Carefully Designing Indonesia’s Energy Policy Framework

Jakarta, March 28, 2024 – The National Energy Council (DEN) plans to adjust the renewable energy mix target. Currently in the draft Government Regulation on National Energy Policy (RPP KEN), DEN plans to reduce the national renewable energy mix target to 17-19 percent by 2025. Previously, the renewable energy mix target was 23 percent by 2025.

The Institute for Essential Services Reform (IESR) considers this a step back from the Indonesian government’s commitment to overseeing the energy transition.

Raditya Wiranegara, IESR Research Manager, in a hearing with the National Energy Board expressed his concern behind the setting of the renewable energy mix target.

“IESR has previously conducted modeling that has been published in our annual report, Indonesia Energy Transition Outlook (IETO). Our modeling results show differences with the modeling results that form the basis for the formulation of the KEN RPP. This is especially evident in the final energy growth, where in the modeling for IETO we used Bappenas’ GDP growth assumption for Indonesia Emas 2045,” Radit said.

This was clarified by Retno Gumilang Dewi, ITB’s modeling team, who assisted DEN in the modeling, that the figures currently circulating are adjusted figures.

“The model we produced can be said to be an ideal model. The modeling was then brought for FGD (focused group discussion) and received various inputs, so it was adjusted,” said Retno Gumilang.

Fabby Tumiwa, Executive Director of IESR on the same occasion said that in preparing a country’s energy planning, it is important to ensure the choice of technology that is most relevant and tested with the latest technological developments.

“This step is important and crucial to avoid being locked-in by high-carbon technologies,” Fabby said.

Fabby added that if we are already trapped in the choice of high-carbon technology, it will require even greater investment to get out of the high-carbon technology. IESR also encourages the achievement of renewable energy targets that have been set in the RUPTL and national strategic projects as a driver of the growth of the domestic renewable energy industry.

Encouraging Industrial Decarbonization Starting from Consumer Lifestyle

Jakarta, 22 March 2024 – The increase of the earth’s temperature is an inevitable phenomenon as a result of various natural events and human activities and lifestyles which produce greenhouse gas (GHG) emissions as the cause of the rise in the earth’s temperature.

The invention of the steam engine in 1880 made monumental changes to human life with the beginning of industrialization. The development of industry has been accompanied by increasing greenhouse gas (GHG) emissions.

The Intergovernmental Panel on Climate Change (IPCC) in 2022 recorded an increase in earth temperature of 1.1 degrees Celsius. This is a warning for humanity to immediately take steps to control temperature rise to prevent the temperature increase from reaching no more than 1.5 degrees Celsius.

Faricha Hidayati, Coordinator of the Industrial Decarbonization Project, Institute for Essential Services Reform (IESR) explained that rising earth temperatures could trigger hydrometeorological disasters, one of which will be at an increasingly high frequency.

“Apart from environmental problems, another side impact is health costs which will rise along with the increase in disease, especially those that attack vulnerable groups such as the elderly, children and poor households,” explained Faricha.

Even though it is one of the sectors causing increased GHG emissions, the industrial sector has a significant economic contribution. So strategic steps and efforts are needed to decarbonize the industrial sector.

In 2021, industrial sector emissions will be the second largest emitting sector after electricity generation. If we continue to use the business as usual scheme without any intervention, the value of emissions in the industrial sector will double by 2050.

“The industrial sector contributes to emissions of more than 300 million tons of CO2 in 2021, with the highest source of emissions from the use of fossil fuels as an energy source,” added Faricha.

Even though there are regulations that encourage industry to practice sustainable principles, their implementation is not yet mandatory. Even for industries that independently have the initiative to implement sustainable principles, there is no incentive system for them.

Faricha continued, apart from through policy advocacy to the government, consumers can contribute, one of the ways is by choosing products that are produced with sustainable principles. Consumers can also demand that producers or industries start implementing sustainable principles in their production processes.

Embarking on the Decarbonization Journey of the Steel Industry

Jakarta, 20 March 2024 – The industrial sector is one of the important sectors for reducing emissions. The large energy consumption and its significant contribution to the economy in 2022 amounting to 16.48 percent of Gross Domestic Product (GDP), are strong reasons to make this sector more sustainable. Industries with high energy needs, such as the iron and steel industry, require strategic preparation to carry out decarbonization.

