Webinar: Sunset of Coal-Fired Power Plants and the Coal Industry – Reviewing Direction and Multisectoral Impacts in a Just Energy Transition

Background

Indonesia has ratified its commitment to keeping global temperatures below 1.5 degrees Celsius, in line with the Paris Agreement, through Law No. 16 of 2016. The Indonesian government has set climate commitment targets through its enhanced Nationally Determined Contributions (NDCs): a 31.89% reduction in greenhouse gas emissions compared to business-as-usual scenarios and a 43.20% reduction with international assistance by 2030. However, these targets are still insufficient to meet the goals of the Paris Agreement. Based on business-as-usual scenarios, the energy sector is projected to dominate Indonesia’s emissions in the future. The electricity sector can be the first sector to be decarbonized considering the availability of low-emission technologies, such as renewable energy, which are becoming increasingly competitive. However, the Indonesian electricity system is currently dominated by coal-fired power plants.

On November 15, 2022, at the peak of the G20 High-Level Conference, President Joko Widodo and the International Partner Groups (IPG) led by the USA and Japan, including Canada, Denmark, the European Union, France, Germany, Italy, Norway, and the United Kingdom, agreed to the Just Energy Transition Partnership (JETP) agreement. As a follow-up to this agreement, the Indonesian government needs to prepare a Comprehensive Investment and Policy Plan (CIPP) to achieve the target of peak emissions in 2030 and a 34% renewable energy mix in the electricity sector by 2030, as well as support for affected communities. The targets to be achieved are a peak emission of 290 million tons of CO2 in the electricity sector by 2030, net zero by 2050, and a 34% renewable energy mix in the electricity system. As a concrete step, the Indonesian government is currently preparing the CIPP investment plan document, which was originally scheduled to be launched on August 16, 2023, but has been postponed to the end of 2023. This delay is due to the unclear funding framework of the JETP from the IPG countries and the need for further refinement of some analyses in the document. In addition, the government also expects a more inclusive document and opens the opportunity for public consultation in the coming months.

Energy transition in various funding schemes, both JETP and Energy Transition Mechanism (ETM), is expected to prioritize justice aspects, especially for vulnerable and affected groups. The energy transition process should be seen as a comprehensive process that includes the creation of environmentally friendly jobs, social protection for vulnerable groups, as well as skills enhancement and retraining driven by employer programs to address these issues.One of the focuses of JETP is the effort to early retire coal-fired power plants (CFPP) which still contribute about 60% of the overall electricity generation. JETP also recognizes the importance of a fair transition principle for workers and communities affected by the early retirement of PLTU, including the domestic coal industry which will weaken and have an impact on the economy, especially in coal-rich areas. The JETP program in Indonesia must develop a fair transition roadmap that includes the creation of environmentally friendly jobs, social protection for vulnerable groups, as well as skills enhancement and retraining driven by employer programs to address these issues.

The impacts of this coal transition are identified and analyzed in several scenarios to study the relevant outcomes under various future conditions. These outcomes are presented so that stakeholders can make policies that anticipate the impacts that will occur. Therefore, the Institute for Essential Services Reform (IESR) will hold a public discussion to discuss the financing and investment scheme strategies, particularly in relation to the plans and anticipation of the multi-sectoral impacts of the early retirement of coal-fired power plants (PLTU) in efforts to achieve a just energy transition.

Objective:

To present and discuss the impacts resulting from the coal transition process in Indonesia.

To discuss how CIPP JETP supports a just energy transition.

To discuss the role of stakeholders in anticipating these impacts.

Media Briefing: Preparing for Indonesia’s Energy Transition & Anticipating Its Implications and Launching The Indonesia Energy Transition Dialogue (IETD) 2023

Playback Recording

Background

Between 2021 and 2022, the Intergovernmental Panel on Climate Change (IPCC) issued reports from three working groups, all of which uniformly conveyed that there is already scientific evidence related to the climate crisis and its impact on the Earth. One of the key findings of the report is that greenhouse gas emissions due to human activities have contributed to an increase in the Earth’s average temperature by 1.1°C since 1850-1900 and have the potential to rise beyond 1.5°C within the next 20 years. Furthermore, the report also outlines mitigation options that can be pursued and the scale of change that needs to occur, especially in this decade, to stay on track for 1.5°C.

