Continuous Effort in Paving the Way for Solar Energy in Indonesia

press release

Jakarta, July 26, 2023 – The Indonesia Solar Summit 2023, hosted by the Ministry of Energy and Mineral Resources and co-hosted by think tank Institute for Essential Services Reform (IESR), affirms the commitment to accelerate solar deployment in the country.  Solar energy has made it significantly into Indonesia’s NZE pathway, projected at 61% of total electricity sources by 2060. A previous separate study by IESR placed solar energy as the backbone for a zero-emission energy system by 2050.

Minister of Energy and Mineral Resources, Arifin Tasrif, mentioned solar energy is a crucial strategy to achieve 23% of the renewable energy mix within the next two years before 2025. However, he also emphasized the significance of having access to technology and funding to successfully utilize solar energy and meet the renewable energy mix target. According to him, investment in solar energy will easily flow into Indonesia if there is a significant demand in the country. 

“There are two crucial factors that must be considered to accelerate the use of solar energy. The first is the availability of technology, which requires support from the industry. The second is the availability of international and domestic coverage that needs to be mobilized. The target for the renewable energy mix is 23% by 2025, but currently, it only stands at 12.5%, leaving only two years to achieve this goal. Additionally, the aim is to reduce greenhouse gas emissions by approximately 290 million tons in 2030, which has increased to 358 million tons. To achieve this, various efforts are being made, including de-dieselization programs and converting fossil-fueled motorized vehicles to electric motors, to absorb emissions,” said Arifin. 

The progress towards solar energy adoption in Indonesia remains slow. The actual installed capacity of solar PV in 2022 is 271.6 MW or far below the plan of 893.3 MW, based on data from the Directorate General of New, Renewable Energy and Energy Conservation (EBTKE), MEMR. There are several factors that have hindered widespread adoption of solar energy, including complications with land ownership, lack of local experience and unattractive tariffs. Whereas, the latest technical potential is at 3,295 GWp, acceleration of solar deployment will be critical in achieving renewable energy and NZE targets. In the short term, 18 GW of solar energy is needed to attain a 23% renewable energy mix target by 2025, with an investment value of US$14.1 billion, based on BloombergNEF and IESR study

With the announcement of Just Energy Transition Partnership (JETP) last year at G20 Summit 2022 in Bali, Indonesia – a comprehensive investment and policy plan is currently drafted in consultation with relevant stakeholders, covering early coal retirements, just transition measures, and acceleration of renewable energy development. The US$20 billion partnership aims to peak Indonesia’s power sector emission by 2030, and solar energy has become a significant part of the planning due to its techno-economic advantage and high potential for greenhouse gases emission reduction. The first version of such a plan will be unveiled in August 2023.

Rachmat Kaimuddin, Deputy Minister for Infrastructure and Transport, Coordinating Ministry of Maritime and Investment Affairs revealed that to build solar energy industrialization, Indonesia needs to prepare the demand first. 

“Reflecting in this, we intervene in the country, for example through JETP, how we minimize dependence on fossil energy, can be in several forms such as reducing the output of coal-based power plants and creating new demand,” he explained. 

He also emphasized that Indonesia’s cooperation with Singapore for green electricity requires that solar modules and batteries must be produced in Indonesia, so that the demand that arises becomes a trigger for the PLTS industry in Indonesia to form. 

“We don’t want to only import in the future. We hope that a domestic industry will be formed while we are in the process of energy transition,” he said.

Antha Williams, who leads Bloomberg Philanthropies’ Environment Program stated that developing a homegrown solar industry is a key component to advancing Indonesia’s transition to clean, affordable, and reliable energy.

“By cultivating international partnerships to mobilize capital and scale domestic solar manufacturing capacity, Indonesia has the potential to realize its net-zero energy pathway goals through rapid deployment of clean energy projects. Bloomberg Philanthropies welcomes the opportunity to support Indonesia’s goal of becoming a leader in solar energy development.”

Fabby Tumiwa, the Executive Director of IESR, stated that over the last two years, a new market has emerged, utilizing solar PV not only for selling electricity but also for producing new value-added products, such as green hydrogen and ammonia. Based on IESR data, there are currently 10 green hydrogen and ammonia projects that have been initiated since last year, intending to use solar energy as their primary electricity source. These projects are currently in the study phase and are expected to be realized within the next 2-3 years. Fabby also pointed out that experiences from various countries, including some developing ones, demonstrate that constructing Gigawatt-scale solar power plants within a year is an achievable feat.