Indonesia is one of the largest steel producing countries in Southeast Asia, and ranks number 15 steel producers in the world. In 2023, Indonesia’s steel production capacity will reach 16 million tonnes and is estimated to reach 33-35 million tonnes in 2030.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), in the webinar “Accelerating the Transformation of the Steel Industry in Southeast Asia: Indonesia Chapter” stated that Indonesian steel production still has high emissions.

“Indonesia’s projected steel demand is predicted to increase. If we don’t take serious decarbonization steps, emissions from the steel industry will also continue to increase,” said Fabby.

We also face international market demands to produce lower carbon steel. For example, the European Union has implemented the Carbon Border Adjustment Mechanism (CBAM), which, effective in 2026, will have a negative effect on the exports of the Indonesian steel industry. For this reason, the steel industry needs to undergo transformation.

Farid Wijaya, Senior Analyst at IESR, explained that decarbonization for the steel industry will bring prospects for economic growth, although currently there are still quite a lot of challenges.

“Green industrial standards can be one way to encourage environmentally friendly industries. Green standards for steel have only recently been established and are still limited to sheet steel per layer. “Currently there is no steel industry that has received a green certificate due to implementation limitations,” said Farid.

Kajol, Program Manager for Climate Neutral Industry Southeast Asia, Agora Industry, added that currently almost 80% of steel production is carried out through blast furnace technology.

“We have to start thinking about better and modern technology to replace blast furnaces. “When the blast furnace facilities currently operating start to become less efficient in 2030-2040, we must replace them with more modern technology and no longer invest in blast furnaces,” she explained.

One of the technologies Kajol refers to is Direct Reduced Iron (DRI) which can produce primary steel using natural gas or clean hydrogen. Iron ore is reduced to produce DRI, which can then be melted in an electric arc furnace (EAF) to produce primary steel.

Viable strategies for decarbonizing the steel industry include direct and indirect use of renewable energy, resource efficiency and circular economy, and closing the carbon cycle.

Helenna Ariesty, Sustainability Manager of PT Gunung Raja Paksi (GRP) as an industry player emphasized the importance of regulatory certainty in encouraging industrial decarbonization.

“We face several challenges to navigate the inconsistent policy direction. Apart from that, access to funding is affordable considering the initial investment required is significant,” Helenna said.

Joseph Cordonnier, Industrial Policy Analyst, OECD agrees that policy and access to funding will be key framework components for building a supporting ecosystem for industrial decarbonization.

“As part of this framework we also have to really look at how to maximize the utilization of existing assets based on engineering variables, energy efficiency and emission reduction of these assets,” said Joseph.

Fausan Arif Darmaji, Infrastructure Development Analyst, Green Industry Center, Ministry of Industry said the government is aware of the need to reduce emissions from Indonesian steel production.

“The steel sector is also our current focus. “While we are waiting for the policy regulations that are currently being made, we are providing training on GHG calculations for the steel sector, as well as calculating the economic value of carbon,” said Fausan.

Deon Arinaldo, IESR Energy Transformation Program Manager closed this webinar by underlining the need for industrial decarbonization as an effort to remain relevant to the demands of industrial development.

“Currently decarbonization in the industrial sector is still considered a challenge. Not only in Indonesia, but also a global phenomenon. “We must anticipate this trend because decarbonization is inevitable,” said Deon.

Small and Medium Enterprises (SME) Emissions are not Small

Dekarbonisasi emisi UKM

Jakarta, 14 March 2024 – The industrial sector has become the backbone of the Indonesian economy. Not only large industries, Small and Medium Enterprises (SMEs) are also the driving force of the national economy, including creating employment opportunities and contributing 60.5% to GDP.

However, this economic contribution figure is also accompanied by large, haunting emissions. Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform, in his opening remarks for the Webinar on Decarbonization Opportunities for Small and Medium Enterprises in Indonesia and Learning from Global Experience, said that currently emissions from the SME industrial sector in 2023 are 216 million tons of CO2e.

