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.

The Modal Share of Indonesia’s Transportation Requires Strong Push from the Government

Dekarbonisasi sektor transportasi Indonesia

Jakarta, 5 December 2023 – Since 2021 the transportation sector in Indonesia has been ranked as the second highest emitter, displacing industry. Many emissions from the transportation sector are caused by burning fuel, which is the main energy source for vehicles. With projected economic growth and development plans, it is predicted that emissions from the Indonesia’s transportation sector will continue to increase. As an effort to strengthen climate change mitigation actions, decarbonization of the transportation sector is important.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) in the webinar entitled “Dissemination of Indonesia’s Transportation Decarbonization Roadmap”, (5/12) emphasized that to ensure each climate change mitigation actions are in line with the Paris Agreement, emission reduction targets must be calculated not just based on percentages but also taking into account alignment with Paris targets.

“IESR carries out modeling to find policies and steps that can be taken to increase Indonesia’s climate change mitigation actions, especially in the transportation sector,” said Fabby.

The draft transportation decarbonization roadmap focuses on two scales, namely the national and regional scales (Jabodetabek).

IESR sustainable mobility analyst, Rahmi Puspita Sari added that the increase in private vehicle ownership, especially motorbikes, has been one of the factors causing increased emissions from the transportation sector.

“With various types of demand growth and the choice of mode still being private transport, this has an impact on greenhouse gas (GHG) emissions in the transportation sector. “Most of the GHG emissions come from passenger transportation (73%), and followed by land transportation (27%),” said Rahmi.

Fauzan Ahmad, member of the Tasrif Modeling Team, who participated in modeling the transportation decarbonization road map, explained one of the main findings from this simulation, namely that in the Avoid, Shift, Improve (ASI) scheme, which is quite common for transportation management, there is potential for reducing emissions up to 18% by avoiding travel by implementing a work from home (WFH) system.

“Actually, only 8% of the total workers can work from home, of this 8% potential, currently only around 1% of workers work from home. If this potential is maximized, we can reduce emissions even more by the number of trips avoided,” said Fauzan.

Fauzan also added that the choice to review transportation patterns in Jabodetabek was because Jabodetabek was considered as a unified area that interacts with each other.

Arij Ashari Nur Iman, a modeler from the Tasrif Modeling Team, added that with the current condition of the transportation system, the most effective solution for decarbonizing the transportation sector is to divide passenger loads into various modes (mode share).

“Electric vehicles will have a big impact on the goal of reducing emissions, but two conditions must be achieved to have an impact on a national scale, namely increasing the sales share of electric vehicles and creating a policy framework that supports the discard rate of ICE vehicles. Modal shifting to public transportation will be a sustainable solution in the context of fuel and resource use, but requires large initial investment,” explained Arij.

Professor of civil engineering at Gadjah Mada University (UGM), Agus Taufik Mulyono, stated that the Indonesian government still does not have the courage to create (transportation) policies that encourage share modes.

“This share mode issue must be regulated by the government in law, currently there is no law. This study is good, because when more advanced modes of sharing are deemed difficult, then both are still road transportation, but shared between spaces,” he said.

Agus also reminded of implementation challenges if the recommendations of this study were adopted in the form of policies or regulations.

In line with Agus, Alloysius Joko Purwanto, Research and Development Commission, Jakarta City Transportation Council also highlighted the use of public transportation which should be further encouraged.

“Current policies have the potential to cause contradictions, such as the electric vehicle incentive policy, which on one hand has the potential to increase private vehicle ownership rates and has the potential to increase traffic jams because the discard rate for ICE vehicles is still low,” said Joko.

The use of biofuels is also included in the transportation decarbonization roadmap modeling. Edi Wibowo, Director of Bioenergy, Ministry of Energy and Mineral Resources, said that the results of this study are broadly in line with Indonesia’s energy transition road map which will generally add renewable energy capacity to power plants and other sectors will also follow to shift to a more efficient system like such as biofuel.

“We (at the Ministry of Energy and Mineral Resources) continue to develop biofuels, currently we are testing the application of Biodiesel B40 and if the process goes smoothly in 2026 it will start to be used. This (development) effort is a form of real support for Indonesia’s energy transition plan,” said Edi.

Gonggomtua E. Sitanggang, Director, ITDP Indonesia emphasized the importance of public communication to raise awareness among the public. When the public has sufficient awareness and knowledge about the importance of a low-emission transportation system, it will be easier to involve and mobilize them to slowly reduce their dependence on the use of private vehicles.

