Pursuing the Target of a 23% Renewable Energy Mix in 2025 Requires an Acceleration Strategy and Political Commitment

press release

Jakarta, January 15, 2024 – The realization of new renewable energy in 2023 was only 13.1% of the target of 17.9% to reach 23% by 2025. Minister of Energy and Mineral Resources, Arifin Tasrif, when presenting the Achievements of the Energy and Mineral Resources Sector in 2023 & Work Program in 2024 put forward eight strategies, including the construction of 10.6 GW of new renewable energy plants, the construction of 3.6 GW of rooftop solar power plants, the implementation of the 13.9 million kL B35 program, and biomass co-firing of 10.2 million tons in 2025 to achieve the target. 

The Institute for Essential Services Reform (IESR) views the progress made in renewable energy by 2023 starkly contrasting the ongoing increase in fossil fuel production and usage. This trend goes against the essence of the energy transition towards net-zero emissions that the government has been advocating since 2021.

IESR assesses that the low achievement of the renewable energy target mix is systemic, caused by various factors, including the delay in the auction of renewable energy plants by PLN since 2019, constraints on the execution of projects that have been contracted due to bankability, the increase in financial interest rates in the last two years, and the COVID-19 pandemic. 

Some renewable energy projects, especially hydropower and geothermal power plants that are the mainstay of the government, such as Batang Toru Hydropower Plant, Baturaden Geothermal Power Plant, and Rajabasa Geothermal Power Plant, which have been delayed in completion, are suspected of contributing to the low achievement of the renewable energy mix in 2023. Likewise, the protracted process of revising Permen of ESDM No. 26/2021 has hampered the implementation of rooftop solar power plants. Therefore, the 3.6 GW rooftop solar power plant PSN needs to be fixed.

The government plans to pursue the development of large-scale renewable energy plants, including floating solar power plants and wind farms. A rooftop PV roadmap has also been prepared with a target of 900 MW in 2023 and 1800 MW in 2024. However, according to Fabby, the unfinished rooftop PV regulation has caused rooftop PV adoption to drop in the residential and business sectors by 20% and 6%, respectively. As a result, based on IESR’s analysis, by the second quarter of 2023, the cumulative installed capacity of rooftop PV only reached 100 MW, far below the target of 900 MW by 2023.

“The government still has two years to pursue the 23 percent renewable energy mix target, but political commitment, PLN support, and extraordinary steps must be needed. There are several ways, including accelerating the execution of projects that have been contracted, especially from Independent Power Producers (IPP). In addition, the government should urge PLN to conduct regular auctions of large-scale power plants this year and simplify the negotiation of Power Purchase Agreements (PPAs) to execute these projects this year. To pursue the target of 10.6 GW in two years, the government must rely on floating, ground-mounted, and 3.6 GW of rooftop solar PV installed capacity. Therefore, the implementation of the revised Permen No. 26/2021 should no longer be delayed,” explained the Executive Director of IESR, Fabby Tumiwa.

Regarding renewable energy investment, from a target of USD 1.8 billion, only USD 1.5 billion was achieved. Meanwhile, in 2024, the government targets USD 2.6 billion. This amount is still far from the need for renewable energy funding of USD 25 billion annually until 2030 to achieve NZE by 2060. To accelerate renewable energy investment growth, the government needs to help prepare renewable energy projects that can be implemented and are feasible to finance.

Fabby suspects that structural problems have caused the renewable energy investment target never to be achieved during the era of President Jokowi’s administration. In contrast, in the world, renewable energy investment has increased and surpassed fossil energy investment in the last five years. For this reason, Fabby proposes a severe evaluation of this issue so that the government can quickly improve the enabling environment for enhancing the renewable energy investment climate, one of which is a review of coal subsidies through the DMO scheme and domestic coal pricing obligations for coal-fired power plant’s (CFPPs) of National Electricity Company (PLN).

Accelerated renewable energy development is necessary to achieve the high mix target in 2030, as stated by the JETP target, and to support Indonesia’s low-carbon development. Contrary to popular belief, renewable energy electricity prices are much cheaper and competitive with fossil fuels.

“From this MEMR achievement report, the minister of energy and mineral resources has acknowledged that renewable energy costs and integration costs for solar and wind power plants can already be competitive with new power plants. There should be no more hesitation in supporting the acceleration of renewable energy. It is necessary to pay attention to gaps and delays in renewable energy development from upstream to downstream and try to build a strategy. This includes the identification and development of early renewable energy project candidates, the process of entering candidates into PLN’s planning, how the renewable energy procurement process in PLN, as well as a clear risk allocation between PLN and IPP for renewable energy developed by the private sector,” said Deon Arinaldo, Program Manager of Energy Transformation, IESR.

In contrast to the low achievement of the renewable energy mix, the MEMR said there was a reduction in GHG emissions in the energy sector in 2023 of 127.67 million tons of carbon dioxide from the target of 116 million tons.

“The achievement of energy sector emission reduction exceeding the target should be appreciated. However, it should also be noted that the energy sector emission reduction target is based on Indonesia’s enhanced NDC target, which, unfortunately, is not yet compatible with the 1.5 C pathway according to the Paris Agreement. The government needs to explore new strategies involving other energy sectors such as the energy consumption sector in the industrial, transportation, and building sectors and even those interconnected between sectors (sector coupling),” said Deon.

According to IESR, Indonesia’s electricity emission intensity is still high compared to other countries in the region. This could hamper investment interest from multinational industries that require low-emission electricity and easy access to renewable energy.

“The government must try to reduce the intensity of GHG emissions in the electricity system by reducing fossil energy generation and increasing renewable energy generation. One option is the early retirement of PLN power plants over 30 years old by 2025, which can also encourage the acceleration of renewable energy generation,” Fabby said.