Kompas | Energy Transition is Highly Complex, Requires Acceleration of Coal-Fired Power Plant Retirement and Integration of Renewable Energy Networks

Energy transition is a complex process with significant implications, requiring multi-stakeholder dialogue to anticipate and mitigate the impacts of energy transition in Indonesia. This is the foundation for the Indonesia Energy Transition Dialogue (IETD) 2023, which will be held on September 18-20, 2023.

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Warta Ekonomi | Not Only Transportation, IESR: Wind Direction Highly Determines Air Pollution in Jakarta.

Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, stated that the air pollution issue in the capital of Indonesia, Jakarta, is not solely caused by motor vehicles and waste incineration. An important factor proven to play a significant role in this regard is the prevailing wind direction in this metropolitan area.

Read more on Warta Ekonomi.

IESR: Indonesia Needs Comprehensive Package Policy for Energy Transition

Jakarta, 27 June 2023 – The urgency to shift energy transition into a cleaner, more sustainable one has become increasingly crucial, as highlighted by the IPCC synthesis reports, which states that global temperature has already increased 1.1 degree Celsius. Energy, as the driver of economic growth, has been a key factor in economic activities since the very beginning of fossil minerals mining. However, transitioning to cleaner energy systems brings consequences of decreased coal demand, posing a serious threat to regions heavily reliant on the coal economy.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform during the panel discussion of the ASEAN Sustainable Energy Finance on Tuesday, 27 June 2023, emphasized the situation in several provinces in Indonesia which need to consider alternative economic streams, as their local revenue currently comes from coal mining-related activity.

“We need to pay attention to some provinces such as East Kalimantan, which produces 40% of Indonesian coal, and South Sumatera which produces 15%. We need to build local capacity to generate revenue from sectors other than coal,” Fabby said.

Fabby added that the government needs to prepare a comprehensive package of transition finance. The funding should cover not only the technical costs, such as retiring coal fleet, development of renewable energy, improving the grid, but also preparing the community, particularly those employed in the coal mining industry, to adapt into the new labor market. It includes the reskilling and retraining to align their skill with market demand.

“The national government must provide special assistance for regions heavily reliant on coal economics,” Fabby emphasized.

Eunjoo Park-Minc, Senior Advisor on Financial Institutions Southeast Asia of Financial Futures Centre (FFC), agreed on the significant role of government during the transition, especially in designing a supportive policy framework which enables the private sector to participate.

“The role of the investors during this transition time is to develop innovative financing mechanisms. To make it more catalytic, we need a supportive policy framework to make it work,” she said.

Besides that, Eunjoo pointed out the need for international cooperation, as most of the (transition) projects are taking place in the developing countries while the financing primarily comes from the developed countries. 

The Asian Development Bank (ADB), as one of the multilateral banks financing the energy transition emphasized the importance of justness aspects. This is explained by Veronica Joffre, Senior Gender and Social Development Specialist at ADB. 

“One of the aspects of ETM (Energy Transition Mechanisms) is the justness. It means potential social impact should be assessed and managed, including employment, supply chains, and the environment,” said Veronica.

She added that as achieving net-zero emissions is the path for the future, the transition towards that direction should be consciously designed.

Possible Intervention Options to Reduce Energy Sector Emissions

Jakarta, 30 May 2023 – Transforming the power sector into a low carbon energy system is an absolute necessity. One of them is to pursue emission reduction targets in order to maintain the increase in global average temperature to be at the level of 1.5 ℃. It is stated in the IPCC AR6 Synthesis Report that from 2011 – 2020, the average global temperature has increased by 1.1℃, amidst various human activities that continue to produce emissions. The energy sector is one of the largest contributors to emissions in Indonesia after forestry and land use. Plans to develop fossil-based energy generators are an obstacle in efforts to reduce emissions from the electricity sector.

Indonesia is in the top three rankings as a country with CFPP in the pipeline after China and India. A total of 13.8 GW of CFPP with various development progresses have been included in the PLN RUPTL 2021 – 2030.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), during the launching report and public discussion ‘Delivering Power Sector Transition’ said that one of the reasons for the increase in the global average temperature is the burning of fossil fuels.

“Thus, reducing coal capacity in the electricity system is one of the key actions in efforts to achieve the target of the Paris Agreement, which is to keep global temperature rise at 1.5 degrees Celsius,” he said.

In the Indonesian context, commercial issues have become one of the aggravating factors for the coal phase-out. Dadan Kusdiana, Director General of New and Renewable Energy and Energy Conservation, Ministry of Energy and Mineral Resources, conveyed that coal phase out still requires joint encouragement from all parties.

“We still have to fight for this (phasing out coal and adding renewable energy capacity). Because, according to current regulations, they are not in the same regulations. However, I want to encourage that the process must be done in the same rhythm,” he said.

IESR considers the coal phase-out in Indonesia as an important matter, because as one of the recipients of the Just Energy Transition Partnership (JETP) funding commitment, Indonesia has an obligation to reach a peak emission of 290 million tons of CO2 in 2030 and increase the renewable energy mix by 34% in 2030.

“To achieve the target of the Paris Agreement, the target set by JETP is actually not enough. However, this can be a starting point for accelerating the development of renewable energy in Indonesia,” explained Raditya Wiranegara, IESR Senior Researcher who is a member of the study author team.

Raditya added that in the Delivering Power Sector Transition report, IESR found that of the 13.8 GW PLTU planned for construction in the 2021-2030 RUPTL, 2.9 GW could be cancelled, 10.6 GW needed to end operations early, and 220 MW were considered for repurposing with renewable energy-based power plants such as biomass.

Akbar Bagaskara, power sector researcher in IESR added that the reduction in emissions will be directly impact the cost of the electricity system.

“The cancellation of CFPP construction accompanied by early retirement for the existing CFPP will be the best scenario for reducing emissions. Cancellation of CFPP in the pipeline will reduce emissions significantly. However, it is felt that this is still not optimal to achieve the JETP target in 2030,” he added.

IESR calculates that to achieve the JETP target, at least 8.6 GW of coal must be retired before 2030, followed by the phase out of 7.6 GW of coal-fired power plants before 2040.

Gigih Udi Utomo, Director of Energy Conservation at the Ministry of Energy and Mineral Resources, commented that the coal phase-out and the cancellation of the CFPP need to be seen as two different things.

“When we talk about the early retirement road map, we are referring to the mandate of Presidential Decree 112/2022. Early retirement is for existing CFPPs, while this 13.8 GW topic is for CFPP that is not yet operating and is already in the RUPTL, so that each of the options and scenarios offered in the study needs to be explored again and requires dialogue with relevant stakeholders,” he explained.

Independent Power Producers as PLN’s partner in meeting national electricity demands state that energy business actors are basically willing to support the government in the transition.

“However, what needs to be noted is that the participation of projects that will be canceled or CFPP units whose retirement age will be accelerated must be based on the voluntarily principle not mandatory because basically the project owner has secured the contract with PLN,” said Chairman of the Association of Indonesian Private Electricity Producers (APLSI), Arthur Simatupang.

Kirana Sastrawijaya, Senior Partner of Umbra, reminded that it is important to review the PPA (Power Purchase Agreement) document between IPPs and PLN especially for the proposal to cancel the CFPP construction.

“Presidential Decree No. 112/2022 can be used as a legal basis for phasing out coal, but there needs to be list of criteria of which CFPPs unit eligible for phase-out. This Presidential Decree can also become a basis for canceling a CFPP, although it does not specifically talk about cancellation,” she said.

In the context of legal law, Karina stressed that potential legal disputes could occur. So, in addition to the applicable government regulations, the contract document (PPA) must be a reference document because it regulates in detail various restrictions on the parties and funders.

IEVO 2023: Reviewing Indonesia’s Electric Vehicle Ecosystem

Jakarta, 21 February 2023 – The transportation sector contributes almost a quarter of the energy sector’s emissions in 2021. Most of the transportation sector’s emissions come from fuel, of which 52% comes from imported fuel. Given the Indonesian government’s target of achieving net-zero emission status by 2060 or sooner, it is important to decarbonize the transportation sector.

Adapting the ASI approach, i.e: Avoid – Shift – Improve, the Institute for Essential Services Reform (IESR) is looking at one of the decarbonization strategies for the transportation sector, namely electric vehicles. Explained by Fabby Tumiwa, Executive Director of IESR during the launch report of the Indonesia Electric Vehicle Outlook 2023, that the number of electric vehicles in Indonesia has continued to increase in the last 5 years, but the market share is still low.

“However, the electric vehicle market share is only 1% of total vehicle sales in Indonesia per year. Several factors still make potential buyers reluctant, such as the high initial price, and supporting ecosystems such as charging stations which are still limited in number,” he explained.

As one of the supporting ecosystems for electric vehicles, charging stations, both Public Charging Stations (SPKLU) and Public Battery Swapping Stations (SPBKLU) have an important role in accelerating the adoption of electric vehicles. Psychologically, the number of charging stations influences the decision of potential EV consumers.

“In numbers, the number of SPKLUs actually continues to grow. But currently it is still concentrated in Java and Bali. Only 12% of SPKLU are located outside Java – Bali,” explained Faris Adnan, IESR Power System researcher.

In addition to the number of charging stations, Faris stated a few more things, including the type of charging system, which currently most of the SPKLU is slow charging type one. It is necessary to look for a comprehensive location to determine the type of charging used. Office areas and shopping centers where people will stay around can use medium or slow charging. However, for places such as public charging on roads, it must use the fast-charging type.

Standardization of charging ports is also one of the discussions in this report. Faris explained that currently there are 3 types of charging ports for four-wheeled electric vehicles. This is one of the obstacles for prospective SPKLU investors because the obligation to provide these three types of ports has an impact on the investment capital that must be provided.

“If the government manages to standardize port charging, the investment value for SPKLU will be more attractive,” explained Faris.

Ilham Fahreza Surya, IESR environmental policy researcher, who is also the author of IEVO 2023 added that the government’s discourse to provide price incentives for electric vehicles should focus specifically on public transportation, logistics vehicles, and two-wheeled vehicles.