“This figure is equivalent to one third of national industrial sector emissions. So, we need to seriously strive to decarbonize the SMEs industry because by prioritizing the sustainability aspect, SMEs will level up,” said Fabby.

As much as 95% of the SME sector’s emissions come from burning fossil fuels, the remaining 5% from burning waste. Large economic contributions need to be anticipated as a result of emissions output. If significant steps are not taken to reduce SME sector emissions, there is a possibility that SME emissions will increase in the future.

Abyan Hilmy Yafi, IESR Energy Data Analyst, explained in a survey carried out by IESR on 1000 SMEs throughout Indonesia that to start decarbonizing the SME industry there are several approaches from increasing understanding to technical solutions such as switching technology.

“For cross-sectors, there is a need to increase the understanding of SMEs about energy consumption and the emissions they emit. Active outreach is also needed to promote renewable energy. By sectoral approach, there are several technical recommendations such as the use of electric boilers in the textile and apparel industry,” he explained.

Bo Shen, Energy Environmental Policy Research, LBNL explained that globally, challenges to decarbonizing the SME industry include gaps in the knowledge of SME owners or managers regarding emissions, energy, or furthermore climate change and its relevance to their business.

“When SMEs already have sufficient knowledge and awareness to carry out decarbonization or reduce emissions from their business, finance becomes the next obstacle. The current upfront costs for, for example, looking for technology vendors or energy service providers (Energy Service Company – ESCO), are still quite high for the financial scale of SMEs,” explained Bo Shen.

Each country will use a different approach to encourage the decarbonization of their SMEs. In the United States, for example, governments are collaborating with universities to build industrial assessment centers.

“Apart from being useful for decarbonizing the SMEs industry, this approach also prepares skilled workers who have direct training opportunities in the SME industry,” explained Bo Shen.

Bo also added an interesting case from China which formed an initiative called Green Growth Together (GGT). This initiative encourages decarbonization of SMEs that are part of established product supply chains.

The established brands they supply require their entire supply chain network to implement emission reduction or decarbonization practices. This demand also comes with required financial assistance or technical assistance.

Ahmad Taufik from the Green Industry Center of the Ministry of Industry (Kemenperin) stated that Indonesian is currently experiencing challenges in the industrial sector. The contribution of the industrial sector to GDP continues to decline.

“Structurally, we are still continuing to improve various things, from industrial development, SME development, to ensuring the availability of environmentally friendly jobs (green jobs) and professional staff (green professionals),” said Taufik.

Encouraging the Energy Transition in the Industrial Sector in South Sumatra

Jelajah Energi Sumatera Selatan

Palembang, 26 February 2024 – Energy is a basic need for individuals and communities with various purposes. Even though energy is something crucial in human life, not many people know or are critical of the energy sources (such as electricity) that they use every day.

On a larger scale such as the industrial sector, energy needs will be directly proportional to the productivity and economic contribution of the products produced. Somewhat different from energy use on a household scale, energy use in the industrial sector is relatively well monitored. In terms of awareness of energy sources, industry tends to better understand the energy sources they choose.

In an effort to promote the use of renewable energy, the Institute for Essential Services Reform (IESR) collaborates with the South Sumatra Province Energy and Mineral Resources Office to organize the South Sumatra Energy Exploration (Jelajah Energi Sumatera Selatan) activity for one week starting from Monday, February 26th, 2024 to Friday March 1st, 2024. This activity also embraces journalists as strategic partners in increasing public literacy regarding the energy transition.

The series of events began with an introductory workshop to provide participants with a basic understanding of energy and the energy landscape of South Sumatra, which acts as an “energy barn”. However, the dominant energy used is fossil energy i.e coal. Meanwhile, apart from fossil energy sources, South Sumatra Province also has a technical potential for renewable energy reaching 21,032 MW, yet only around 4.7% or 989 MW has been utilized.

Rizqi M. Prasetyo, IESR Sub-National Project Coordinator, explained that with the renewable energy potential of South Sumatra, projects can be utilized to bring benefits to the community.

“One of the (good practices, ed) that has been carried out in South Sumatra is the CSR initiative to use solar PV to drive land irrigation water pumps,” said Risky.