Fabby highlighted three essential supporting factors to encourage the development of solar PV, “Firstly, it requires political will and strong, active leadership from the government, along with the establishment of transparent and sustainable policies and regulations. Secondly, there is a need for the development of an integrated ecosystem, which involves defining quality standards and guarantees for solar modules, ensuring the availability of qualified and trained human resources. Lastly, it is crucial to foster the growth of an integrated and competitive solar PV manufacturing industry.”

Indonesia’s Chairmanship in ASEAN 2023 presents an opportunity to engage the public and raise awareness about the benefits of solar PV adoption. Public outreach campaigns, educational programs, and community-driven initiatives can inform people about the environmental advantages, economic benefits, and energy independence that come with solar PV usage. Building public support and understanding can facilitate smoother and more widespread adoption of solar PV technology. Besides that, Indonesia’s Chairmanship can set a precedent for solar PV adoption in ASEAN through policy alignment, regional cooperation, investment promotion and innovation. It is timely to promote and drive domestic solar industries and supply chains in parallel with fast deployment of solar projects. 

IETO 2023: Accelerating the Rapid Steps of the Energy Transition in Indonesia

Handriyanti Puspitarini, Peneliti Senior IESR

Jakarta, December 15, 2022The Institute for Essential Service Reform (IESR) launched the Indonesia Energy Transition Outlook (IETO) 2023 report. IETO 2023 is the 6th edition; previously, this report was titled Indonesia Clean Energy Outlook in 2017 but changed its name in 2020. Its transformation widens the analysis from initially focusing solely on clean energy developments to analyzing the energy system, including its funding system.

Deon Arinaldo, Manager of the Energy Transformation Program, IESR, stated that Indonesia’s energy transition had entered a new phase. It’s reflected in several published policies supporting adopting low-carbon and low-emission technologies, such as Presidential Decree 112/2022. In addition, the achievement of funding commitments for the energy transition Just Energy Transition Partnership (JETP) and infrastructure projects resulted from the G20 Summit. IESR also reviewed this topic in the IETO 2023 report.

“Funding is one of the keys to a successful energy transition in Indonesia. Furthermore, we also highlight the role of solar power in the energy transition and the development of electric vehicles,” he said.

Fabby Tumiwa, Executive Director of IESR, presented at the report’s launch and discussed the Indonesia Energy Transition Outlook (IETO) 2023 organized by IESR with the support of Bloomberg Philanthropies, explained that the earth’s temperature has increased by at least 1.1°C. Without intervention, the temperatures can reach 2.8°C. Furthermore, Fabby emphasized that a transition to renewable energy is crucial to limiting the increase in the earth’s temperature to more than 1.5°C.

“The IESR study shows that solar PV is coupled with a storage capacity of 50% and 100%, so renewable energy will be cheaper than operating a coal-fired power plant (CFPP) after 2032. That is, when we still maintain fossil power plants in the energy system, we will face an increase in much more expensive energy costs,” explained Fabby Tumiwa.

Fabby Tumiwa
The Executive Director of IESR, Fabby Tumiwa attended the launch and discussion of the Indonesia Energy Transition Outlook 2023

Fabby continued that enlarging the portion of renewable energy in Indonesia’s energy system is far more profitable than utilizing fossil energy or maintaining fossil energy with carbon capture technology, such as carbon capture and storage (CCS). However, 87% of the electricity consumed by Indonesia still comes from fossil energy and only 13% from renewable energy. For this reason, Fabby said three things needed to be done to encourage the energy transition.

“First, make the most of Indonesia’s renewable energy potential for the electricity, transportation, industrial and other sectors. Based on the latest ESDM study, Indonesia has far more than enough renewable energy potential to achieve 100% renewable energy to achieve net zero emissions (NZE). By increasing renewable energy, we also have to reduce coal power plants. Second, boost investment for the energy transition,” said Fabby.

The IESR study assesses that Indonesia will need USD 25-30 billion in investment from now until 2030 to support the achievement of net-zero emissions (NZE) by 2060 or sooner. A no-regrets policy is required to obtain investment, or once there is a policy, it cannot be revoked or terminated. Second, it is necessary to reform policies that hinder renewable energy. Thus, said Fabby, the government must review the domestic market obligation (DMO) for coal mining because this policy contradicts Indonesia’s efforts to promote renewable energy. Third, managing the energy transition process. The energy transition is a risky action because it will cause an increase in costs in the short term, and at the same time, we are still dependent on coal energy. Moreover, the energy transition process needs to be managed effectively so that the energy transition process will be smooth.