“Apart from that, it is also important to look at the relationship between the national government and regional governments. What needs to be underlined is our laws and regulations relating to regional autonomy (otonomi daerah), where the one who has the budget and authority is the regional government, while transportation has not yet become one of the KPIs (key performance indicators) for regional leaders. As a result, the budget for the transportation sector is very minimal,” said Gonggom.

The ‘Just’ Principle in Financing Just Transition in Indonesia

Johor Bahru, Malaysia, 16 November 2023 – Leading up to COP28 in the United Arab Emirates, there is a growing focus on climate financing efforts. Climate financing has become a critical focus to support a fair transition towards a sustainable, low-carbon economy.

The transformation towards a low-carbon economy and financing for a just transition requires government leadership. Governments can seize opportunities in funding energy transition by ensuring the fair execution and accountability of energy transition. For instance, the funding from the Just Energy Transition Partnership (JETP) supported by developed countries aims to expedite the energy transition. The ‘just’ aspect must take precedence in every energy transition funding agreement.

Wira Agung Swadana, the Green Economy Program Manager at the Institute for Essential Services Reform (IESR), stated that the energy transition is not solely about closing coal-fired power plants and shifting towards renewable energy plants. Instead, a broader perspective is needed to understand the impacts that will arise from the energy transition.

“The funding for the energy transition is not solely confined to infrastructure development; rather, every aspect of a just transition should also be taken into consideration. Just transition itself is not only about the affected workforce but also involves the broader community surrounding coal mining areas,” Wira expressed during the Asia-Pacific Climate Week 2023.

Furthermore, Wira also assesses that the funding for JETP is still very limited and insufficient to meet the set targets. This funding source is still predominantly dominated by loan-based financing.

“IESR is part of the technical working group with the JETP Secretariat. JETP funding still heavily relies on loans, and some of these are not new commitments from donor countries. Only about 1.62% of what we receive comes in the form of grants for a fair transition. There’s still a shortfall in funds, which I find quite ironic. Grants need to be increased rather than relying solely on loans,” he emphasized.

The funding for energy transition should encompass a comprehensive approach, including the early retirement of coal-fired power plants, addressing coal-producing regions, increasing the use of renewable energy, and managing transitions in mining locations. Wira believes that JETP still lacks a comprehensive and holistic approach.

“The funding for energy transition should ideally serve as the starting point. Currently, Indonesia is in the process of implementing the National Medium-Term Development Plan (RPJMN), utilizing domestic commitments and striving to align it with JETP and the Energy Transition Mechanism (ETM). The Indonesian government needs to address various challenges at the domestic, national, and international levels,” added Wira.

Tiza Mafira, Director of the Climate Policy Initiative (CPI), revealed that there are debates within some financial institutions regarding financing for a just transition.

“The issue lies in debates within financial institutions about whether financing for a just transition is part of financing for energy transition. When we discuss the ‘just’ aspect, we’re talking about several critical projects within the energy transition. It’s not just a few projects but an overall significant change in the economy. If not managed properly, this will have a significant impact on a large scale,” explained Tiza.

Message to Global Leaders for COP 28

Jakarta, 3 November 2023 – The Conference of the Parties (COP 28) will soon be held in Dubai, United Arab Emirates. One of the agendas for this annual meeting is to see the progress of global actions to deal with the climate crisis. In a public discussion held by the Foreign Policy Community Indonesia (FPCI) on Friday 3 November 2023, Marlistya Citraningrum, Sustainable Energy Access Program Manager, Institute for Essential Services Reform (IESR), explained that in anticipation of this annual meeting of world leaders, the new Indonesian Government just released the Comprehensive Investment and Policy Plan (CIPP) document and plan to announce the investment plan officially at the COP 28.

“Bluntly speaking, this document is quite disappointing because even though it promises a list of renewable energy projects, it is still very focused on large-scale renewable energy (base-load renewables) such as hydro and geothermal. Variable Renewable Energy (VRE) such as solar and wind is considered a high-risk project,” explained Citra.

Apart from the lack of support for VRE, Citra also highlighted the low commitment to early retirement of coal power plants. In the CIPP document, which is currently in the public consultation process, IPG countries are only willing to facilitate early retirement of 1.7 GW coal. In a draft document last year, the United States and Japan were initially willing to finance 5 GW of early retirement coal-fired power plants.

“In fact, to achieve the net zero emission target, Indonesia needs to retire around 8 GW of coal,” emphasized Citra.

