Renewable Energy Must Reign Supreme in Southeast Asia

Jakarta, March 27, 2024-Southeast Asia is a world’s fifth-largest economy region in 2022. However, this economic growth comes with a concerning projection: greenhouse gas (GHG) emissions in the region are expected to soar by 60 percent by 2050. Curbing these emissions is pivotal for global efforts to combat climate change. Unfortunately, current endeavors to promote renewable energy in Southeast Asia fall short of aligning with the Paris Agreement, which aims to limit global warming to below 1.5 degrees Celsius.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), stated at the Revision 2024 International Conference in Tokyo (14/3) that ASEAN countries have set a target to achieve a renewable energy mix of 23 percent by 2025. However, he emphasized that this target doesn’t align with the Paris Agreement’s objectives.

“To align with the Paris Agreement, the renewable energy mix needs to account for 55 percent, with variable renewable energy (VRE) contributing 42 percent. Except for Vietnam, Cambodia, and the Philippines, others have yet to reach 5 percent VRE penetration. The good news is that in 2023, ASEAN countries will have over 28 GW of operating utility solar and wind capacity, a 20 percent increase in operating capacity since last year. Currently, they make up 9 percent of ASEAN countries’ total electricity capacity. But in order for ASEAN countries to meet the goal, they need to install more renewable energy,” Fabby remarked.

Fabby further highlighted the relatively abundant renewable energy resources in Southeast Asia, which are estimated to be 40-50 times greater than the region’s current energy needs. He suggested that utilizing floating solar power plants could be a strategic move towards decarbonizing the energy system. He elaborated on the technical potential, with reservoirs boasting 134 to 278 GW and natural water surfaces such as rivers, lakes, and seas holding 343 to 768 GW. However, he stressed the importance of conducting detailed calculations of the technical, market, and economic potential, as well as site-specific assessments to develop floating solar power plants.

Additionally, he highlighted the need for Southeast Asian countries to adopt more ambitious policies, provide robust budget support and incentives, and enact policies that attract investment. The average annual investment in renewable energy capacity should be increased by five times to USD 73 billion per year.

Fabby emphasized that Southeast Asian countries must elevate their ambitions to meet the Paris Agreement targets. As an immediate step, ASEAN should aim for a 23 percent renewable energy mix by 2025 and 40 percent by 2030.

“Various studies have shown that decarbonizing the energy system with renewable energy in Southeast Asia is feasible; however, current policies and actions are insufficient to achieve significant decarbonization by 2050. While renewable energy resources are abundant and ample, substantial investment is needed. Each country must reform policies and manage risks associated with renewable energy projects to attract and mobilize investors further,” Fabby added.

He also cautioned against perpetuating a narrative that prioritizes fossil energy as a baseload generator under the guise of maintaining energy security, while sidelining renewable energy. Such a narrative, he argued, is counterproductive and contradicts the spirit of the Paris Agreement.

Embarking on the Decarbonization Journey of the Steel Industry

Jakarta, 20 March 2024 – The industrial sector is one of the important sectors for reducing emissions. The large energy consumption and its significant contribution to the economy in 2022 amounting to 16.48 percent of Gross Domestic Product (GDP), are strong reasons to make this sector more sustainable. Industries with high energy needs, such as the iron and steel industry, require strategic preparation to carry out decarbonization.

Indonesia is one of the largest steel producing countries in Southeast Asia, and ranks number 15 steel producers in the world. In 2023, Indonesia’s steel production capacity will reach 16 million tonnes and is estimated to reach 33-35 million tonnes in 2030.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), in the webinar “Accelerating the Transformation of the Steel Industry in Southeast Asia: Indonesia Chapter” stated that Indonesian steel production still has high emissions.

“Indonesia’s projected steel demand is predicted to increase. If we don’t take serious decarbonization steps, emissions from the steel industry will also continue to increase,” said Fabby.

We also face international market demands to produce lower carbon steel. For example, the European Union has implemented the Carbon Border Adjustment Mechanism (CBAM), which, effective in 2026, will have a negative effect on the exports of the Indonesian steel industry. For this reason, the steel industry needs to undergo transformation.

Farid Wijaya, Senior Analyst at IESR, explained that decarbonization for the steel industry will bring prospects for economic growth, although currently there are still quite a lot of challenges.

