IETO 2023: Anticipating the Energy Crisis by Utilizing Renewable Energy

Jakarta, 14 December 2022- The global energy crisis shows the vulnerability of fossil-based energy security, including Indonesia, where 67% of the energy mix comes from fossil energy. Facing the uncertainty of social, political, economic and environmental conditions regarding national energy security, the government needs to make a sustainable and just energy transition by optimizing the use of renewable energy sources to replace fossil energy sources. This is the main discussion of the Institute Essential Services Reform (IESR) flagship report entitled Indonesia Energy Transition Outlook (IETO) 2023.

The impact of the energy crisis can be seen in energy prices such as coal, natural gas and crude oil, which have soared 2-4 times in mid-2022 compared to 2019. It has made domestic coal producers more interested in exporting overseas, which has led to a depletion of domestic coal supplies. To overcome the problem of the energy crisis in the short term, the Indonesian government made various decisions such as maintaining the Domestic Market Obligation (DMO) policy, disbursing fossil energy subsidies which reached 650 trillion and adjusting fuel prices to reduce subsidy burdens. However, coal, oil and gas reserves are decreasing every year, and the pressure to overcome the threat of the climate crisis demands a long-term solution so that Indonesia is free from an energy crisis in the future.

“To provide affordable and safe energy, increasing renewable energy for electricity supply, transportation and industry and reducing fossil energy must be accelerated. The energy transition needs to be carried out gradually following social, economic and political conditions that affect policy direction and people’s purchasing power. However, the faster we increase the renewable energy mix, the lower the vulnerability to energy security and the cheaper energy prices in Indonesia will be. It was shown in some IESR study results. The key word is ambitious but also flexible targets,” said Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), at the Media Conference for the launch of IETO 2023.

The condition of European countries and the UK, which are currently experiencing high energy prices, is an example of using transition fuels, such as natural gas, as a wrong strategy. When there is a gas shortage, they temporarily increase fossil energy which denies global efforts to reduce greenhouse gas (GHG) emissions which cause climate change due to rising earth temperatures exceeding 1.5 degrees Celsius.

IESR encourages the government to complete all homework to boost the development of renewable energy and energy efficiency quickly.

“There is still a lot of work to be done to make the energy transition truly happen and sustainable, for instance adjusting National Energy Policy (KEN) and National Energy General Plan (RUEN), phasing out coal and gas subsidies, reforming prices and electricity subsidies, accelerating the termination of coal-fired power plants, developing the domestic solar cell and module industry, adjusting the grid code, as well as integrating transportation and industrial decarbonization strategies according to the zero-emission path. The government must pursue all these reforms quickly, and the community must continue to push for the transition to occur,” explained Fabby.

IETO 2023 also highlights the high level of public awareness of the energy transition. However, in general, energy transition readiness in Indonesia is still low, although several policies, supporting regulations and renewable energy development plans have been issued, such as the enhanced NDC, RUPTL 2021-2030, which contains a 51.6% portion of renewable energy and Presidential Regulation 112/2022 concerning Acceleration Development of Renewable Energy for the Provision of Electric Power.

“Several things still need to be fixed, such as the capacity limit for installing PLTS roofs by 15%, which certainly reduces the public’s interest in utilizing this technology and contributing to the renewable energy mix on a national scale. Based on a public survey that we have conducted, more than 60% of the people we surveyed agree to accelerate the cessation of using coal as the main source in the electricity sector and support the government to start paying attention to other sources such as solar radiation, water and wind. With this huge public support, the government must begin to be able to prove its commitment to providing a cleaner source of electricity for the whole community,” said Handriyanti D Puspitarini, Main Author of IETO 2023 who is also a senior researcher at IESR.

All discussions regarding the status and analysis of the energy sector to accelerate the energy transition are summarized in the Indonesia Energy Transition Outlook (IETO) 2023. Published in 2017 with the Indonesia Clean Energy Outlook (ICEO), which later transformed into the IETO in 2019, the IETO presents several new chapters with analysis depth.