On the same occasion, the Secretary General of the Ministry of Energy and Mineral Resources (ESDM), Rida Mulyana, explained that the energy transition is one of the priority issues at the G20 Indonesia Presidency in 2022. It can be seen by the Bali Compact agreement, which can serve as a guide to achieving the NZE 2060 or faster. Furthermore, Indonesia already has a road map for the transition of new renewable energy (NRE) to net zero emission in 2060, created by the Ministry of Energy and Mineral Resources.

Sekretaris Jenderal Kementerian Energi dan Sumber Daya Mineral (ESDM), Rida Mulyana
Secretary General of the Energy and Mineral Resources (ESDM) Ministry, Rida Mulyana, attended the launch and discussion of the Indonesia Energy Transition Outlook 2023

“Indonesia plans to build massive solar PV starting in 2030, followed by onshore and offshore wind power plants starting in 2027, and geothermal will also be maximized. Indonesia will optimize hydroelectric power plants, we will send the electricity to load centers on other islands, and nuclear power plants will operate in 2039,” said Rida Mulyana.

Akbar Bagaskara, IESR Electricity System Researcher, stated the electricity system is low-hanging fruit to reach NZE. The electricity system contributes 250 MtCO2 emissions, or about 40% of emissions in the energy sector. Renewable energy status in the energy mix is ​​12.67%, while the 2025 target is 23%. Thus, said Akbar, Indonesia needs to reduce its fossil capacity and seek alternative energy sources to achieve this target.

“At least Indonesia can use renewable energy that has not been maximized, such as solar and wind. Then, the transmission network (grid) must also be made flexible. However, regulations are needed regarding guidelines for operational systems and negotiations for generating units,” said Akbar.

In line with Akbar, Raditya Yudha Wiranegara, IESR Senior Researcher, explained that what can be done to provide renewable energy penetration is to operate CFPP flexibly. Technically, this operation requires changes in the main components of the CFPP.

“Flexible operation will require flexibility regarding power purchase agreements and fuel supply contracts. According to the IEA, by making these contracts more ‘flexible,’ there will be savings of 5% of the total operating costs for a year, or the equivalent of USD 0.8 billion. Grid Code should also be made more detailed. This is also necessary so that operators have guidelines for operating regulations in a flexible manner,” stated Raditya.

Julius Christian, IESR Clean Fuel Specialist Researcher, explained that until now, fossil energy consumption in transportation had reached 87%, the industry has reached 56%, and buildings have reached 41%. In the transportation sector, using electric vehicles is a crucial strategy for a low-carbon transportation system because it has higher energy efficiency and uses renewable energy. Julius explained that up to now, 199 buildings had been certified as green buildings in Indonesia, even though large buildings should already have green building certification.

“We need to focus on four things to accelerate the energy transition; 1) regulations encourage people and industries to switch to carbon-efficient technologies; 2) the government needs to socialize more to increase public awareness to switch to low-carbon; 3) incentives and financing schemes are also worth considering; 4) preparing the supporting ecosystem,” said Julius.

On the other hand, Martha Jessica, IESR Social and Economic Researcher, said the importance of collaboration between the central government and local governments to promote the energy transition and achieve NZE. Currently, 71.05% of provinces in Indonesia have established Regional Energy General Plans (RUED), in which each region sets its energy mix targets.

“One province that has shown a commitment to the development of renewable energy is Central Java. Interestingly, there is a new commitment to green recovery this year. This is defined as using public budgets to target the site level, especially for renewable energy development. Approximately IDR 8.9 billion has been budgeted for this commitment. This development has succeeded in increasing the income of its users by 2-3 times, where farmers get an easier water source through solar water pumps,” said Martha.

Handriyanti Puspitarini, the IESR Senior Researcher, said several essential things in Indonesia’s energy transition status, namely, fossil energy use, had increased this year due to the increasingly vibrant economy. Still, this condition is sure to change due to the large amount of foreign assistance to reduce emissions, especially in the electricity sector. She considered that regulations supporting renewable energy penetration need to be available. She gave an example that limiting the capacity of a rooftop solar PV by 15% would reduce people’s interest in utilizing it and suppress community participation regarding the renewable energy mix on a national scale.

“Thus, changes are needed, such as increasing financial support for rooftop solar PV project developers, clarifying tariff schemes and licensing processes, and increasing developer access to capital with lower interest rates. Implementation of President Regulation112/2022 also needs to be observed next year. Some people also think that this is the time for Indonesia to do an energy transition and utilize other energy sources such as solar, water, and wind,” said Handriyanti.