APLSI Declares Just Energy Transition, Supports Acceleration of Green Energy Mix

press release

Jakarta, 15 November 2022- Presidential Regulation No. 112/2022 on the Acceleration of Renewable Energy Development for Electricity Supply mandates the Ministry of Energy and Mineral Resources (MEMR) to develop a roadmap for the early retirement of the coal-fired power plants (CFPP). It is in line with Indonesia’s commitment to the Global Coal to Clean Power Transition declaration at the Conference of the Parties 26 Summit (COP26 Summit), which considers the early retirement of coal-fired power plants in the 2040s, with international funding and technical assistance, and achieving the Net Zero Emission (NZE) target by 2060 or earlier as stated by President Joko Widodo.

The Institute Essential Services Reform (IESR) views that the government’s goal needs to be supported by various parties, including Independent Power Producers (IPP), who currently operate more than 15 GW of power plants in Indonesia.

“Indonesia Independent Power Producers (APLSI) supports the Government of Indonesia’s plans and policies that encourage decarbonisation and energy transition. We are ready to transform to continue contributing to an independent, increasingly environmentally friendly and sustainable national electricity, to support the Indonesian Government’s Net Zero Emission target,” said Arthur Simatupang, Chairman of APLSI, at the declaration of the Just Energy Transition Initiative by Indonesian Power Producers organized by IESR in collaboration with APLSI in conjunction with the 2022 Indonesia G20 Summit in Bali. 

“APLSI wishes to optimize the role of the private sector as a government partner in building a reliable electricity system based on just energy transition by diversifying investment in power plants from various renewable energy sources whose potential is huge in Indonesia,” Arthur explained.

It has also been stated in the Expression of Interest between APLSI and the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) at the Kadin Net Zero Hub event at the B20 Indonesia Summit. At that event, Arthur mentioned that his party had signed an agreement to conduct an intensive joint study on the diversification of power plant investment so that the role of the private sector would be optimal in realizing low-carbon economic growth by partnering with the government in building a reliable, independent electricity system, and a just energy transition.

Furthermore, IESR said that a just energy transition would run with the availability of space for renewable energy development, including by terminating the operational period of CFPP more quickly.

“The IESR study found that to be consistent with limiting temperature rise to 1.5°C, all CFPPs, that are not equipped with carbon capture, must be retired before 2045. In the period 2022-2030, at least 9.2 GW of power plants must be retired, of which 4.2 GW comes from private electricity, without which it will be difficult to achieve NZE,” said Fabby Tumiwa, Executive Director of IESR.

On the same occasion, Rida Mulyana, Secretary General, MEMR, said the importance of partnership to decarbonise the energy system. He explained that based on Presidential Regulation 112/2022, Indonesia plans not to build new coal-fired power plants after 2030 except those that are committed or under construction.

Furthermore, Wanhar, Director of Electricity Program Development at the Directorate General of Electricity, MEMR outlined a roadmap for the early retirement of coal-fired power plants in Indonesia.

Through his presentation, Wanhar explained that the government also took various steps to achieve the NZE 2060 target, including ensuring the retirement of CFPP owned by IPP after the power purchase agreement (PPA) was ended, and Combined Cycle PP retired after the age of 30.  Furthermore, starting in 2030, there is an increasingly massive development of solar power plants, followed by wind power plants both on land and offshore starting in 2037.

However, Wanhar emphasized, several provisions need to be fulfilled in terminating the operational period of coal-fired power plants in Indonesia.

“Retirement of CFFP can only be done once grid reliability is ensured, with substitution from renewable replacement and/or transmission system installation, the assurance of just transition of a fair energy transition. There should not be any negative social impact from coal plant early retirement, affordable renewable energy generation prices, and the availability of international financing support,” Wanhar explained.

Based on IESR’s “Financing Indonesia’s Coal Phase-out” study with the Center for Global Sustainability, University of Maryland, to retire 9.2 GW of coal-fired power plants by 2030, Indonesia needs international funding support to meet the cost of retiring the power plants, around USD 4.6 billion by 2030. 

Supporting decarbonisation efforts in the power sector, the Government of Indonesia will work with the International Partners Group (IPG) to realize investment plans to support the early retirement of coal-fired power plants as well as other low-carbon technologies. The cooperation will support the achievement of Indonesia’s electricity system decarbonisation targets, including achieving peak electricity sector emissions of 290 million tonnes of CO2 by 2030, preparing CFPP projects that must be retired early, and ensuring the achievement of a renewable energy mix of at least 34% by 2030.

“For the early retirement of coal-fired power plants, especially those owned by IPPs, to take place with the principle of just energy, the government must form a national commission or task force involving relevant government agencies by the end of this year. Its tasks include comprehensively assessing the list of coal-fired power plants that have the potential to be retired immediately, as well as renegotiating with IPPs,” explained Deon Arinaldo, Energy Transformation Programme Manager, IESR.

Deon added that CFPP contract negotiations between PLN and IPP must begin by considering the potential for additional costs without jeopardizing the investment climate in Indonesia. 

“The government also needs to assess the appropriate financing mechanism to retire coal-fired power plants owned by private power producers. The financing mechanism also needs to support the link between the financing of early retirement of CFPP and investment in renewable energy so that it can mobilize international financial support,” he concluded.

