Employment Readiness for Renewable Energy in Indonesia

Jakarta, May 2023 – Indonesia has made important commitments to achieve climate and development targets, and it has begun to pay attention to reducing carbon emissions while at the same time strengthening economic and social resilience. As a developing country, committing to decarbonized development while maintaining economic growth is critical, particularly for Indonesia, which has set a target of 5.7% annual economic growth in its long-term plan, Visi Maju 2045. No country has transitioned to high-income status while also reducing emissions, despite the fact that this is the implicit challenge of the low-carbon transition (World Bank, 2023). Decoupling economic growth from carbon emissions will necessitate significant and sustained improvements in many aspects beyond environmental matters, encompassing economic, social, innovation, and fiscal policies, to drive transformational change (Fankhauser & Jotzo, 2017; OECD, 2022). Indonesia’s employment conditions, as one of its socio-economic and welfare indicators, will also be affected by numerous changes brought about by decarbonization, including the increased use of renewable energy and the reduction of the use of fossil fuels. These changes will shift the demand for employment towards cleaner economic activities and energy sources.

How is the future employment of the energy and related sectors?

Globally, in 2019, over 65 million people were employed in the energy and related sectors, accounting for almost 2% of formal employment worldwide, where half of the energy workforce is employed in clean energy technologies (IEA, 2019).  The number of workers employed in the energy sector by 2030 globally could rise to 139 million under the 1.5°C scenario, including more than 74 million in energy efficiency, electric vehicles, power systems/flexibility and hydrogen; while currently the worldwide employment in renewable energy is up to 12.7 million in 2021 (IRENA & ILO, 2022). Thus, there are still many potential jobs in renewables globally, including in Indonesia, where losses in fossil fuel sectors would be more than compensated by gains in renewables and other energy transition technologies.

Indonesia can expect to see both changes in potential new green jobs and changes in the nature of the existing jobs – in which not all green-related jobs in Indonesia have high skill requirements, yet trends in high-income countries suggest that the demand for advanced green skills will grow, thus requiring a commensurate shift in training and education (World Bank, 2023). Approximately 40 percent of existing Indonesian firms reported having a green strategy; 58 percent of firms reported having dedicated energy teams or personnel, and, while about 37 percent of surveyed firms indicated that they monitor emissions from energy use, only 15 percent set energy and emissions targets (IRENA & ILO, 2022), while the new green job opportunity is also emerging with the increasing number of renewable energy and energy efficiency related firms in Indonesia. Renewable energy jobs in Indonesia are expected to increase throughout the transition, from 0.63 million currently to 0.74 million in 2030 and 1.07 million in 2050, with bioenergy and solar technologies dominating renewable energy jobs in Indonesia in this first decade of transition (IRENA, 2023). However, on the human capital preparation front in 2022, there has been no notable improvement from last year, and the government has not established any clear strategy for preparing the workforce required in the energy transition, let alone preparing the existing workforce to shift from fossil-based generation to renewable ones (IESR, 2022a).

What can we do to improve employment readiness?

As the renewables sector expands and evolves, a skilled renewable energy workforce will need to emerge, and to close the skill gap, a set of well-designed labour market policies and forward-looking education and training programs will be needed (IRENA, 2023). Especially in Indonesia, there will be no one strategy fit for all in order to improve human capital readiness; thus, a general approach with local understanding and action will be more powerful in this context because employment and demographic conditions vary. Policy considerations based on geographic or specific areas of impact and potential need to be carefully considered in the energy transition in Indonesia, with some matters in policies for greening including industrial and enterprise policies, skill development policies, active labour market policies, occupational safety and health policies, and social protection policies (ILO, 2023). In the bigger picture, employment readiness is one of the important aspects that determine successful economic transformations in low-carbon development. Furthermore, government interventions, transformation approaches, community revitalization, and comparative advantages are needed to ensure more sustainable economic development in transition impacted areas (IESR, 2022b).

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Preparing Human Capital for The Energy Transition

Jakarta, May 2023 – The world is moving to a low-carbon economy. Consequently, the energy supply for the economy also shifts from fossil fuel to renewable energy. Last year, for the first time, global investment in low-carbon energy technologies (including non-energy production technologies such as electrified transportation, electrified heat, and sustainable materials) surpassed USD 1 trillion and matched the investment level in fossil fuel. The increased investment in low-carbon technologies resulted in rising employment in the field. Globally, employment in renewable energy production has been constantly growing from 7.3 million in 2012 to 12.7 million in 2021.