The Director of the Environment at the Ministry of National Development Planning/Bappenas, agreed on the importance of increasing climate commitment and action, not only as climate action but also as part of development.

“In the draft RPJPN which is currently progressing, we are targeting our emission reduction target to increase to 55.5% in 2030 and 80% in 2045. This is a necessity to increase climate targets and ambitions,” said Medril.

We Don’t Have a Choice, We Have to Achieve Carbon Neutrality

Jakarta, 25 October 2023 – Industry is the main driver for economic growth and the largest sector to stimulate technology advancement. Industrial-scale economic activity has already transformed the global economy since its peak. Unfortunately, the tremendous economic growth must be paid for by the high greenhouse gas emissions transmitted. 

For a while, people are trying to figure out a way to minimize the GHG emission from the industrial process. This effort will be a meaningful step in the race to achieve net zero emission in this century as it is mandated by the Paris Agreement.

Deon Arinaldo, Energy Transformation Program Manager at the Institute for Essential Services Reform (IESR) during the Dissemination Workshop of Indonesia Industry Decarbonization Roadmap and Policy Recommendation on Wednesday 25th October 2023 said that IESR is currently looking into five big industries i.e cement, pulp & paper, steel, textile, and ammonia and develop a decarbonization roadmap. 

“We are in the beginning of decarbonizing our industry sector, and we need more collaboration between stakeholders as there are just so many stakeholders involved in the industry sector,” Deon said.

Farid Wijaya, senior analyst IESR later explained that Indonesia has initiated a green industry policy framework, yet it still needs more improvement to make it more robust and contextual. 

“The five industries that we are looking at are highly motivated to decarbonize their business process, but currently there are still challenges such as the cost and policy framework that still need to be improved,” explained Farid.

Realizing that the industrial process requires a vast amount of energy from electricity to decarbonize the industry sector, it is a must to also decarbonize the power sector. 

“(The availability) of policies that support industry to connect to renewable power or develop its own renewable electricity are very important,” said Hongyou Lu, Energy and Environment Technology Researcher, LBNL.

Lu added that industry decarbonization is inevitable but multifaceted and it has potential to grow the local economy, reduce air pollution and make the commodity more competitive in the global trade.

Stephane de la Rue du Can, Energy-Environmental Policy Research Scientist, LBNL then added that there should be a complete package of policy reform to decarbonize the industry sector, including (1) industry GHG reduction targets and planning, (2) innovation, (3) electrification and fuel switching, (4) energy efficiency, (5) material efficiency and circular economy, and (6) workforce and local communities.

Endra Dedy Tamtama, Energy Conservation Monitoring Coordinator, Ministry of Energy and Mineral Resources shares that currently energy efficiency practices done by some industries are those either no cost or low cost. Things related to retrofitting utilities that require significant capital cost are not yet done.

“Because currently there is no fiscal incentive is given to industries once uses an energy efficient infrastructure, any changes that require significant cost, although it will save more energy, has not fully tapped,” Endra said.  

Muhammad Akhsin Muflikhun, Technology Expert of PSE UGM, emphasized the importance of technology readiness to support industry decarbonization such as the utilization of hydrogen.

“Hydrogen has been our focus for energy storage technology. We try to compare hydrogen storage vs. batteries, so far there is still a huge gap in energy efficiency once it is stored in a battery compared to once it is kept in a hydrogen storage system,” he said. 

Sri Gadis Pari Bekti, Functional Intermediate Expert, Ministry of Industry agrees that technology will be a game changer during the industrial decarbonization. The emerging technology such as CCS and CCUS, and hydrogen are expected to be able to fulfill energy needs in the industry.

“As part of our support to industry, we facilitate certification for industry. To some extent, the government can help the capacity building and certification process,” Bekti said.

In order to smoothen the industry decarbonization the availability of green financing is crucial.

PT PLN, as the main energy supplier in Indonesia through their Bioenergy manager, Yudas Agung Santoso, said that currently they are still mapping the energy needs especially from industry as in the near future some big industries such as nickel smelter will come.

“For industry (and those who need) currently, we have a Renewable Energy Certificate (REC) program, in which we dedicate a renewable power generator to supply those who subscribe the certificate so they can get green electricity,” he said.

Nan Zhou, Energy Environmental Policy Senior Scientist, LBNL, in her concluding remark highlighted the importance for Indonesia to take the lesson learnt from other countries who start decarbonizing its industry earlier. 

“We don’t have a choice; we have to achieve carbon neutrality. So, we must do any possible action to make it happen,” Zhou said.