The Declaration of Supporting the Roadmap of Just Energy Transition was carried out to coincide with the G20 Summit. This is expected to provide a positive signal for the Indonesian Government’s leadership at the G20, which also highlights the energy transition or the transition from polluting energy to renewable energy as one of the main issues.

“Indonesia’s leadership in conducting early retirement of power plants to accelerate the energy transition will create a good precedent for other G20 countries.  The spirit to accelerate the end of CFPP operations through the declaration of IPPs  supported by the government and PLN will be an example for India, which will hold the G20 presidency in 2023 and become an example for other ASEAN countries in Indonesia’s leadership in ASEAN in 2023,” concluded Fabby Tumiwa.***

Points of declaration:

Support the Roadmap for a Just Energy Transition in Indonesia

  1. Willing to transform to continue to contribute to an independent national electricity that is increasingly environmentally friendly and sustainable to support the net zero emission target.
  2. Support the Indonesian government’s plans and policies that encourage decarbonisation and energy transition.
  3. Diversify investment in power generation from various alternative renewable energy sources, in which Indonesia has enormous potential.
  4. Committed to opening up opportunities for renewable green energy sources and a sustainable energy supply ecosystem.
  5. Optimizing the role of the private sector as a government partner in building a reliable electricity system and a just energy transition. 

CFPP Early Retirement is a Decisive Factor for Achieving Ambitious NZE

Dialogue at ISEW 2022 with the topic “Indonesian Energy Transition New Ambition Targets To Achieving Indonesia’s NZE Target””

 

Jakarta, October 10, 2022 – Retiring all coal-fired power plants (CFPP) in Indonesia early by 2045 becomes a determining factor for the accomplishment of zero-emission by 2050 according to the Paris Agreement to reduce the average risen temperature under 1.5 degrees Celsius. This was stated by Fabby Tumiwa, the Executive Director of the Institute for Essential Services Reform (IESR) in his welcoming remarks at Indonesia Sustainable Energy Week (ISEW) 2022.

“According to the IESR report, by 2030, Indonesia needs to end the operation of CFPP by 9.2 GW and the operation of all its units by 2045,” he says. He believes that the clause that gives a mandate to the Ministry of Energy and Mineral Resources (MEMR) to prepare a roadmap to accelerate the retirement of the operational period of CFPP in President Regulation No.112/2022 is the best preliminary step.

In line with this statement, Rida Mulyana, the Secretary General of MEMR, on the same occasion, says that President Regulation 112/2022 will attractively draw investments and give incentives for renewable energy. According to Rida, this is the right momentum to encourage the use of renewable energy amidst the high fossil energy prices. In addition, customers’ demand for clean energy rises.

Rida says that the government has made strategies to reduce the operation of CFPP gradually by setting a 30-year maximum contract.

“The capacity (CFPP-ed) will rise to 2030 and afterwards CFPP development will end, and the last CFPP will retire by 2058,” says Rida.

Moreover, he says that to reach net zero emissions by 2060 or earlier according to the government target, super grid development is planned to boost the development of renewable energy and, at the same time, maintain electricity stability. This will open up opportunities to export electricity to other ASEAN countries, and be connected to ASEAN super grid.

 “To support and accelerate renewable energy, Indonesia will need 1 trillion USD by 2060 for the generation and transmission of renewable energy. Financial need will grow in line with Indonesia’s plan to implement early retirement of CFPP for the upcoming years,” Rida says.

 Financial need will decline if renewable energy technology price also decreases. Besides that, the application of President Regulation 112/2022, the implementation of the CFPP retirement program, the uncomplicated permit process for renewable energy, and the accompaniment, and socialization of renewable energy regulation will boost renewable energy development in Indonesia.

 Vivi Yuliawati, the Ad interim Deputy for Maritime Affairs and Natural Resources mentions that to implement the strategy for net zero emissions by 2060, the crucial thing is to formulate technical policy to ease energy transition.

 She hopes that the result of the discussion of ISEW 2022 will be the basis for the preparation of the Medium-Term National Development Plan (RPJMN) 2025-2029 & Long‐Term Development Plan (RPJP) in 2045 by Bappenas related to energy transition to mitigate the impact of transition on the Indonesian socio-economy.

 “Renewable energy technology is not enough, we need a capacity orchestra to build a new capacity in renewable energy,” she says.

 Energy transition narration that involves all levels of the communities is also encouraged during ISEW 2022.

 “ISEW is held to facilitate a more inclusive discussion, includes various stakeholders, including the ones affected by the energy transition. Moreover, it is momentum towards the 20th summit or KTT G20 that will be held by November, which will make energy transition one of its major issues,” says Energy Program Director of Indonesia/ASEAN GIZ Lisa Tinschert.

ISEW was held based on the cooperation among Indonesia Clean Energy Forum (ICEF), Institute for Essential Services Reform (IESR), and Clean, Affordable, Secure Energy for Southeast Asia (CASE). CASE is a cooperation program between two countries: Indonesia – Germany (Directorate of Electricity, Telecommunications and Information Technology, Ministry of National Development Planning/Bappenas, and funded by the Ministry of Economy and Climate Action of the Federal Government of Germany). Before the event, a discourse on energy transition in Indonesia has been held regularly in Indonesia Energy Transition Dialogue (IETD), which this year participated in ISEW 2022. As a premiere in 2022, ISEW will take place for 5 days from October 10 to 14, 2022 with the theme of Reaching Indonesia’s Net Zero Energy System: Unite for Action and Strategy. Everyone can attend the event for free at isew. live.