Report Launching and Discussion : 1.5°C-aligned coal power transition pathways in Indonesia: additional strategies beyond the Comprehensive Investment and Policy Plan (CIPP)

Background

Indonesia has ratified the Paris Agreement through Law no 16/2016. As a result, Indonesia is legally bound to contribute to the global struggle to mitigate the climate crisis through ambitious efforts and action in reducing Greenhouse Gas (GHG) emissions and limiting the increase of the average global temperature below 1.5 0C. In one of the IPCC climate model results of a 1.5 0C compatible pathway, the global Greenhouse Gas (GHG) emission must decrease by 45% in 2030 compared to 2010 and reach net zero emission by 2050. As of now, Indonesia is among the top 10 greenhouse gas (GHG) emitters and is still projected to increase its emissions, with the energy sector as the highest GHG contributor by 2030.

In November 2023, the Government of Indonesia published the first version of the Comprehensive Investment and Policy Plan (CIPP), outlining the country’s power sector emissions reduction roadmap and strategies. While the plan was expected to detail how the emissions reduction and renewable targets envisioned by the JETP will be delivered with investment and policies, we find that critical elements of a successful coal power transition are absent from the current version. 

According to the CIPP report, the investment required to achieve the 2030 targets proposed in the plan is estimated at 97 US$ billion.8 These resources will cover over 400 priority projects22, including grid development, phase-out of coal power plants, and the deployment of renewable energy. Overall, 50% of the resources are allocated for investment in dispatchable clean technologies such as geothermal and hydropower, while 26% is designated for variable renewable plants, and 20% for transmission infrastructure. The early retirement of coal plants represents just 2% of the entire plan8.

Join the Institute for Essential Services Reform (IESR) and the Center for Global Sustainability (CGS) at the University of Maryland on (insert date) to learn about new research into achieving a successful coal power transition in Indonesia. This event will launch two new reports, followed by a discussion session to disseminate key findings and recommendations to Indonesian stakeholders.

  1. To address the gaps in investment and subsequent resources, IESR and CGS assessed existing and pipeline coal power plants to determine retirement priority using a muti-criteria framework under a 1.5 0C compatible emission pathway for Indonesia. The research develops a comprehensive, high-ambition pathway for Indonesia’s coal power transition by combining a global integrated assessment model (GCAM), a power system dispatch model (PLEXOS), and bottom-up analyses. It expands the existing version of the CIPP in several dimensions, including (1) assessing the pathway that is 1.5°C aligned through 2050, (2) covering both on-grid plants and off-grid captive plants, (3) exploring a larger set of transition options for different coal plants, and (4) conducting plant-by-plant assessments to better understand the technical and economic suitability for individual plants, using the best available data. Further analysis is done to determine the costs and benefits of the early coal retirement scenario from economic, social, and environmental aspects, for a wider set of stakeholders. 
  2. The Center for Global Sustainability’s new report and database, the first of its kind on industrial parks, which is a pivotal element of the broader CIPP initiative aimed at bolstering regional economies. This launch highlights the importance of enhanced data availability, essential for understanding demand and making informed decisions about captive coal development. It also emphasizes the need to balance environmental objectives with economic growth and explores the potential for developing renewable energy sources within industrial estates.

Objective

The objectives of these seminars and workshops are:

  1. Disseminate the IESR-UMD study on transition strategies and 1.5°C -aligned pathway for on grid and captive power plants
  2. Discuss and identify aspects to consider for Indonesia to implement its coal-to-renewables strategy.
  3. Identify and propose a holistic framework for Indonesia beyond JETP CIPP to assess its transition strategies and 1.5°C -aligned pathway

Workshop and Capacity Building for Media Phase 1

Background

Indonesia, the world’s largest archipelago, is faced with two major crises: climate change and the energy crisis. The impact of climate change is increasingly felt with the increasing frequency of natural disasters, such as floods, landslides and droughts. On the other hand, the energy crisis is characterized by a high dependence on fossil fuels that are depleting and not environmentally friendly.

An energy transition towards renewable energy or clean energy is the solution to overcome both crises. Renewable energy such as solar, wind and water have great potential to meet Indonesia’s energy needs, while reducing greenhouse gas emissions and the impacts of climate change.

