Advancing Strategies for Increased JETP Funding

press release

Jakarta, August 29, 2023 – The comprehensive investment and policy plan (CIPP), which was initially scheduled for August 2023 to be the end of same year, is considered necessary by the Institute for Essential Services Reform (IESR) to refine the CIPP document to meet the agreed targets and formulate a robust cooperative effort for a just energy transition (Just Energy Transition Partnership/JETP), as well as opening more comprehensive public consultations.

The Executive Director of IESR, Fabby Tumiwa, stated that to reach the goals outlined in the JETP, which include reducing peak greenhouse gas emissions by up to 290 million metric tons of CO2 by 2030 and achieving a renewable energy mix of 34% by the same year, as well as attaining Net Zero Emissions (NZE) by 2050, a minimum of 150 billion is required.

One strategy involves decreasing the capacity of coal-fired power plants (CFPP) before 2030 through either natural or early retirements. IESR  has estimated that a gradual reduction of up to 8.6 GW in CFPP capacity is necessary until 2030. It is important to note that this figure does not account for any reductions in off-grid CFPP capacity outside the PLN’s jurisdiction.

“Until now, IPG and GFANZ’s interest in providing CFPP early retirement funding is shallow, even though a reduction in CFPP is needed to increase penetration of renewable energy,” said Fabby.

IESR estimated the early retirement costs at USD 4 billion, which is lower than the amount assessed by PLN previously. Fabby suggests that IPG should provide funding for the early retirement of CFPP due to its involvement in maintaining the credibility of JETP.

In addition, IESR believes that improving the CIPP document will clarify the funds needed for priority projects, such as constructing renewable energy pipelines. Based on the IESR study, Indonesia must invest USD 1.3 trillion to meet the Paris Agreement objective for the energy transition until 2050, which averages USD 30 billion to USD 40 billion per year. Until 2030, a minimum of USD 130 billion is necessary.

IESR believes that the allocation of the grant portion in the JETP scheme needs to be increased to support broad aspects of a just transition and the transformation of crucial actors so they can implement the ambitious CIPP soon. At least the portion of the grant required is around 10%-15% or USD 2 billion to USD 3 billion in the JETP scheme to execute the energy transition in Indonesia. IESR knows that increasing the grant allocation on the proposed scale requires intense cooperation and commitment from the Indonesian government and international partners in JETP. Through close collaboration, all parties involved can work together to meet this financial need and ensure the success of a sustainable energy transition in Indonesia.

“JETP needs to support the energy transition process in Indonesia, not just determine priority projects to achieve targets. Because JETP requires systemic changes, it requires increasing the capacity of key actors such as PLN and related ministries/agencies, grant funding to compile regulatory/policy changes, as well as supporting affected actors if JETP is implemented later, for example, workers in coal mines or the general public near the CFPP project,” explained Deon Arinaldo, Program Manager Energy Transformation, IESR.

IESR also emphasizes the importance of involving more comprehensive public consultations in the decision-making process related to JETP. Opening up opportunities for a wide range of stakeholders to provide input will ensure that the project accurately reflects community needs and aspirations. Increasing transparency and community involvement will enhance the legitimacy of JETP and lead to more enduring outcomes.

“The public, the primary beneficiary, should have the right to contribute to the CIPP document. Their participation will ensure that the aspects of a just transition, which is one of the spirits of JETP, are reflected accurately as they better understand the real conditions on the ground. The JETP secretariat only held one FGD session with the civil society community at the beginning of compiling this document. In the second leg of the document preparation process, it is hoped that the number of FGD sessions will be increased to more than once. Also, it is crucial to distribute this draft document in advance so that it can be studied before the FGD session,” said Raditya Wiranegara, Senior Analyst of IESR.