“Green industrial standards can be one way to encourage environmentally friendly industries. Green standards for steel have only recently been established and are still limited to sheet steel per layer. “Currently there is no steel industry that has received a green certificate due to implementation limitations,” said Farid.

Kajol, Program Manager for Climate Neutral Industry Southeast Asia, Agora Industry, added that currently almost 80% of steel production is carried out through blast furnace technology.

“We have to start thinking about better and modern technology to replace blast furnaces. “When the blast furnace facilities currently operating start to become less efficient in 2030-2040, we must replace them with more modern technology and no longer invest in blast furnaces,” she explained.

One of the technologies Kajol refers to is Direct Reduced Iron (DRI) which can produce primary steel using natural gas or clean hydrogen. Iron ore is reduced to produce DRI, which can then be melted in an electric arc furnace (EAF) to produce primary steel.

Viable strategies for decarbonizing the steel industry include direct and indirect use of renewable energy, resource efficiency and circular economy, and closing the carbon cycle.

Helenna Ariesty, Sustainability Manager of PT Gunung Raja Paksi (GRP) as an industry player emphasized the importance of regulatory certainty in encouraging industrial decarbonization.

“We face several challenges to navigate the inconsistent policy direction. Apart from that, access to funding is affordable considering the initial investment required is significant,” Helenna said.

Joseph Cordonnier, Industrial Policy Analyst, OECD agrees that policy and access to funding will be key framework components for building a supporting ecosystem for industrial decarbonization.

“As part of this framework we also have to really look at how to maximize the utilization of existing assets based on engineering variables, energy efficiency and emission reduction of these assets,” said Joseph.

Fausan Arif Darmaji, Infrastructure Development Analyst, Green Industry Center, Ministry of Industry said the government is aware of the need to reduce emissions from Indonesian steel production.

“The steel sector is also our current focus. “While we are waiting for the policy regulations that are currently being made, we are providing training on GHG calculations for the steel sector, as well as calculating the economic value of carbon,” said Fausan.

Deon Arinaldo, IESR Energy Transformation Program Manager closed this webinar by underlining the need for industrial decarbonization as an effort to remain relevant to the demands of industrial development.

“Currently decarbonization in the industrial sector is still considered a challenge. Not only in Indonesia, but also a global phenomenon. “We must anticipate this trend because decarbonization is inevitable,” said Deon.

Reviewing Indonesia’s Renewable Energy Investment Needs

Investasi energi terbarukan

Jakarta, March 8th, 2024 – Indonesia’s energy transition commitment officially began three years ago when the State Electricity Company (PLN) issued the 2021-2030 Electricity Supply Business Plan (RUPTL) which targets increasing renewable energy capacity as one of the prerequisites for achieving net zero Indonesia’s emissions in 2060, specifically the electricity sector in 2050.

During the Market Review session, Friday 8 March 2024, Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) stated that the development of renewable energy is a necessity. The government, through a number of policies such as RUPTL 2021, and Presidential Decree 112/2022 has announced additional renewable energy capacity as well as a commitment to no longer build new PLTUs except those already in the contract process.

“These commitments must be translated to executable technical and economic plans. Therefore, the RUKN and RUPTL revision process which is currently underway is very important,” said Fabby.

In the 2024 – 2040 RUPTL, PLN plans to increase its renewable energy generation capacity by up to 80 GW. This plan will have the consequence of a significant increase in renewable energy from currently around 9 GW to 70 GW.

Fabby added that this enthusiasm and ambition needs to be monitored by the public considering that the government’s record for increasing renewable energy capacity is always below the target. In pursuing the target of a 23 percent renewable energy mix by 2025, Indonesia has not shown the expected progress. Until 2023, the renewable energy mix will only be 13 percent. This makes the remaining two years a challenge for accelerating renewable energy.

The required cost for building renewable energy plants, which reaches USD 152 billion (equivalent to 2,300 trillion rupiah) by 2040, is in the spotlight. This figure is considered a realistic figure by Fabby, considering that this figure represents investment needs including the need for building renewable energy plants as well as building transmission and distribution networks.

“The figure of USD 152 billion is a realistic figure at this time. We also have to understand that technology continues to develop, it is very possible that in the future this investment need will gradually decrease according to technological developments,” explained Fabby.

Fabby highlighted the government’s intention to involve the private sector more. To invite greater private investment, regulatory improvements are needed, including the National Energy Policy in line with the electricity sector’s net zero emission target in 2050, a review of electricity purchase prices from renewable energy generators, and a review of the current electricity tariffs.