“IETO will consistently highlight, measure and provide recommendations for accelerating Indonesia’s energy transition from year to year. Several reports providing in-depth analysis on specific aspects related to the energy transition such as aspects of energy transition funding, solar energy, and electric vehicles were published in separate reports entitled Indonesia Sustainable Finance Outlook or ISFO, Indonesia Solar Energy Outlook or ISEO, and Indonesia Electric Vehicle Outlook or IEVO, which complements the IETO analysis and recommendations this year,” explained Deon Arinaldo, IESR Energy Transformation Program Manager.

Supported by Bloomberg Philanthropies, IESR will hold discussions and launch the Indonesia Energy Transition Outlook 2023 report on December 15, 2022. The IETO 2023 report can be accessed at s.id/IETO2023-IESR.

Launching of Report and Discussion on Indonesia Energy Transition Outlook 2023: Tracking the Progress of Energy Transition in Indonesia

Background

In 2022, as the COVID-19 pandemic began to subside, the global economy began to return to normal. As a result of increased economic activity, energy demand has returned to growth to pre-pandemic levels. Several extraordinary events also occurred in 2022 that affected the energy commodity market, mainly the war conflict between Russia and Ukraine, which pushed up the prices of all commodities. Indonesia is also a country that feels the impact. The increase in the price of fossil energy commodities has affected the subsidy and compensation budget in 2022, which has increased up to three times and prompted the government to set an increase in fuel prices and basic electricity tariffs for several customer groups.

Indonesia as a country that has ratified the Paris Agreement through Law no 16/2016, has confirmed its position to achieve net zero emission in 2060 or earlier. Furthermore, as the G20 presidency this year, Indonesia has also determined the energy transition as one of the three focuses of the G20 discussion. After going through discussions and various meetings, Indonesia and several donor countries that are members of the International Partner Group agreed on a Just Energy Transition Partnership (JETP) which stated a funding commitment of up to 20 billion dollars in the next 3-5 years to support the energy transition in Indonesia, especially in the electricity sector. As a follow-up, this funding support needs to be put in the form of an investment plan and a policy change plan that needs to be prepared by the Indonesian government.

Apart from the electricity sector, Indonesia’s energy transition also needs to be encouraged and accelerated in various other energy sectors such as transportation and industry. Based on the IESR Deep decarbonization of the energy system study (2021), the electrification of transportation and industry is a key strategy while also encouraging energy efficiency. Several government programs that have been encouraged include setting targets for electric vehicles and their infrastructure as well as the electric motorbike conversion program. In the industrial sector itself, initiatives such as the Net Zero Hub, initiated by the Indonesian Chamber of Commerce and Industry (KADIN) show a similar movement from business and industry players to reduce greenhouse gas emissions and even reach net zero sooner than 2060.

These developments show that Indonesia’s energy transition is entering the take-off phase. The next question is, is the current energy transition process in line with the targets of climate crisis mitigation and sustainable development? If not, what options can Indonesia focus on in accelerating the energy transition soon?

The progress and development of the energy transition in Indonesia are specifically reviewed in one of the flagship IESR reports which are launched at the end of each year: Indonesia Energy Transition Outlook (IETO). The IETO, which has been published since 2017, previously entitled Indonesia Clean Energy Outlook (ICEO) aims to monitor the development and progress of the energy transition in Indonesia as a whole, as well as identify challenges and opportunities in the following year. This report includes an analysis and review of policies, developments in the status of technology, and the energy transition ecosystem.

Over the years, IESR has attempted to increase the scope and rigour of the IESR analysis in this report. The sixth edition of the IETO also collects various perspectives from stakeholders in the energy sector and curates them with in-depth studies to present a strategic analysis of how to transition energy and transform towards a low-carbon energy system in the country. The launch of this year’s IETO was also preceded by several special reports highlighting the energy transition process from the perspective of energy transition finance (Indonesia Sustainable Finance Outlook/ISFO) and also solar energy (Indonesia Solar Energy Outlook/ISEO). A follow-up report that will focus more on the development of electric vehicle implementation, the Indonesia Electric Vehicle Outlook/IEVO will complement this year’s IESR IETO report series.