Secretary of the South Sumatra Province ESDM Service, Ahmad Gufran, said that his party was open to various ideas for greater use of renewable energy.

“We will continue to contribute to the development of the renewable energy sector to obtain clean, environmentally friendly energy. In the future, we hope that the use of clean energy can expand to all levels of society,” said Ahmad Gufan.

After receiving a general introductory workshop, the Energy Exploration journey began by visiting PT Pupuk Sriwidjaja (PUSRI). PT PUSRI is the first fertilizer producer in Indonesia and has been operating since the 1970s. Considering that the company’s operational period is quite long, production assets have also entered a period of revitalization. This moment is also used to switch to a cleaner type of technology for future operational periods.

VP of Environment at PUSRI Palembang, Yusuf Riza, explained that in an effort to be in line with the government’s agenda to reduce greenhouse gas (GHG) emissions, PT PUSRI is taking a number of steps, including implementing energy efficiency practices, using electric vehicles as operational vehicles in factory environments, and installing on-grid rooftop PV for office operations.

“Currently we have installed a rooftop PV of 110 kWp as an energy source in office buildings, and this year (2024, ed) we plan to increase our (PV) capacity by 100 kWp. So in total we will have around 210 kWp PV capacity,” said Yusuf.

Communities Build Sustainability-Based Businesses

Cirebon, 26 January 2024 – On the fourth day, the West Java Energy Exploration team continued their journey to Cirebon. Precisely in South Kesunean, Kasepuhan Village, Lemahwungkuk District. There, the group moved towards the shoreline to plant mangroves. South Kesunean has one problem, namely the emerging soil phenomenon. This raised land appears due to the accumulation of rubbish on the shoreline which is compacted to form new land.

This habit of residents threatens a mangrove ecosystem which functions to resist sea abrasion. For approximately one year, a group of Kesunean residents took the initiative to form a Working Group (Pokja) to care for the mangrove area located in their area.

The West Java Energy Exploration group visited the Kesunean mangrove area to participate in planting mangroves as an effort to restore mangrove forests.

Pepep Nurhadi, Chair of RW 09 South Kesunean, as well as chair of the South Kesunean Mangrove Working Group (Pokja), said that the presence of mangroves in South Kesunean plays an important role in preventing flooding and abrasion as well as protecting coastal ecosystems.

“For this reason, we thank all parties who have supported us in this mangrove planting effort. “We hope that in the future our area can become an ecotourism area so that it can be more beneficial for local residents,” he said.

 

Karya Nugraha Jaya Cooperative Pioneers Sustainable Dairy Farm:

People and communities continue to look for ways to use renewable energy technology. In the landscape of micro businesses and cooperatives, community groups such as the Karya Nugraha Jaya Producers Cooperative strive to ensure that livestock operational processes can be clean and sustainable.

The Karya Nugraha Jaya Cooperative is a dairy farming cooperative located in Cipari Village, Cigugur District, Kuningan Regency, West Java, founded in 2004 and has around 4000 cows with a cooperative membership of 100 farmers. This cooperative is motivated to organize clean and sustainable livestock farming.

Iding Karnadi, Chairman of the Karya Nugraha Jaya Cooperative, said that the first thing that was initiated was the installation of a biogas reactor to process cow dung waste.

“Initially, dairy cow dung was an environmental problem, apart from being dirty, it also smelled bad. Finally, we collaborated with ITB to create this biogas installation,” he said.

The biogas installation was finally installed with a production capacity of 100 m3 of gas per day. The gas produced is used for electricity needs for water heating on farms. It doesn’t stop there, the Karya Nugraha Jaya Cooperative also installed hybrid solar panel installations on farms and feed factories amounting to 56 kWp.

“For the feed factory, we currently fully use electricity from PLTS amounting to 40 kWp, no longer using electricity from PLN,” said Iding.

Iding then continued that his party continues to look at other opportunities to make its livestock cooperatives more advanced and adopt more sustainable practices. Currently, the party is collaborating with ITB to treat livestock wastewater. In the future, the management of this cooperative hopes that the location of this cooperative will become an educational tourist attraction about Sustainable Dairy Farms.