Indonesia Towards the Green Hydrogen Era

Bogor, February 6, 2024 – In facing the increasingly urgent challenge of climate change, one of the crucial steps that must be taken is to accelerate investment in clean energy technologies. One of the most prominent recent innovations is the development of green hydrogen. Based on data from the Ministry of Energy and Mineral Resources (MEMR), Indonesia has a renewable energy potential of around 3,686 gigawatts, which makes it possible for the country to produce green hydrogen.

Farid Wijaya, Senior Analyst at the Institute for Essential Services Reform (IESR), explained that, unlike fossil fuels, hydrogen energy generates only water, electricity, and heat when converted, it does not leave any trace of greenhouse gas emissions or fine dust. The production process is also environmentally friendly, particularly when using the electrolysis method to separate hydrogen from water compounds, where an electric current is used to break down water molecules into oxygen and hydrogen gas. This makes green hydrogen a way to respond to the need for environmental balance and offers opportunities to create new markets and value for industries around the world. 

“According to the IESR study conducted with the Ministry of Investment / Investment Coordinating Board (BKPM), green hydrogen has several significant benefits. These include reinforcing national energy security, accelerating decarbonization, promoting a sustainable economy, storing excess electricity, and enabling fair access to renewable energy. It is an efficient alternative to fossil fuels that can be converted into NH3, alcohol (such as methanol and ethanol), methane, and synthetic fuels. Additionally, its energy density is higher than batteries while being equally practical to fuel oil (bahan bakar minyak, red)” Farid said in the Stakeholders Consultation Forum on the Development and Utilization of Hydrogen and Ammonia on Tuesday (6/2/2024). 

Furthermore, Farid highlighted several factors that support the commercialization of green hydrogen. First, the advantages, benefits, and obligations in use. Second, the availability and accessibility of technology, time, and safety. Third, affordable and competitive prices are accompanied by investment and operations. Fourth, user, environment, and community friendliness.

“Reflecting on this,  we need cooperation and innovation from both the private sector and government, when it comes to meeting the demand for green hydrogen. This involves transformation and transition of economic values to environmentally friendly and green, high market demand to encourage investment, as well as a direction map and regulatory policies to support national transformation and transition,” Farid said. 

Indonesia, said Farid, can learn from other countries that have implemented green hydrogen. For instance, Fortescue Australia faced challenges in funding 550 MW electrolyzer capacity on Gibson Island due to high investment and electricity costs for utilizing hydrogen as an ingredient of ammonia. Some of the issues encountered include high investment and operational costs, limited government subsidies, and the high price of ammonia as a fertilizer.

“To minimize the occurrence of unwanted events in the use of green hydrogen, we need to take strategic steps. First, standardization and certification, which is important to maintain the value of a safe and controlled supply chain. Second, the establishment of policy direction maps and regulations that support the development of green hydrogen in Indonesia. Third, access to resources, especially related to defense, determines the cost efficiency of investment, energy, and mobility. Fourth, the availability of hydrogen utilization technology, in building a domestic market for sustainable utilization. Fifth, potential markets, especially for global export markets, have high selling points and domestic markets. Sixth, financial support such as the provision of binding incentives and disincentives,” Farid explained.

Dialogue on Equitable Transition: Identifying the Role of the Private Sector in Socio-Economic Empowerment of Communities

Replay Event


Background

Indonesia is the third largest coal producing country after India and China in 2022. According to the Ministry of Energy and Mineral Resources, Indonesia targets coal production of 694.5 million tons in 2023, 0.47% higher than the previous year’s target. As of October 2023, Indonesia’s coal production has reached 567.2 tons or 81.67% of this year’s production target. Coal in Indonesia will mostly be sold to the export market (75%-80%) and consumed domestically (20%-25%). However, with the trend of energy transition, Indonesia’s coal demand seems to be declining, one of which is from India. India decreased its coal demand from Indonesia from 8.43 million tons to 6.11 million tons as of June 2023.