Through the IETO, IESR intends to inform policymakers and all stakeholders in the energy sector regarding the effectiveness of policies and improvements needed to help accelerate the development and transition of clean energy in the country. By doing this, he hopes, Indonesia can ensure energy security, a competitive economy, and a transition to a sustainable energy system shortly.

IETO 2023 will be launched in a special meeting which is also intended to obtain views/perceptions from policymakers and actors on trends that will occur in the coming year in the energy transition. The discussion at this meeting will highlight the energy transition processes that are occurring in various energy sectors in Indonesia and will be followed by an analysis of the energy transition readiness framework in Indonesia’s electricity sector as well as various lessons learned in 2022 to overcome challenges in driving the energy transition in 2023.

 

Objective

The Indonesia Energy Transition Outlook (IETO) 2023 launch meeting and discussion were held with the aim of:

  1. Inform and introduce the IESR Indonesia Energy Transition Outlook (IETO) flagship report.
  2. Conduct a review and evaluation of the development of the energy transition (fossil energy, renewable energy and energy efficiency) in Indonesia during 2022 in the context of the impact of government policies and regulations issued on relevant stakeholders, as well as a 2023 review.
  3. Review the evaluation and readiness of the energy transition (transition readiness framework) in the Indonesian electricity sector with policymakers and stakeholders
  4. Provide a space for policy dialogue for stakeholders with policymakers and business actors as well as civil society organizations in the process of formulating and implementing a more sustainable energy transition policy.

The Russia-Ukraine Conflict and Its Impact on Indonesia’s Energy Sector

Jakarta, April 14, 2022 – The military conflict involving Russia and Ukraine is still ongoing. A number of direct and indirect impacts have begun to be felt by a number of countries, especially European countries because Russia is one of the main suppliers of gas and oil for a number of European countries.

Russia’s political attitude which continues to carry out military action has put the ‘customers’ of Russian oil and gas in a dilemma. If they continue to buy oil and gas from Russia, they are indirectly contributing to the financing of the war. If they don’t buy the oil and gas, their energy security is threatened. Gas and oil currently available have also increased in price, which means higher costs.

Will the Russia-Ukraine war situation have an impact on Indonesia? The Clean, Affordable, and Secure Energy for Southeast Asia (CASE) project held a public discussion entitled “The Geopolitics of Energy Transition” to examine the impact of the Russia-Ukraine war on the global energy system and lessons learned for Indonesia’s energy transition.

Fabian Hein, analyst of energy statistics and scenarios, Agora Energiewende explained that currently European Union countries such as Germany, are trying to reduce dependency on fossil energy, especially gas.

“There are two approaches to dealing with this crisis. The first is a short-term approach by replacing gas with coal and oil. Second is a long-term strategic plan by increasing the capacity of renewable energy in the energy system,” Fabian explained.

Dependence on fossil energy does not only occur in Germany, or the European Union countries. Indonesia also has a large dependence on fossil energy for both electricity generation and fuel for the transportation sector.

Widhyawan Prawiraatmadja, a lecturer at SBM ITB, warned Indonesia to be careful in viewing and responding to this geopolitical issue.

“The issue of the current energy crisis is not only an imbalance between supply-demand, but there are other factors, namely war, so that energy commodity prices fluctuate and in the Indonesian context the government is in a difficult choice between providing more subsidies or increasing energy prices such as fuel,” Widhyawan explained. .

The choice of the Indonesian government to maintain the share of fossil energy and even provide subsidies through various policies is increasingly irrelevant in these times. The Executive Director of the Institute for Essential Services Reform, Fabby Tumiwa, stated that the lesson that can be drawn from the impact of the Russia-Ukraine conflict mainly on European countries is that dependence on one commodity is a threat to the energy security of a region.

