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.

Preventing Energy Crisis, Indonesia Needs to Accelerate Renewable Energy Development

Jakarta, 11 October 2021– The energy crisis in Europe is a lesson for many countries, especially Indonesia to maintain their energy security by reducing dependence on the fossil energy market, preparing prudently for the energy transition, and diversifying energy, especially for renewable energy. 

William Derbyshire, Director, Economic Consulting Associates (ECA) UK explained that the UK’s dependence on fossil energy is reflected in its power generation mix which places a share of gas as much as 42%, while for renewable energy it is only dominated by Wind Power Plants (PLTB) with a share of 16 %.

“If high fossil fuel prices are the problem, the answer is to reduce dependency on coal and gas, rather than to add more fossil fuel,” explained William in the online webinar “Energy Crisis in UK and Europe: Lesson learned for Indonesia Energy’s Transition” ( 11/10/2021) organized by Clean, Affordable and Secure Energy for Southeast Asia (CASE).

 

So far, wind power has become the UK’s backbone for generating electricity from renewable energy plants. However, this wind power has high variability even though it can be projected from historical records of wind patterns and speeds at a certain point. But according to Gareth Davies, Managing Director, Aquatera, this variability can be overcome if we can identify new areas with high wind speeds and build new plants there.

“By spreading (wind power) production across the wide geographical area we can help to increase resilience and reduce the dependency and reliance on other sources. So this effectively becomes a balancing mechanism for our energy supply,” said Gareth.

The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, emphasized that the volatility in primary energy prices, such as fossil energy, is a common thread of the widespread fossil energy crisis.

“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 in the price of each fossil energy affects each other,” said Fabby.***

 

The event of  Energy Crisis in UK and Europe: Lesson learned for Indonesia Energy’s Transition could be accessed on YouTube IESR  https://youtu.be/YnRd_GIy0eE.