Although visibly slower than the global pace, Indonesia is no exception to this trend. Particularly over the past year, Indonesia has shown an improved energy transition commitment. The president issued a regulation that put a moratorium on coal-fired power plants (although with some exceptions) and overhaul the unattractive pricing regulation that had been hindering renewables investment since 2017. Two months later, a major landmark in Indonesia’s energy transition journey was announced in the form of the Just Energy Transition Partnership (JETP) during the G20 summit in Bali. The JETP commitment is not sufficient to keep the global temperature rise below 1.5oC, but significantly more ambitious than the NDC. It committed to mobilizing USD 20 billion worth of investment for the next 3-5 years to accelerate the energy transition in Indonesia.

All the investments made for energy transition will translate to human capital requirements. It is especially true for renewable energy investments that generally are more labor-intensive than the fossil industry. IESR estimated that investment for achieving net-zero emission by 2050 will bring about 800,000 new jobs in 2030 in the power sector only (excluding jobs in electric vehicles, sustainable materials, etc.). The employment will increase to 3.2 million jobs in 2050. These numbers are much higher compared to the current employment in the power sector that is around 270,000.

However, Indonesia seems to be rather unprepared for the transition in the workforce. The government has no clear strategy for developing the workforce capacity needed and research on renewable energy has been in a declining trend. The government agencies responsible for workforce planning, such as the Ministry of Manpower, have so far been excluded in the energy transition discussions. This unpreparedness is even more crucial for the hundred of thousands that currently are working in the fossil fuel supply industry. Not all of them have transferable skills that could be used in the renewable energy sectors, for example, the operators of heavy-duty equipment which comprise a large proportion of the employment in the fossil industry. A more comprehensive policy set and better coordination among the policymakers, especially to include the agencies responsible for workforce development, is indispensable. Otherwise, Indonesia might miss the economic (employment) benefits of the energy transition.

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The Amend of the MEMR Regulation on Rooftop Solar PV Has the Potential to Undermine the Interest of the Residential Market

Jakarta, 6 January 2023 – The Ministry of Energy and Mineral Resources (MEMR) is revising the Minister of Energy and Mineral Resources Regulation No. 26/2021 concerning rooftop solar PV connected to the power supply grid owned by the holders of power supply business licence for the public interest (Izin Usaha Penyediaan Tenaga Listrik untuk Kepentingan Umum) or commonly referred to as IUPTLU. This change is intended to address the difficulties with installing rooftop solar PV that has occurred in the last year since the ministerial regulation was officially issued.

In the public hearing that was held on Friday, January 6 2023, the Ministry of Energy and Mineral Resources presented substance changes, including there is no limit to the maximum capacity of 100% installed capacity of a rooftop solar power plant, but based on system quota, electricity exports are abolished (no longer counted as bill deduction), capacity costs for industrial customers is nullified (no longer 5 hours), and the transition rules for existing customers are enforced within a certain time.

“Since it was promulgated in August 2021, MEMR Reg No. 26/2021 practically does not work because PLN refuses to implement it. As a result, the government’s target of 450 MWp of additional solar PV capacity in 2022 was not achieved. This revision seems to be a meeting point between the government’s interests and PLN and accommodates PLN’s interests in reducing the potential for electricity exports from solar PV users due to net-metering regulations considering the overcapacity conditions. But AESI regrets that this accommodation has the potential to reduce the economy and interest in residential rooftop solar PV, which has the potential to grow,” said Fabby Tumiwa, Chairman of the Indonesian Solar Energy Association (AESI) in Jakarta.

Since January 2022, 10-15% rooftop solar PV capacity restrictions have occurred in various regions in Indonesia for customers, both residential on the kilowatt scale to industrial customers with capacities on the megawatt scale. This capacity limitation discombobulated the provisions of MEMR Reg No. 26/2021 (maximum 100% installed electric power) and reduced potential customers’ interest to adopt rooftop solar.

In the proposed changes to the substance of the Ministerial Regulation, the capacity limit of up to 100% will not be reinstated but will be based on a quota system with first come, first serve. This change directly responds to capacity restrictions occurring in the field. However, the technical determination of system quotas needs to be clarified, especially concerning renewable energy development plans in the regions. In addition, the period for setting quotas per 5 years is too long due to the dynamics of electricity supply technology.

AESI supports the determination of quotas by taking into account the reliability of the IUPTLU electricity network but proposes that capacity quotas be determined every 2 years, with a review conducted every six months.