“The IEA also criticized that European countries failed to implement the first principle of energy security, namely supply variation. Apart from depending on one type of commodity, Europe is also very dependent on one country as a supplier, this is vulnerable to the security of energy supply there,” he said.

Fabby continued, that the Russia-Ukraine conflict had a significant global impact on energy development. Renewable energy is more resilient in terms of price and supply due to its local nature. So developing renewable energy in Indonesia is increasingly becoming a necessity in the future to ensure energy security.

Energy Crisis Or Fossil Energy Crisis?

Jakarta, October 11, 2021 – In recent months, many media have reported on the energy crisis in Europe. In the UK, for example, many electric and gas utility companies went bankrupt and were forced to close. People are also seen queuing at gas stations to buy fuel. This phenomenon shows us that even countries with strong economies are still quite vulnerable to energy security issues.

CASE for Southeast Asia Project held a discussion entitled “Energy Crisis in UK and Europe: Lessons Learned for Indonesia’s Energy Transition” which invited speakers from the UK and Europe (11/10/2021). In this discussion, the public in Indonesia is involved in the discussion to find out various important facts and findings related to the issue of the energy crisis that is currently happening in the UK and Europe.

In the UK the, industrial and household sectors are quite dependent on natural gas. With the winter season is approaching, the demand for gas is increasing as the need to warm homes also increases. This condition, when a country relies heavily on energy sources that are vulnerable to global markets, does raise a question: is this really an energy crisis, or is it a fossil energy crisis?

William Derbyshire, Director of Economic Consulting Associates (ECA), UK, on this occasion gave an explanation regarding the fact that the primary energy mix in the UK relies on natural gas as much as 42%. Furthermore, William also showed data that illustrates that since 2017, the price of natural gas has gradually increased until 2021, which has resulted in an increase in the selling price of electricity.

“If high fossil fuel prices are the problem, then the answer is reducing dependence on coal and gas, not adding more fossil fuels,” William said.

Based on this conclusion, renewable energy is a good solution to reduce dependence on fossil energy. But not without challenges, the UK, which has 16% of wind power plants in its power generation mix, has several important points to note. For example, Gareth Davies, Managing Director of Aquatera explained that wind farms in the UK have a fairly high variability scale.

Responding to this challenge, Gareth conveyed the need to conduct spatial analysis and planning related to areas that have sufficient wind gust potential, also taking into account the historical climate data.

“By distributing wind power production over a wider geographic area, it will help improve energy security and balance the UK’s energy supply through renewable energy,” said Gareth.

In line with William’s statement regarding the importance of making an immediate energy transition, Dimitri Pescia, Program Manager Southeast Asia of Agora Energiewende explained the fact, for example, in Germany, the investment cost to build renewable energy power plants is much cheaper than to build fossil power plants. In this context, Dimitri explained that investment in renewable energy can be considered as a hedging strategy to minimize the risk of using fossil energy in the energy transition period over the next few years.

From this discussion, the public is being helped to understand the real situation and the lessons that can be drawn for the energy transition process in Indonesia. Fabby Tumiwa, Executive Director of IESR said that Indonesia needs to quickly adopt the use of renewable energy to minimize the risk of an energy crisis due to dependency on fossil energy. Fabby added that the development of these abundant potentials of renewable energy in Indonesia needs to be accompanied by energy efficiency, development of energy storage technology, as well as inter-island interconnectivity.

“It should be remembered that the current energy crisis is a fossil energy crisis. The volatility of fossil energy prices is very high. The increase of fossil energy prices will have an effect on other aspects,” said Fabby, emphasizing the real cause of the energy crisis in the UK and Europe.

Closing this discussion, Fabby expresses the urgency for the public to know this issue contextually so that there would be no panic in the community. “Indonesia itself does not need to worry about energy crises that occur in Europe, China, Britain, India, because Indonesia has the advantage of a better energy transition planning towards decarbonization way earlier,” concluded Fabby.

Watch again the discussion here: