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.

Warta Ekonomi | IESR Estimates That 5 GW of Coal-Fired Power Plants Will Not Be Able to Recieve Funding from China

Indonesia needs to anticipate the changing times in the coal industry, which is showing a global declining trend. In a seminar titled “Sunset of Coal-Fired Power Plants and the Coal Industry,” Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), conveyed that coal is currently experiencing a significant decline.

Read more on Warta Ekonomi.

Indonesia’s Commitment to Energy Transition is Impacting Financing Opportunities

press release

Jakarta, September 18, 2023 – An energy transition in the electricity sector that prioritizes equitable principles and is affordable for society requires a combination of strategic factors, long-term commitment, and policies that lead to investment opportunities for the development of renewable energy and technological innovation. This was stated by Deon Arinaldo, Program Manager of Energy Transformation, Institute for Essential Services Reform (IESR).

“All forms of investment, especially for energy infrastructure with a lifespan exceeding 20 years, it is essential to have long-term policies and legal certainty in place to ensure success. This is important for project developers and financial institutions to calculate the project risks. Moreover, renewable energy projects require relatively large initial investments compared to other energy sources. By committing to long-term targets and synergies from various existing policies and regulations, the level of investment risk can be reduced so that renewable energy projects remain bankable with low-interest funding,” explained Deon.

Febrio Nathan Kacaribu, Head of the Fiscal Policy Agency, Ministry of Finance of the Republic of Indonesia in the 2023 Indonesia Energy Transition Dialogue (IETD), said that energy transition carried out by a developing country like Indonesia must take place in just and affordably. He assessed that to achieve an Updated Nationally Determined Contribution (NDC) of 29% unconditionally (with its own efforts) in 2030 in the energy sector, it would reach IDR 3,900 trillion.  However, the financial requirements of an Enhanced NDC (ENDC) with an unconditional emission reduction target of 31.89% are still being estimated.

Febrio explained that his party had made several breakthroughs in efforts to finance the energy transition in Indonesia, including expanding investment through green sukuk, with the total investment mobilization from the issuance of green sukuk reaching USD 6.54 billion from the 2018-2022 period as well as implementing several regulatory frameworks in Energy Transition Mechanism (ETM) has been carried out. Febrio emphasized that collaboration for blended finance with the private sector has increasingly great opportunities.

“One of the obstacles for the private sector (to invest in the energy transition, ed) is the lack of a common understanding or taxonomy. This year, with Indonesia as chairman of ASEAN, one of the things agreed was that transition activities would also include the early termination of coal-fired power plant operations, which are included in the transition finance taxonomy. There are green provisions with certain limits that can be financed by the private sector; for example, if early retirement of coal fired power plants (CFPP) before 2040, then the private sector will join in (financing-ed),” said Febrio.

Dadan Kusdiana, Secretary General of the Ministry of Energy and Mineral Resources (MEMR) mentioned that the trend in the cost of renewable energy tends to decrease while fossil energy, such as coal, is increasing. Dadan mentioned, although the investment needs for the energy transition are very large, Indonesia has the potential for renewable energy and various forms of financing, which also come from various international organizations.

“Large investment (for the energy transition, red) is an opportunity to transition the energy sector. Indeed, there will be an increase in costs, but we will feel the benefits of reducing the costs of renewable energy in the long term,” explained Dadan.

Jonathan Habjan, Economic Counselor at the United States Embassy in Indonesia, said that the energy transition is a challenging process and involves many people over a long period, so it needs to be done correctly and efficiently.

“Of course, this will cost a lot of money, require a lot of effort, and change how business is done in many ways,” he said.

 

Jonathan added that to ensure that the energy transition somewhat takes place, it is necessary to involve people classified as vulnerable, including those who still work in the coal industry.

The Indonesia Clean Energy Forum (ICEF) and the Institute for Essential Services Reform (IESR), in collaboration with the Ministry of Energy and Mineral Resources (MEMR), held the 2023 Indonesia Energy Transition Dialogue (IETD) on 18-20 September 2023.