“We recommend that the government give priority to two-wheeled vehicles to get incentives to cut prices, and also combine this incentive plan with TKDN rules. So those who are entitled to receive incentives are motorbikes that come from manufacturers who have complied with TKDN regulations,” explained Ilham.

From an industrial standpoint, electric vehicle assembly is the most advanced industry compared to the other supporting electric vehicles component industry. One of the highlights is Indonesia’s plan to downstream nickel into batteries.

Pintoko Aji, IESR’s renewable energy researcher, sees that the Indonesian government’s plan can be utilized by the electric vehicle industry that intends to operate a factory in Indonesia.

“With the existence of a domestic battery industry, domestic electric vehicle manufacturers can use domestically produced batteries in their vehicles as a strategy for fulfilling TKDN components,” explained Pintoko.

In a panel discussion following the presentation of the Indonesia Energy Transition Outlook 2023 report, Wildan Fujiansah, Coordinator of Electricity Technical Feasibility, the Ministry of Energy and Mineral Resources explained that, to answer several issues in the provision of electric vehicle ecosystems in Indonesia, they issued a MEMR ministerial regulation No.1/2023 which regulates one of them regarding standardization charging port, power and battery size.

“Ministerial Regulation No. 1/2023 also regulates SPKLU investment, which previously had to provide 3 charging ports, now only 1 is enough. One of the objectives of this regulation is indeed to boost SPKLU investment,” explained Wildan.

Riza, Senior Researcher for Electric Vehicle Charging Infrastructure, BRIN stated that from a technical point of view the electric vehicle charging process is not just a device with a certain technology.

“In its development, the charging process must match the battery features while the EV continues to develop, “said Riza.

From the user side, two-wheeled electric vehicles are currently widely used by ride hailing companies for their driver partners. However, to increase the confidence of potential users to switch to using electric vehicles, the number of supporting infrastructure, especially battery swapping stations, needs to be increased.

Rivana Mezaya, Director of Digital and Sustainability Grab Indonesia emphasized that from an industrial point of view, electric vehicle users can explore various efforts to own electric vehicle units, but support is needed regarding the availability of supporting infrastructure such as battery swapping stations.

“This collaboration with various parties will encourage the general public to be able to take part in the energy transition in Indonesia,” said Meza.

In addition to collaboration to create an ecosystem that supports electric vehicles from upstream to downstream, dissemination of comprehensive, easily accessible and discoverable information is very important to encourage changes in people’s behavior. This was said by Indira Darmoyono, Chairperson of the Environmental and Energy Transportation Forum, Indonesian Transportation Society.

“Good practices in using electric vehicles and important information such as where conversion workshops are certified, conversion costs, incentives in various forms must be widely publicized so that people have sufficient information and are motivated to switch to electric vehicles,” concluded Indira.

The Indonesia Electric Vehicle Outlook report is one of the main IESR reports, and can be read through https://iesr.or.id/pustaka/indonesia-electric-vehicle-outlook-ievo-2023 

Time Moves On, Has Indonesia’s Energy Transition Moved Forward?

Indonesia’s energy transition journey is entering a critical period considering that the available time is getting shorter. Indonesia’s closest target is to achieve 23% of the renewable energy mix by 2025. Meanwhile, the Just Energy Transition Partnership (JETP) agreement committed at the 2022 G20 Summit targets 34% of renewable energy by 2030.

In this increasingly shorter time span, the progress of the energy transition in Indonesia is unfortunately still stagnant. The Transition Readiness Framework developed by the Institute for Essential Services Reform (IESR) since 2020 records that in 2022 there are no significant developments in various energy transition sectors in Indonesia. Political commitment and energy transition policies, as well as the investment climate for renewable energy plants are in the low category. This can be interpreted as a challenge in the development of renewable energy as well as a factor that needs to be considered so that Indonesia does not fail to achieve its targets.

It is undeniable that there is an increase in the installed capacity of renewable energy every year. However, this additional capacity is not fast enough to meet Indonesia’s renewable energy capacity targets in an effort to limit the increase in the average global temperature below 1.5 degrees Celsius.

Why is it important for Indonesia to achieve its renewable energy targets? Indonesia is included in the top ten largest emitting countries in the world. Thus, Indonesia has a responsibility to reduce its greenhouse gas emissions significantly. Indonesia’s emissions are dominated by two sectors, namely land use change and the energy sector.

From the energy sector, emissions can be reduced drastically by focusing on the electricity sector by increasing the share of renewable energy generation and switching to electric systems (electrification) for vehicles and industry.

The Indonesia Energy Transition Outlook 2023 sees an opportunity to add renewable energy capacity in 2023. The existence of international assistance to reduce emissions, especially from the energy sector, must be a catalyst for accelerating renewable energy capacity as well as a means of creating a portfolio to attract more investment for renewable energy. To achieve net zero emissions status by 2050, Indonesia needs USD 25-30 million annually.

Systematic changes to improve the investment climate are needed. According to renewable energy developers, there are at least three points that need to be improved, namely the need for FiT (Fit in Tariff), fiscal incentives, and soft loans.