In addition to the downward trend in coal demand from abroad, the Indonesian government has endorsed several commitments that will affect the use of coal going forward in line with the energy transition agenda towards renewable energy. In 2022, the Government of Indonesia passed Presidential Regulation No. 112 of 2022 on the Acceleration of Renewable Energy Development for Electricity Generation, which explicitly stipulates a ban on the construction of coal-fired power plants starting in 2030. This commitment was supported through the signing of the Just Energy Transition Partnership (JETP) agreement between Indonesia and IPG and GFANZ. Through the CIPP document, the Government of Indonesia intends to achieve peak emissions in the power sector at 290 MT CO2 and a renewable energy mix of 34% by 2030. In addition, the document also states that Indonesia should strive for an equitable energy transition process where social, economic and environmental impacts are also a concern for policy makers. The existence of national and global policies also has the potential to affect the company’s business and also the socio-economic structure of communities around mining areas.

Extractive industry activities are often the main source of local revenue, but they also cause economic, socio-community and environmental losses. With the energy transition agenda, the government plans to limit coal consumption, which will lead to faster closure of coal mines and affect local community activities. In Law No.4/2009 on Mineral and Coal Mining, post-mining activities require business actors to restore the natural environment to its original state. This is also stipulated in Law No.40/2007 which requires companies in the natural resources sector to carry out Social Responsibility activities which are widely associated with community empowerment. By integrating activities that suit the economic needs of the community with the company’s plans, it is hoped that the community can independently develop their economic activities and can be free from dependence on the company. Thus, the role of the company and local government is important for post-mining activities.

Therefore, IESR intends to invite business actors to provide information and strategies for planning successful community and environmental empowerment programs in preparation for post-mining activities. This event is also expected to strengthen post-mining planning between the government and business owners in the fair energy transition agenda.

Objective

This activity has several objectives, namely:

  1. To obtain and disseminate information related to post-mining reclamation programs both in terms of planning and implementation as well as the challenges faced towards an equitable transition;
  2. Obtain and disseminate information on the role of businesses or industries in preparing for the impact of the energy transition on the community and the surrounding environment;
  3. Identify collaborative forms of post-mining activities to develop based on economic potential, natural resources, and people through the implementation of a just transition;

Presentation

Reclamation and Post-Mining, Koordinator PPNS Minerba – Dr. Y. Sulistiyohadi

Reklamasi-dan-Pascatambang-Koordinator-PPNS-Minerba

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Reclamation and Post-Mining Ombilin1 – Yulfaizon

Reklamasi-Pasca-Tambang-Ombilin1-IESR

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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.

Indonesia’s Effort in Greening the Chemical Industry

Jakarta, 21 November 2023 – Chemical industry is considered as one that is heavy on emission. In Indonesia, various industries, including iron & steel, pulp & paper, cement, and textile interconnect with the chemical industry. The integration of the Indonesian chemical industry, especially ammonia, into the fertilizers industry, contributes to Indonesia’s position as the fifth largest ammonia producer in the world. Indonesia’s proactive measures to green its ammonia industry significantly impact the global ammonia landscape.

Faricha Hidayati, the project coordinator for industry decarbonization at the Institute for Essential Services Reform (IESR) during the webinar titled “Greening the Chemical Industry: International Perspective and Insights” highlights the amount of emission released for every ton of ammonia produced. 

“For every ton of ammonia produced, its average direct emissions are 2.4 tons of CO2. It is two times higher than crude steel and four times that of cement,” Faricha said. 

Given that huge number of emissions, the ammonia industry accounts for 2% of global energy usage. Therefore, decarbonizing the industry is evidently crucial. Faricha further explained that IESR is currently proposing four pillars to decarbonize the ammonia industry in Indonesia: material efficiency, energy efficiency, green ammonia, and the utilization of CCS during the process. 

Faricha added that there is an opportunity to propel the ammonia industry in Indonesia as they are already aware of their emission and have the willingness to figure out a way to limit the emission.

“Another opportunity is Indonesia’s vast potential for green hydrogen projects, coupled with variable renewable energy up to 3,686 GW,” she said.

After assessing the current status quo, IESR urges the government to set a clear emission reduction target for the industrial sector. Though currently Indonesia already has a grand vision on achieving net zero emissions in 2060 or sooner, there is still no clear target and roadmap for the industry sector in contributing to the NZE goal.

Implementing the energy efficiency measures in the ammonia industry is considered as the low- hanging fruit to decarbonize the industry sector. This approach requires least initial investment and technology adoption, while advocating for the long-term strategies.

The full version of the webinar “Greening the Chemical Industry: International Perspective and Insights” can be watched here.