Eradicating net metering by eliminating the export of electricity to the PLN grid, which applies to all customer categories without exception, will have major impacts on the residential (household) market. The current economic level of rooftop solar PV is still influenced by net metering because the household load profile is mostly at night. The absence of exports will lessen the reduction in household electricity bills and extend the payback period for purchasing a rooftop solar system, making rooftop solar unattractive for household customers.

“A market survey conducted by the Institute for Essential Services Reform (IESR) in 7 provinces in Indonesia in 2019 – 2021 shows that the economy of solar PV is an important and determining factor for residential customers to use rooftop solar. The majority of respondents also want to get savings of at least 50% and clear and fast installation procedures,” added Marlistya Citraningrum, Manager of the IESR Sustainable Energy Access Program.

The National Strategic Project (PSN) for rooftop solar PV with a target of 3.6 GW in 2025 and achieving the 23% renewable energy target requires community participation. With just a 20% market share for R2 and R3 class customers (3,500 VA and above), there is a potential of 400,000 households throughout Indonesia – equivalent to 1.2 GWp of rooftop solar if each instals a minimum of 3 kWp.

The impact on residential rooftop PV will reduce the benefits of creating green jobs through small-scale solar PV installation businesses targeting the household market segment, which has started to grow since 2018. With the potential for adoption spread across various cities in Indonesia, the residential rooftop solar PV market also contributes to the opening of green jobs, for example, technicians and installers, and the growth of MSME rooftop solar PV installers. If the latest revision of the MEMR regulation is passed with the currently proposed clauses, the growth and opportunities of these green businesses will certainly be hampered. AESI and IESR recommend that net metering be implemented for residential customers with export-import calculations which can be discussed later.

In the public hearing, there were many questions raised by solar energy developers (developers), installers (EPC companies), local governments, and rooftop PV users.

AESI assesses that instead of supporting the renewable energy transition, the revision of this regulation will hinder the addition of rooftop PV. For this reason, AESI proposes that the export of electricity from residential customers is still permitted on condition that the installed capacity is 100% of the customer’s power. This provision is reviewed within 5 years or after the residential rooftop PV reaches a cumulative 5% of the total installed capacity of generators in the system. 

The Ministry of Energy and Mineral Resources has opened a channel for submitting input for this process until January 13, 2023.

IESR: Indonesia Needs Economic Transformation in Coal-Produced Regions

press release

Jakarta, 11 July 2022 – The demand for coal as a long-term energy source is predicted to decrease significantly. This trend is affected by stronger climate commitment from coal-imported countries to shift into renewable energy. Institute for Essential Services Reform (IESR) in its study even said that if the government’s commitment to reducing emissions was following the Paris Agreement to achieve net-zero emission by 2050, then in 2045, coal would no longer be utilized in Indonesia’s energy system. It demands the government’s commitment to preparing the economic transformation and employment for regions whose income is dominated by the coal sector.

Fabby Tumiwa, Executive Director of IESR said that the enhancement of emissions target in Nationally Determined Contribution (NDC) from countries that utilize coal, such as China, Japan, South Korea, United States, Europe Union, South Africa, and other countries, will affect the reduction to fossil energy projects’ funding. Referring to the Paris Agreement, if whole countries adopt a more aggressive coal phase-out, then in 2030, coal production will drop by 20%, 30% in 2040, and 90% in 2050.

“This production reduction should be anticipated due to the impact on employment and will also affect the national and coal-produced regions’ income. This threat is quite serious considering coal-produced regions do not have many choices for their economic alternative while carrying out post-coal mining economic transformation will take a long time. Now is the time to make a transformation and prepare the foundation to conduct post-coal mining and post-coal power plant economic transformation. The failure to succeed in economic transformation will not only cause a higher unemployment rate but also the decline in economic competitiveness,” said Fabby.

He added that coal-produced regions need to be supported with a particular national policy. IESR even recommended this issue should be prioritized and included in forming RPJMN 2024-2029.

Julius Christian, the author of the IESR study titled Redefining Future Jobs: The implication of the coal phase-out to the employment sector and economic transformation in Indonesia’s coal regions urged the central and coal-produced regions in Indonesia to anticipate the possibility of income reduction and employment opportunities for the workers from the coal sector.

“Collaboration between the central and regional government will be an important note in preparing the long-term economic strategy to realize a more diverse economic structure and no longer depend on coal,” Julius explained.

In 2020, there were approximately 250.000 workers who directly worked in the mining sector. These workers, in general, are aged under 50 years old. Therefore they still could be prepared with various types of training to shift to other employment sectors. Besides, the government also needs to prepare the allowance and social safety net to anticipate the rapid decline in coal demand.

“Coal workers are one of the most impacted groups from this coal decline. However, currently, the workers have not realized the risk they will be facing and have not been included in all energy transition discourse,” added Julius.

Ronald Suryadi, a researcher at IESR who is also writing the report Redefining Future Job, also said that economic transformation needs to be addressed for Indonesia’s provinces that its Gross Regional Domestic Product (GRDP) is mainly gained from the coal sector, such as North Kalimantan that produces 48% national coal supply, South Kalimantan (32%), South Sumatra (9%), North Kalimantan (3%), and Central Kalimantan (3%).

“A gradual economic transformation is not only needed to mitigate the resulting impact, but also to achieve an economic structure that can keep up with the current development in the future,” said Ronald.

IESR pushes for an inclusive planning and strategy formulation process by involving the affected groups, especially the workers and the community around mining areas. The purpose is that economic transformation will be carried out sustainably and correspond to people’s needs. For instance, economic transformation in the coal area can be carried out by modernizing the agricultural sector. Besides, the government also needs to strengthen the existing main industries with a high multiplier effect, such as the food and chemical industries. In addition, the preparation to establish an economy that is centralized on services can be implemented by building infrastructure, restoring the environment, and intensifying human resources.

The IESR study ‘Redefining Future Jobs’ can be downloaded at https://s.id/FutureJobs. ***

Green Jobs: Promising yet Untapped Opportunity

Jakarta, November 6, 2021 – Green jobs have become an issue that is starting to be discussed a lot. Young people try to understand green jobs to figure out what fields are included in green jobs, what are the prospects for future opportunities, as well as what should be prepared to work in this sector. Project Clean, Affordable, and Secure Energy (CASE) for Southeast Asia in collaboration with Indonesia Mengglobal hosted a webinar entitled “Green Jobs in Indonesia: Opportunities, Challenges, and Future Outlook” with the aim of providing an overview of green jobs from practitioners in various fields. 

Previously, a mini survey to gain the perception of young people about green jobs was conducted. The survey, which attracted around 200 respondents, revealed one interesting finding, namely that more than 90% of respondents stated that they would prefer companies that have concern on environmental issues.

Desi Ayu Pirmasari, a researcher at the University of Leeds, England, stated that green jobs have a wide sector. “Green jobs have a very broad spectrum, not limited to specific sectors such as energy. For example, when civil servants make greener city plans, procurement staff who consider the carbon footprint in the procurement of goods. Lawyers can also become green jobs if they help others to breathe fresh air and fight for climate change.”

Desi’s opinion is agreed by Julius Christian, a researcher on clean fuels at IESR, with the trend of using renewable energy that is getting wider. According to him, currently there are so many sectors that need workers who understand sustainability, SDGs, and the environment concepts in general.

“In the energy sector only, in the next 5-10 years renewable energy will be more competitive with fossil energy, so the energy transition is inevitable. From the IESR study on Deep Decarbonization itself, there will be around 3.2 million new jobs. Of course, this is a big opportunity and must be prepared from now, “explained Julius.

Preparation of human resources and financial resources is very important, because the development of technology moves so fast requires qualified human resources and adequate financial support.

“So if in the future we want to take advantage of this (green jobs) opportunity, for example making a solar panel manufacturing plant in Indonesia, we must act quickly. We have to consider the full lifecycle of everything, from the carbon footprint of the manufacturing process to use, and the results are not instant. We can only see (the results) in the next 10 years for instance,” said Noor Titan Putri, post-doctoral researcher, Helmholtz-Zentrum Berlin, Germany.

Jonathan Davy, founder and CEO of Ecoxyztem Venture Builder, said that many entrepreneurs are starting to invest in the green jobs sector. The challenge of developing an environmentally friendly business in Indonesia lies in the adoption of environmentally friendly technologies.

“Technology adoption must meet three categories, i.e desirability (whether the market wants to use it), viability (whether technology is needed), and feasibility (whether the business is possible to run). Currently, we are still heavily regulated so that some business processes are still locked,” explained Jonathan.

Jonathan also highlighted the development of human resources, which he said needed to shift the mindset from how many jobs could absorb workers to how many people could create jobs.