Civil Society Organizations (CSOs) and the media have an important role in encouraging the government to achieve clean energy targets in Indonesia. CSOs can act as agents of advocacy, education, and community mobilization to support clean energy. Although CSOs have an important role, there are still capacity gaps in understanding and communicating energy transition issues. Meanwhile, mass media can act as agents of education and persuasion to support clean energy. Although the mass media has an important role, there is still a capacity gap in understanding and communicating energy transition issues, especially in local mass media. This is due to the complexity of energy transition issues that require in-depth knowledge and understanding. Moreover, there are many differences of opinion and challenges on new renewable energy (NRE) as a solution for clean energy sources in the future.

To achieve the impact of CSO pressure on government policies in line with the Net Zero Emission (NZE) target in 2060 or sooner, it is important to increase CSO capacity so that advocacy and information dissemination are more targeted. To that end, IESR created a capacity building program designed to increase the capacity of CSOs in understanding and communicating energy transition issues in Indonesia.

The capacity building program is expected to benefit CSOs in improving their ability to promote energy transition through advocacy, education, and community mobilization. This capacity building program is an important step to improve the capacity of CSOs in supporting the energy transition in Indonesia. By increasing the capacity of CSOs, it is expected that the energy transition in Indonesia can be implemented more effectively and sustainably.

Prior to the capacity building program, IESR has conducted an in-depth analysis of the condition of mass media coverage in Indonesia and conducted mass media mapping. These results were used to create a capacity building concept that adapts to the needs. Needs that IESR considers important enough to be followed up will be selected as the basis for the capacity building concept.

The capacity building program will be held in two phases in 2024. In the workshop that will be held at the end of May 2024 (stage 1), climate change, the introduction of energy transition, and also the energy transition roadmap in Indonesia will be presented. Regarding climate change, it will be presented how the condition of Indonesia with current government policies will impact the NZE target. It will also explain how Indonesia’s environmental conditions and the effect of carbon emissions on climate change are occurring. The introduction to energy transition is given with material that is already structured and relevant to current conditions. The general public can access it freely and learn about the energy transition more easily. As well as the energy transition roadmap that needs joint commitment so that the NZE target can be achieved. Phase 2 will discuss more technical issues such as solar and wind power generation technologies as well as nuclear and CSS technologies. This phase will be conducted at the end of June or sooner.

About Climate Action Tracker (CAT)

The Climate Action Tracker (CAT) is an independent scientific analysis that assesses a country’s climate action and measures its conformity with the Paris Agreement to pursue efforts to limit global temperature rise to 1.5oC.

CAT is the product of a consortium of two organizations, Climate Analytics and New Climate Institute, in collaboration with several other institutions. CAT has been providing its independent analysis to policymakers since 2009.

In 2022, the Institute for Essential Services Reform (IESR) officially joined as a collaborator in CAT. IESR provides assessments of other countries’ mitigation targets, policies and actions and reviews Climate Analytics’ assessments of Indonesia’s mitigation targets, policies and actions.

About the Energy Transition Academy

The Energy Transition Academy by transisienergi.id is a digital learning portal on energy transition. The materials provided in this program are reliable and up to date sources. Also relevant to Indonesia’s current conditions.

The Energy Transition Academy is an educational solution for students, civil society organizations, journalists to deepen their understanding of energy transformation in Indonesia and the world. In addition, the Energy Transition Academy also targets and develops skill building, so that the younger generation can contribute and be active in the energy transition process.

Objective

  1. Providing knowledge related to energy transition issues and renewable energy in Indonesia
  2. Understand the complexity of energy transition issues that occur
  3. Can identify and analyze energy transition policies
  4. Develop effective advocacy and communication strategies
  5. Build a common perception among mass media in the field of climate change or renewable energy in encouraging the energy transition
  6. Build networks and cooperation with various parties

Workshop and Capacity Building for Civil Society Organizations (CSO) Phase 1

Background

Indonesia, the world’s largest archipelago, is faced with two major crises: climate change and the energy crisis. The impact of climate change is increasingly felt with the increasing frequency of natural disasters, such as floods, landslides and droughts. On the other hand, the energy crisis is characterized by a high dependence on fossil fuels that are depleting and not environmentally friendly.

An energy transition towards renewable energy or clean energy is the solution to overcome both crises. Renewable energy such as solar, wind and water have great potential to meet Indonesia’s energy needs, while reducing greenhouse gas emissions and the impacts of climate change.