IETO 2024: Reviewing Progress in the Energy Transition in Indonesia

Jakarta, 15 December 2023 – In the last three years, there has been a number of advances in the energy transition in Indonesia. Since 2020, the Indonesian government has begun to include the energy transition agenda in the government’s agenda.

At the launch of the annual flagship report Indonesia Energy Transition Outlook 2024, Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) emphasized that this progress is important.

“In the last 3 years, Indonesia has attempted to consolidate renewable energy incentive policies. The results are not yet widely visible, but the energy transition issue is increasingly being discussed, has become an important issue, and is on the government agenda. The next stage, with a consolidated policy, Indonesia’s energy transition steps can be faster.”

Fabby added that in compiling the IETO 2024 report, the IESR team used four frameworks to analyze the development of the energy transition in Indonesia including (1) policy and regulatory framework, (2) funding and investment support, (3) implementation of technology, and (4) social impact and public support.

On the same occasion, Dadan Kusdiana, Secretary General of the Ministry of Energy and Mineral Resources (MEMR), stated that the consolidation carried out by the government at this time was not only carried out from a regulatory perspective, but was also carried out from a techno-economic one.

“In our opinion, one of the keys to the success of NZE (net zero emissions) in the power generation sector is the existence of a super grid that connects the islands in Indonesia,” said Dadan.

Indonesia’s decarbonization achievements during 2023 are considered less than encouraging, where in this one year the addition of renewable energy capacity only increased by around 1 GW, far from the 2021-2030 RUPTL target which set 3.4 GW target in the same period.

Alvin Sisdwinugraha, IESR Electricity Sector Analyst, said that Indonesia needs to immediately improve to pursue its decarbonization target, especially in developing renewable energy projects.

“The government can implement a number of strategies including reviewing the project preparation phase, increasing project attractiveness, improving the domestic renewable energy supply chain, and immediately improving electricity network infrastructure,” he said

Alvin also highlighted the biomass development strategy, which is closely related to the availability of land for the feedstock. Considering the limited availability of land, he said. It would be good if the use of biomass is focused on hard-to-abate sectors.

Apart from the electricity sector, other sectors that consume energy are industry and buildings. The industrial sector is the trigger for a significant increase in energy consumption in Indonesia, or around 81%. In 2022, there will be the addition of 5 commercial smelter units, which could have an impact on the potential to double energy consumption by 2023.

Fathin Sabbiha Wismadi, Energy Efficiency Analyst in Buildings, IESR, said that the existence of binding regulations would be an acceleration of energy efficiency.

“We have 6 things that can contribute to reducing energy intensity in Indonesia, first, electrification. Second, energy efficiency, third, regulations regarding energy consumption and energy efficiency, fourth, ecosystem and infrastructure such as charging locations, fifth, incentives and sixth, increase awareness of the Indonesian people,” said Fathin.

From the supply side, at the sub-national level, a number of provinces in Indonesia have completed General Regional Energy Plans (RUED). Anindita Hapsari, Agricultural Analyst, Forestry, Land Use and Climate Change IESR highlights the need for assistance in each region in accelerating the adoption of renewable energy.

“The capabilities of each region are different, requiring assistance in the form of regulations and schemes, both financial and non-financial,” said Anin.

Availability of financing is one of the issues that hinders the acceleration of renewable energy. One reason is that the perception of renewable energy investment is still relatively low. Martha Jessica, IESR Socioeconomic Analyst conveyed that investment in renewable energy generation is still considered a high-risk investment.

“The realization of investment in renewables is also still low. The trend is very far from ideal, in which this year and last year did not reach the target, namely the investment target of USD 1.8 billion in 2023, but last semester only around 30% was achieved,” she said.

The electricity sector is the leading sector in Indonesia’s decarbonization agenda, because it already has a decarbonization roadmap. However, targets in the electricity sector are still not easy to achieve.

His Muhammad Bintang, Energy Storage and Battery Technology Analyst, IESR, said there are at least three things that need to be encouraged to ensure the electricity sector decarbonization target is achieved.

“First, we need to build a clean energy ecosystem, secondly physical and non-physical infrastructure, and prioritize interventions that have been proved,” he said.