Indonesia ratified the Paris Agreement through Law No. 16/2016. This means that Indonesia has legally committed itself to addressing the challenges of climate change by supporting global efforts to limit the increase in the average temperature to 1.5°C below the pre-industrial era average temperature. According to one of the IPCC models, to achieve this temperature limit, greenhouse gas (GHG) emissions must be reduced by 45% by 2030 compared to GHG emission levels in 2010 and reach net zero by 2050.

As a country that has ratified the Paris Agreement, Indonesia has reaffirmed its commitment to contribute to addressing the climate crisis. Indonesia’s own GHG emission reduction target in the Updated Nationally Determined Contributions (UNDC) is 29%, which increases to 31.89% in the Enhanced Nationally Determined Contributions (ENDC), while the target with international support in the UNDC is 41%, increasing to 43.20% in the ENDC.

A study by the Institute for Essential Services Reform (IESR) and the University of Maryland (2022) found that 9.2 GW of coal must be phased out from the state-owned utility (PLN) grid by 2030, and all unabated coal generation must be retired by 2045 at the latest, to put Indonesia on track to achieve the Paris Agreement’s global temperature target of 1.5°C. The study also concluded that coal emissions should begin to decline before the end of the decade.

Several initiatives and measures are in place to support and facilitate the early retirement of Indonesia’s power plants. In addition to the Transition Mechanism (ETM) launched at COP-26, during the G20 Summit, Indonesia and the International Partnership Group (IPG) have also signed the Just Energy Transition Partnership (JETP) agreement. This agreement aims to achieve the power sector’s peak emissions target of 290 million metric tons of CO2 (MtCO2) by 2030, attain a renewable energy mix of 34% by 2030, and make the power sector carbon-neutral by 2050.

In an effort to strengthen Indonesia’s climate action, the Government of Indonesia received a funding commitment of USD 20 billion from the Just Energy Transition Partnership (JETP) program. The formulation of the implementation of the funding is translated into a Comprehensive Investmentand Policy Plan (CIPP), which focuses on investment areas consisting of developing transmission and distribution networks, the early retirement of coal-fired power plants, accelerating the utilization of baseload-type renewable energy, accelerating the utilization of variable-type renewable energy, and building renewable energy supply chains. The government has finalized the CIPP document and will conduct public consultations over the next few months.

The energy transition can reduce Indonesia’s exposure to similar problems in the future. A smooth and successful energy transition requires the support of all parties, including the general public. Therefore, the process of preparing for the energy transition also needs to pay attention to aspects of inclusiveness. Additionally, it is important to consider impact management and anticipate the implications of the energy transition process. This includes considerations such as the fate of CFPP workers whose operational periods are ending prematurely, the creation of new jobs (green jobs), and how Indonesia’s energy transition can support economic growth through the shift from fossil industries to low-carbon industries.

Therefore, to further discuss the readiness of the energy transition in Indonesia and the launch of the 6th Indonesia Energy Transition Dialogue (IETD), we will organize a Media Briefing. This media briefing aims to provide an overview of the process and impact of Indonesia’s energy transition and to convey the implementation plan of the IETD as a forum for fact-based discussions that support the best policy formulation in the energy sector, facilitating more ambitious climate targets.

1 www.ipcc.ch/sr15/chapter/chapter-2/

2 IESR UMD, 2022, Financing Indonesia coal phase-out

Objective

  1. To inform about the JETP program’s Comprehensive Investment and Policy (CIPP) development.
  2. To discuss the socio-economic implications of the energy transition and anticipation measures in Indonesia.
  3. To announce the implementation details of the Indonesia Energy Transition Dialogue 2023 event on September 18-20, 2023.

Presentation Material

ESDM

130923-DEK-IETD-IESR-ESDM

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Faisal Basri

130923-DEK-IETD-IESR-Faisal-Basri

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Kompas | Indonesia’s Target for Reducing Emissions is Insufficient to Combat Global Warming

Indonesia’s emission reduction target is critically insufficient, aka very far from enough to reduce global warming. Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, said there needed to be a more significant gap between the current policies and emission levels compatible with the Paris Agreement.

Read more on Kompas.