Civil Society Organizations (CSOs) and the media have an important role in encouraging the government to achieve clean energy targets in Indonesia. CSOs can act as agents of advocacy, education, and community mobilization to support clean energy. Although CSOs have an important role, there are still capacity gaps in understanding and communicating energy transition issues. Meanwhile, mass media can act as agents of education and persuasion to support clean energy. Although the mass media has an important role, there is still a capacity gap in understanding and communicating energy transition issues, especially in local mass media. This is due to the complexity of energy transition issues that require in-depth knowledge and understanding. Moreover, there are many differences of opinion and challenges on new renewable energy (NRE) as a solution for clean energy sources in the future.

To achieve the impact of CSO pressure on government policies in line with the Net Zero Emission (NZE) target in 2060 or sooner, it is important to increase CSO capacity so that advocacy and information dissemination are more targeted. To that end, IESR created a capacity building program designed to increase the capacity of CSOs in understanding and communicating energy transition issues in Indonesia.

The capacity building program is expected to benefit CSOs in improving their ability to promote energy transition through advocacy, education, and community mobilization. This capacity building program is an important step to improve the capacity of CSOs in supporting the energy transition in Indonesia. By increasing the capacity of CSOs, it is expected that the energy transition in Indonesia can be implemented more effectively and sustainably.

Prior to the capacity building program, IESR has conducted an in-depth analysis of the condition of mass media coverage in Indonesia and conducted mass media mapping. These results were used to create a capacity building concept that adapts to the needs. Needs that IESR considers important enough to be followed up will be selected as the basis for the capacity building concept.

The capacity building program will be held in two phases in 2024. In the workshop that will be held at the end of May 2024 (stage 1), climate change, the introduction of energy transition, and also the energy transition roadmap in Indonesia will be presented. Regarding climate change, it will be presented how the condition of Indonesia with current government policies will impact the NZE target. It will also explain how Indonesia’s environmental conditions and the effect of carbon emissions on climate change are occurring. The introduction to energy transition is given with material that is already structured and relevant to current conditions. The general public can access it freely and learn about the energy transition more easily. As well as the energy transition roadmap that needs joint commitment so that the NZE target can be achieved. Phase 2 will discuss more technical issues such as solar and wind power generation technologies as well as nuclear and CSS technologies. This phase will be conducted at the end of June or sooner.

About Climate Action Tracker (CAT)

The Climate Action Tracker (CAT) is an independent scientific analysis that assesses a country’s climate action and measures its conformity with the Paris Agreement to pursue efforts to limit global temperature rise to 1.5oC.

CAT is the product of a consortium of two organizations, Climate Analytics and New Climate Institute, in collaboration with several other institutions. CAT has been providing its independent analysis to policymakers since 2009.

In 2022, the Institute for Essential Services Reform (IESR) officially joined as a collaborator in CAT. IESR provides assessments of other countries’ mitigation targets, policies and actions and reviews Climate Analytics’ assessments of Indonesia’s mitigation targets, policies and actions.

About the Energy Transition Academy

The Energy Transition Academy by transisienergi.id is a digital learning portal on energy transition. The materials provided in this program are reliable and up to date sources. Also relevant to Indonesia’s current conditions.

The Energy Transition Academy is an educational solution for students, civil society organizations, journalists to deepen their understanding of energy transformation in Indonesia and the world. In addition, the Energy Transition Academy also targets and develops skill building, so that the younger generation can contribute and be active in the energy transition process.

Objective

  1. Providing knowledge related to energy transition issues and renewable energy in Indonesia
  2. Understand the complexity of energy transition issues that occur
  3. Can identify and analyze energy transition policies
  4. Develop effective advocacy and communication strategies
  5. Build a common perception among mass media in the field of climate change or renewable energy in encouraging the energy transition
  6. Build networks and cooperation with various parties

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.

Webinar on the Decarbonization Opportunities of Small-to-Medium Enterprises (SMEs) in Indonesia and Lesson Learnt from Global Experience


Replay Event


Background

Indonesia is one of the largest economies in the world and continues to experience growth. Amongst other economic activities, the industrial sector as the backbone of the economy will also be expected to grow to support the realization of Indonesia Emas in 2045. Along with the growth, the expected growth of the industrial sector will contribute to the country’s total greenhouse gas emissions, which in 2021 have reached about 420 MtCO2 and are expected to double if no necessary measures are taken. Therefore, a commitment to transition towards more sustainable business and industrial practices is compulsory to control and limit the emissions to 31.89-43.2% less than the business-as-usual level in 2030, whilst ensuring the global competitiveness of Indonesia’s industry.

