Indonesia Energy Transition Outlook 2024: Tracking Progress of Energy Transition in Indonesia: The Trend and Transformation in Achieving Indonesia Net Zero Ambition

Background

In 2023, through the presidential decree lifting the COVID-19 pandemic situation, it became a stimulus for economic recovery and national development to accelerate. Until the second quarter of 2023, economic growth in Indonesia was recorded at 5.17% (yoy) and showed economic strengthening in several regions in Indonesia. Meanwhile, Indonesia is projected to experience a population increase of 0.9% by 2023. This will certainly boost the level of domestic energy demand. On the other hand, external factors of energy security are caused by conflicts in Russia and Ukraine and the stability of the Middle East region, which will be able to affect the world energy commodity market. Indonesia is also a country that feels the impact.

Indonesia, as a country that has ratified the Paris Agreement through Law No. 16/2016, has emphasized its position to achieve net zero emissions by 2060 or earlier. This commitment is emphasized by increasing the national contribution target, or Enhance-NDC, by 31.89% with its own efforts and 43.20% with international assistance. In line with this, through the Just Energy Transition Partnership (JETP) commitment between the Government of Indonesia and donor countries that are members of the International Partner Group, Indonesia targets to achieve 44% of the renewable energy mix by 2030 and retire 1.7 GW of power plants from the operation of power plants in the network. However, the JETP target is considered less ambitious for efforts to achieve the target of controlling temperature rise by 1.5 oC. This is because it does not include the intervention of captive PLTU, which has a large role in contributing emissions in Indonesia.

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. On the demand side of national energy needs, the industrial sector is recorded to have a demand of 44.21% in 2022, of which 56.5% is met by coal. This condition is influenced by government policy through the Domestic Market Obligation (DMO) regulation. This policy can support the development of domestic industries that use national natural resources, but on the other hand, the use of coal in the industrial sector also increases greenhouse gas emissions. So it is necessary to control emissions and innovate in energy transformation in the industrial sector. Some large industries that need attention are the cement, iron and steel, and ammonia industries. In the transportation sector, through Ministerial Decree No. 8 of 2023, 38 mitigation action steps have been established that focus on the electrification of land vehicles, including motorcycles, cars, and public vehicles, as well as the use of low-carbon fuels in sea and air transportation.

These developments show that Indonesia’s energy transition is entering the take-off phase. The question is, is the current energy transition process in line with Indonesia’s climate crisis mitigation and sustainable development ambitions? If not, what options can Indonesia focus on to accelerate the energy transition in the near future?

The progress and development of energy transition in Indonesia are specifically reviewed in one of IESR’s flagship reports launched at the end of each year: the Indonesia Energy Transition Outlook (IETO). Published since 2017, the IETO, previously titled Indonesia Clean Energy Outlook (ICEO), aims to regularly monitor the development and progress of Indonesia’s energy transition and identify challenges and opportunities for the following year. The report covers policy analysis and review, technology status updates, and the energy transition ecosystem.

Over the years, IESR has worked to improve the coverage and rigor of its analysis in this report. The sixth edition of the IETO also gathers various perspectives from stakeholders in the energy sector and addresses them with in-depth studies to deliver strategic analysis on the energy transition and transformation to a low-carbon energy system in the country.

Through the IETO, the IESR intends to inform policymakers and all stakeholders in the energy sector on the effectiveness of policies and improvements needed to help accelerate the development and transition of clean energy in the country. By doing so, it is hoped that Indonesia can ensure energy security, a competitive economy, and transition to a sustainable energy system in the near future.

IETO 2024 will be launched in a special meeting to get views and perceptions from policymakers and actors on the upcoming trends in the energy transition. Discussions in this meeting will highlight the energy transition processes taking place in various energy sectors in Indonesia and be followed by an analysis of the energy transition readiness framework in Indonesia’s electricity sector, as well as lessons learned in 2023 to address challenges in driving the energy transition in 2024.

Objective

The Indonesia Energy Transition Outlook (IETO) 2024 launch meeting and discussion was organized with the following objectives:

  1. Inform and introduce the IESR flagship report, Indonesia Energy Transition Outlook (IETO).
  2. Review and evaluate the development of the energy transition (fossil energy, renewable energy, and energy efficiency) in Indonesia during 2023 in the context of the impact of government policies and regulations issued to relevant stakeholders, as well as the review in 2024.
  3. Review the evaluation and transition readiness framework for Indonesia’s electricity sector with policymakers and stakeholders.
  4. Provide a policy dialogue space for stakeholders, including policymakers and businesses, as well as civil society organizations, in the process of formulating and implementing more sustainable energy transition policies.

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.

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.