased from 346 in 2017 to more than 79.000 in 2022.

The Institute for Essential Services Reform (IESR) continually strives to contribute to popularizing the energy transition with various studies and advocacy activities. One of them published its main report, which encourages and measures the energy transition process in Indonesia, entitled Indonesia Energy Transition Outlook (IETO). Published annually since 2017, IETO 2023 is the 6th volume. Previously, this report was titled Indonesia Clean Energy Outlook in 2017 but changed its name to Indonesia Energy Transition Outlook in 2020.

The launch of the IETO was welcomed by various parties, including journalists in the mass media, who have a significant role to play: collecting and distributing the correct information.

Sugiharto, an ANTARA journalist, said that the IETO is a critical report that is getting better from year to year and has become a reference in journalistic writing because it contains various data and information about Indonesia’s energy transition program.

“With the IETO report with complete data, we as journalists quite often use it as a writing reference, especially regarding the diversity of data outside the government,” explained Sugiharto.

On the other hand, Sugiharto assessed that Indonesia’s energy transition development has been moderate. Even though Indonesia has a lot of renewable energy potential, that is exceptionally qualified to meet domestic energy needs. Regulatory and funding barriers are challenges for developing the energy transition in Indonesia that need to be overcome.

“Based on the low renewable energy mix, the government needs to be aggressive in realizing Indonesia’s energy transition ambitions,” said Sugiharto.

Aditya Putra, a journalist for Kompas Daily, explained the IETO, which outlines the challenges of the energy transition in Indonesia and the strategic steps in the future. Moreover, Aditya stated that these topics are interesting to be known by the public.

Researcher on Indonesia Energy Transition Outlook 2023
Researcher on Indonesia Energy Transition Outlook 2023

“The data presented in the IETO can earn attention on energy transition, including those that journalists may have missed or not disclosed regularly to the public by the Government, for example, regarding the declining mix of renewable energy in primary energy. Getting further away from the target that has been set, “explained Aditya.

In this regard, Aditya hopes that the existence of reports such as IETO 2023 can oversee the commitment and implementation of the Government’s energy transition agenda and plans. In line with Aditya, Vindry Florentin, a journalist for Koran Tempo, stated the integration of comprehensive data discussing the energy transition in the IETO report became a reference for the media. Moreover, said Vindry, the data shared by the Government needed to be completed and integrated.

Efri Ritonga, a senior journalist for Koran Tempo, also said that the development of energy transition in Indonesia continues currently, although it is still slow. Moreover, there are some community initiatives to initiate an energy transition. Such as the use of rooftop solar in residential areas, as well as the development of large-scale renewable energy, are still constrained. In addition, using fossil fuels is still dominant because of price, availability, and affordability. Some people are unfamiliar with the issue of the energy transition.

“There are several reasons the issue of the energy transition is not well known in the broad community. First, there is not much information about energy transition practices that people can start themselves with, for example, by using an electric stove, installing a rooftop PLTS, reducing the use of private vehicles made of fossil fuels, or switching to electric vehicles. Second, in terms of practicality and cost. For example, in the transportation sector, the price of electric cars is still prohibitive, and the availability of charging stations is still minimal,” said Efri and Vindry.