Small-to-medium enterprises (SMEs) hold a crucial position in Indonesia’s economy and constitute the largest share of manufacturing industries in the country. According to the Asian Development Bank, in 2019, SMEs accounted for about 99% of formal business and nearly 97% of employment in Indonesia. Locally, they also foster social development and equity, contributing to rural development, community empowerment, and poverty reduction. Despite its role in becoming the engine of economic growth locally and nationally, SMEs’ financial management and technical capacitances are often left behind to be developed compared to large businesses. Moreover, as with more relaxed regulations toward SME players, emissions from this sector are often overlooked and may unfold a higher number of emissions compared to the larger industry sector. Based on IESR’s latest study, it is found that the estimated energy-related emissions of SMEs reach 216 MtCO2 in 2023, on par with the emissions generated from industry sectors nationally.

This webinar is conducted to disseminate the latest study findings of IESR and LBNL that focus on exploring decarbonization opportunities suitable for SMEs in Indonesia. Key insights for SME players, policymakers, and financial institutions will be unfolded to unlock the untapped potential of energy efficiency and decarbonization in SMEs whilst improving their business competitiveness toward the current market change. Moreover, global experience on SME decarbonization will be shared to showcase the best practices that are already implemented in China, the United States, and other significant economies in the world hence providing a best reference for retrofitting for Indonesia’s SME landscape. The webinar will be held online via Zoom and streamed on IESR’s YouTube channel. It is expected that the webinar will provide valuable insights and spark innovative initiatives amongst all stakeholders in Indonesia to start the decarbonization journey for SMEs.

Objective 

There are several objectives of this workshop:

  1. Disseminate and share information on Indonesia’s Small-to-Medium Enterprises (SME) landscape on its economics, energy, and waste management,
  2. Receive feedback from the SME decarbonization recommendation from relevant key stakeholders,
  3. Discuss essential and actionable steps required to implement the decarbonization initiatives for Indonesia’s SMEs, and 
  4. Discuss challenges and opportunities, and initiate collaborations to promote decarbonization and sustainable growth in selected SMEs in Indonesia.

Presentation

Exploring Decarbonization Opportunities in Indonesia’s Small-to-Medium Enterprises (SMEs) – Abyan Hilmy Yafi

Exploring-Decarbonization-Opportunities-in-Indonesias-Small-to-Medium-Enterprises-SMEs-Abyan-Hilmy-Yafi

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Unlocking Energy Efficiency – Decarbonization Potentials in SMEs – Bo Shen

Unlocking-Energy-Efficiency-Decarbonization-Potentials-in-SMEs-Bo-Shen

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Decarbonization of Small and Medium Industries (SMIs) in Indonesia – Achmad Taufik

DECARBONIZATION-OF-SMALL-AND-MEDIUM-INDUSTRIES-SMIs-IN-INDONESIA-Achmad-Taufik

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Explore South Sumatra Energy: Promoting Renewable Energy in the Land of Sriwijaya

Palembang, February 26, 2024 – South Sumatra, also nicknamed “Bumi Sriwijaya”, is one of the provinces that achieved a regional renewable energy mix target greater than the national target. In 2022, the renewable energy mix in South Sumatra reached 23.85 percent, higher than the national energy mix target of 23 percent by 2025. To encourage greater renewable energy utilization and promote renewable energy at the regional level, the Institute for Essential Services Reform (IESR) through the Energy Transition Academy in collaboration with the Energy and Mineral Resources (ESDM) Office of South Sumatra Province held Jelajah Energi South Sumatra on February 26 – March 2, 2024.

Based on data from the Department of Energy and Mineral Resources, South Sumatra Province, the potential for renewable energy in this area is around 21,032 MW, consisting of solar energy of 17,233 MWp, hydro of 448 MW, wind of 301 MW, bioenergy of 2,132 MW and geothermal of around 918 MW. However, currently only around 4.70% of this potential has been utilized, with an installed capacity of renewable energy of around 989.12 MW.