Low Carbon Development Acceleration Requires Target and Strategy Synergy

press release

Jakarta, August 10, 2023 – Sustainable development with minimal emissions is believed to be the key to lifting Indonesia out of the middle-income trap it has been in for 30 years (1993-2022) and transitioning towards a developed country. The Institute for Essential Services Reform (IESR) urges the Indonesian government to set ambitious, measurable emissions reduction targets and include them in the Nationally Determined Contribution (NDC).

Fabby Tumiwa, Executive Director of IESR, in his remarks at the seminar “Bridging the Cross-Sectoral Gap in Pursuing More Ambitious Climate Targets in Indonesia” organized by IESR, mentioned that based on global action Climate Action Tracker (CAT) data, as measured by the current policy base, would lead to a global temperature increase of 2.7°C. However, Indonesia’s latest emission reduction target is categorized as critically insufficient, which means it is far from enough to reduce global boiling. There is a gap between current policies and emission levels compatible with the Paris Agreement. Based on Indonesia’s climate policy and action, emissions will reach 111.4-132.0 GtCO2e/year by 2030 (excluding LULUCF), 351-415% over 1990 levels. To be compatible with the Paris Agreement, emissions must fall to 0.56-0.86 GtCO2e/year in 2030 (excluding LULUCF).

“In addition, we need to look at Indonesia’s NDC shows a gap in action towards meeting the net zero target. The transportation and industrial sectors need to take action, while the energy sector already has a clear strategy to reduce greenhouse gas emissions. A transparent and measurable strategy and plan is needed to achieve the target of the Paris Agreement,” he said.

Furthermore, he alluded to the delivery of different signals from policymakers who adjust the priorities of each sector regarding climate crisis mitigation. This has slowed progress toward achieving emission reduction targets per the Paris Agreement.

“The lack of a clear strategy leads to inconsistent climate action and policymaking across sectors and inadequate budget allocations for adaptation and mitigation. It is crucial to integrate climate action into the National Long‐Term Development Plan (RPJPN) and National Medium Term Development Plan (RPJMN) planning processes,” he said. 

He also emphasized that Indonesia’s chairmanship in ASEAN should be seen as an opportunity to encourage other ASEAN countries to adopt more ambitious climate policies and actions. Indonesia’s climate policies are considered among the most ambitious in ASEAN.

Medrilzam, Director of the Environment for the Ministry of National Development Planning/Bappenas, on the same occasion, explained that his party had completed the 2025-2045 National Long-Term Development Plan (RPJPN) document, which prioritized the principles of sustainable development. One of the main targets is reducing greenhouse gas (GHG) emissions by up to 95% in 2045. He says lowering emissions is closely related to developing a greener economy. In particular, in Indonesia in 2025-2045, RPJPN targets Indonesia’s per capita income to be equivalent to developed countries of around US$30,300 and enter the 5 (five) most significant economies globally.

“Reducing emissions should not be seen as just reducing emissions, and must consider economic development. Green economic interventions with low-carbon development will increase the environment’s carrying capacity and reduce GHG emissions while encouraging Indonesia’s average GDP growth in 2022-2045 to reach 6-7%,” said Medrilzam.

However, Medrilzam highlighted the amount of investment required on average of IDR 2.377 trillion per year from 2025-2045 to implement green economic policies.

“To meet this need, policies are needed to strengthen green innovative financing, such as blended finance, impact investment, carbon taxes, and others. The green investment will also provide job creation benefits of up to 1.66 million jobs/year in 2045,” he said.

Ferike Indah Arika, Young Expert Policy Analysis Center for Climate Change and Multilateral Financing Policy, Fiscal Policy Agency, Ministry of Finance, explained it is crucial to have innovative financing to support climate mitigation and adaptation beyond the State Budget. He compared the accumulated funding for climate change mitigation needed in the 2018-2030 range to reach IDR 4.002 trillion, which is still far less than the investment required for green economy policies.

“The state revenue and expenditure budget (APBN), whose allocation is monitored for mitigation and adaptation activities, is still far between what we have and what is needed. This huge disparity in funding needs, of course, cannot only be met by the limited state budget,” said Ferike.