Secretary of the Energy and Mineral Resources Agency (ESDM) of South Sumatra Province, Ahmad Gufran said, to encourage the utilization of renewable energy, his party carried out several implementations of regional energy management strategies in South Sumatra. For example, conducting a study of renewable energy potential in South Sumatra. Then, the South Sumatra Provincial Government supports the acceleration of the battery-based electric motor vehicle program for road transportation with the issuance of South Sumatra Governor Regulation Number 26 of 2021 concerning the Use of Battery-Based Electric Motor Vehicles, and encourages the private sector to participate in developing renewable energy both to meet company needs and for corporate social responsibility.

“In order to implement the energy transition, we will continue to contribute to the development of the renewable energy sector to obtain clean energy that is environmentally friendly. In the future, we hope that the utilization of clean energy can be more developed to all levels of society,” said Ahmad Gufan. 

Sub-National Coordinator, Sustainable Energy Access Program, IESR, Rizqi M Prasetyo mentioned that South Sumatra is known as an energy granary, particularly renewable energy such as solar energy. According to him, South Sumatra has the largest solar potential among other technical renewable energy potentials. However, its utilization is actually small, only 7.75 MWp in the 2012-2022 period. For this reason, IESR believes that South Sumatra can encourage the use of ground-mounted solar power and rooftop solar power by preparing supporting regulations and policies, conducting socialization about solar power in the community, and encouraging community participation to be involved in the adoption of rooftop solar power accompanied by attractive incentives. Rizqi views that the collaboration between the government, the private sector and the community is the determining factor for the success of the utilization of environmentally friendly energy.

“Based on the practice of utilizing renewable energy in South Sumatra from the private sector at the Solar Power Plant (Solar PV) in Tanjung Raja Village, Muara Enim, South Sumatra, it has been useful for irrigation of agricultural land for farmers in the village. The solar power plant has a capacity of about 16.5 Kilowatt peak (kWp), with about 525 farmers benefiting from the irrigation solar power plant and enabling harvests more than 3 times a year. The government needs to encourage initiatives from various sectors to gain benefits from the huge potential of renewable energy such as solar energy, so that more and more people can feel the impact both environmentally and economically,” said Rizqi.

Rizqi explained that IESR realizes that access to knowledge about renewable energy and its benefits tends to be limited. Meanwhile, proper understanding is needed to mobilize support for renewable energy development in the regions. Addressing the knowledge gap on renewable energy, IESR has provided an energy transition learning platform called the Energy Transition Academy that can be openly accessed by the public.

“IESR, through the academy.transisienergi.id platform, has provided various energy transition classes that are organized in an interesting and easy-to-understand manner. Not only learning about energy transition, IESR also has a special channel for everyone who wants to know about rooftop solar PV adoption by visiting solarhub.id,” Rizqi explained.

In Jelajah Energi South Sumatra, participants will be invited to see firsthand various renewable energy projects that are already running in various locations in the province, including PT Pupuk Sriwidjaja Palembang’s PLTS, Tanjung Raja Village Irrigation PLTS, and PT Green Lahat’s PLTMH. In addition, there were discussion forums and meetings with relevant stakeholders, to discuss strategic steps in accelerating the implementation of renewable energy in South Sumatra.

 

About Institute for Essential Services Reform

The Institute for Essential Service Reform (IESR) is a think tank organization that actively promotes and strives for the fulfillment of Indonesia’s energy needs, upholding the principles of justice in natural resource utilization and ecological sustainability. IESR engages in activities such as conducting analysis and research, advocating for public policies, launching campaigns on specific topics, and collaborating with diverse organizations and institutions.

Strengthening the Government’s Commitment in Mitigating Climate Change

Jakarta, 15 December 2023 – The Indonesian government continues to improve in terms of strengthening its commitment to climate change mitigation. Since starting to aggressively commit to climate mitigation in 2021, the Indonesian Government has continued to carry out follow-up actions through various assessments of funding commitments and creating decarbonization roadmaps in each sector.

Nurcahyanto, Policy Analyst for the Ministry of Energy and Mineral Resources (MEMR), said at the launch of the Indonesia Energy Transition Outlook (IETO) 2024 report organized by the Institute for Essential Services Reform that one of the efforts currently being carried out by the government through the Ministry of Energy and Mineral Resources is to carry out revision of the National Energy Policy (KEN). It is hoped that the results of the revised KEN will be more relevant to Indonesia’s current efforts to carry out comprehensive decarbonization, especially in the electricity sector.

“Target revision (KEN) is only a method based on numbers, but from an implementation perspective it must be supported by regulations and we need to optimize it. For example, in carrying out early retirement for PLTUs, a road map needs to be prepared, as well as consolidation with related ministries/institutions,” he said.

The issuance of Presidential Decree 112/2022 is one of the guiding documents for the decarbonization of Indonesia’s electricity sector, with the main point being to accelerate the cessation of coal-fired power plants.

August Axel Zacharie, Head of Energy Cooperation, Danish Embassy, said that in the global context, Indonesia’s position as a developing country (emerging economy) is an investment attraction in itself, but Indonesia needs to prepare a supportive ecosystem.

“Investment needs for the energy transition, which reach approximately 1 trillion USD until 2050, must be seen as not just building infrastructure, but within these cost requirements there are community aspects, job transition, quality of life, and other non-physical aspects,” added August.

Still related to the high need for investment in renewable energy, and the government’s obligation to guarantee energy security, the Indonesian Government provides energy subsidies. However, this policy is not a sustainable policy.

Evita Herawati Legowo, PYC Senior Fellow, stated that it is necessary to think about a more targeted method for providing energy subsidies.

“There needs to be involvement of all parties in this matter, not just collaboration but a clear division of tasks as to who does what, starting from industry, research, energy, as well as investors,” said Evita.

The Indonesian Government’s commitment to decarbonization is a binding guideline. Delivered by Unggul Priyanto, Main Expert Engineer, BRIN, especially after 2060, all energy sources must come from clean energy sources.

“(The use-ed) LNG, or natural gas, is one option during the transition. But after 2060, like it or not, it has to be replaced with a truly clean (energy source-ed),” he said.

Exchanging Insights on Local Solar Manufacturer in Indonesia and Viet Nam

Ha Noi, 14 December 2023 – The Ministry of Science and Technology of Viet Nam hosted its annual event: Technology and Energy Forum 2023, in collaboration with the Ministry of Industry and Trade and Project Clean, Affordable and Secure Energy for Southeast Asia in Viet Nam.In recent years, Viet Nam has witnessed remarkable development in the trends of energy transition, particularly in wind and solar power. By the end of 2022, the total capacity from wind and solar power had reached 20,165 MW, constituting 25.4% of the overall power capacity within the system.

However, despite this progress, 90% of equipment for renewable energy projects in Viet Nam is imported from countries like China, Germany, India, and the US. This reliance is due to the country’s limited ability to perform specific tasks during project assessment and development phases and its high dependence on imported technologies. Factors contributing to this situation include inadequate local technology capacity, production levels falling short of requirements, and a lack of support from industrial policies and mechanisms to encourage renewable electricity.

Consequently, Vietnamese enterprises and local supply chains have seen limited participation. Similarly, Indonesia faces comparable challenges in its procurement of renewable energy, particularly in solar power. Despite both countries boasting immense potential in solar power, their domestic markets are not yet equipped for solar manufacturing. This deficiency stems from uncertainties in local demands and the lack of competitiveness in the local supply chain.

Fabby started with an explanation about local content regulation that could minimize dependence on imported products. 

“Indonesia is currently facing domestic market issues; these local products encounter difficulties entering the market. The lack of a credible development pipeline limits financial viability for new solar modules manufacturing facilities. When it comes to Rooftop PV, PLN limits the installation capacity to 15%. This regulation further restricts the market for domestic solar modules,” state Fabby.

Fabby went on to highlight several lessons learned from implementing Local Content Regulations (LCR) in Indonesia, which could potentially accelerate the development of Viet Nam’s solar energy local content. First, despite the projected growth in solar power, there’s insufficient market signal to stimulate the growth of the solar module industry without a reliable pipeline. Second, inconsistencies in policies across government bodies might discourage investment in the solar power market due to increased uncertainty. Third, support for the domestic solar modules industry should encompass downstream raw material industries to reduce import dependency and enhance the competitiveness of end products. Lastly, governments should offer incentives, both fiscal and non-fiscal, to encourage the development of solar module manufacturing facilities. Fabby emphasized that LCR, without a conducive investment climate for the industry, might impede rather than foster the development of solar power.