Nurcahyanto, Associate Policy Analyst, Directorate of Energy Conservation, Ministry of Energy and Mineral Resources of the Republic of Indonesia, explained that from the energy sector, to encourage the acceleration of GHG emission reduction, the termination of coal-fired power plants operation is one of the main contributions in reducing emissions in the power generation sector. Nurcahyanto emphasized that the draft roadmap for the early termination of coal-fired power plant operations with a target of retiring a total capacity of 4.8 GW of coal-fired power plants in 2030 has been completed and submitted to the Coordinating Ministry for Maritime Affairs and Fisheries, the Ministry of Finance, the Ministry of State Owned Enterprises (BUMN), and PT PLN (Persero) for comments.

 

ASEAN Grid Interconnectivity as the Start of Renewable Energy Security in the Region

press release

Jakarta, 13 June 2023 –  To reach energy security sustainably and to face challenges of global climate change, Indonesia’s chairmanship in 2023 needs to be a strong leader in the decarbonization efforts of the energy sector in Southeast Asia. region. Institute for Essential Services Reform (IESR) views that Indonesia can further its regional cooperation and collaboration on innovation, technology, renewable energy research, and push for clearer and enticing policies to boost investments in the renewable energy sector.

As a region, ASEAN has committed to reach a 23% energy mix target in primary energy and 35% capacity of renewable energy installed by 2025. Furthermore, to expand the regional electricity trade , integrate the region’s power grid, and to strengthen the reliability of the power grid, ASEAN is currently building the ASEAN Power Grid (APG).

The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, explains that the project to interconnect ASEAN’s grid through ASEAN Power Grid (APG) could be a starting point for ASEAN member states to boost renewable energy capacity in the electricity sector and shift their dependency to fossil fuels. Indonesian chairmanship in ASEAN 2023 with one of its main focus being Sustainable Energy Security has to be utilized to push ASEAN member states to focus on efforts to decarbonize their energy systems. 

“Indonesia has the chance to lead ASEAN to transition their energy, amplifying the renewable energy mix, and to reduce fossil energy. Indonesia has given examples for other ASEAN member states to have a more ambitious target that aligns with the Paris Agreement. One of which is to push ASEAN member states to end CFPP operations before 2050 and to push agreements between ASEAN member states to build cell industries, solar modules, and energy storage (battery),” Fabby Tumiwa assessed. 

ASEAN itself has a capacity of 7.645 MW on the existing interconnecting grid in the ASEAN Power Grid project, according to a presentation from the Sub Coordinator of the Electricity Program MEMR, Yeni Gusrini, in the IESR Webinar titled Toward a Decarbonized ASEAN. In the future, the interconnection grid will be added in capacity to around 19.000 – 22.000 MW and covers a wider area.

“ASEAN Power Grid contributes towards the economic development in ASEAN by helping fulfill energy demand in ASEAN and to develop regional industry player’s growth. On the first phase, the electricity grid in Laos, Thailand, Malaysia, and Singapore has been connected through the Lao PDR, Thailand, Malaysia, Singapore Power Integration Project (LTMS-PIP), which has been the pioneer of the power trade mechanism that has transmitted 100 MW from Laos to Singapore, utilizing the existing interconnection,” Yeni explicated. 

IESR views that the development of an interconnection grid that accommodates the integration of renewable energy in Indonesia needs to be accelerated so that it aligns with the Paris Agreement to net zero emission (NZE) in 2050.

“Interconnection between the islands in Indonesia and between the countries in ASEAN is one of the enabling factors of renewable energy integration. The existence of this interconnection will help solve the problem of intermittency and to maximize renewable energy usage, so that if there’s an oversupply such as solar PV in the daylight built in another location, the electricity can be transmitted to another place. Before that, ASEAN member states have to keep refurbishing their renewable energy investment climate in their respective countries and regionally with a more interesting regulation framework,” explained Deon Arinaldo, Program Manager of Energy Transformation IESR. 

Deon says, Indonesia is a country with the biggest economy and energy consumption rates in ASEAN, and has a massive energy resource. With ASEAN chairmanship this year and a supportive process and regulations for energy transition at the national level such as JETP and New and Renewable Energy Bill, this will make Indonesia an example and trigger the acceleration of ASEAN’s transformation process.

IESR believes that the decarbonization efforts are not limited to the government, but also involves the participation of various stakeholders, including private sectors, civil society, and international agencies. In this spirit of collaboration, Indonesia needs to invite all parties to join in the effort to tackle climate change and create a sustainable future for ASEAN.