What can the G20 Power Utility Companies do to Address the Climate Crisis?

Bali, 29 August 2022 – The electricity sector is one of the biggest emitters after the forest and land use sectors. As the window of opportunity to keep the global temperature at the 1.5 degrees level is getting tighter, the urge to decarbonize the electricity sector is becoming more and more crucial. Power utility companies will be the main driver of the decarbonization effort to reach net zero emissions. 

Philippe Benoit, Adjunct Senior Research Scholar Center on Global Energy Policy, Columbia University, during the seminar “The Role of G20 Power Utilities in Climate Mitigation Effort” hosted by C20, emphasizes the importance to reform state-owned power companies (SPC), realizing its roles as power producers, power purchasers, and network owner/operator to accelerate the energy transition.

“SPCs are multidimensional. When we talk about decarbonization we have to think about SPC as they are the ones who will set the pace of decarbonization,” he said.

Philippe continued that market-based scenarios such as carbon tax, carbon trading, and regulatory pricing can be an instrument to influence SPCs to decarbonize. Moreover, the government can also make resources available to SPCs by supporting them, doing advocacy and directly exercising government shareholder power.

Mahmoud Mohieldin, High-Level COP 27 Champion Egypt, proposed several points to address, including the comprehensive energy policy covering fossil fuel phase-out, energy access and the development of green hydrogen. 

“The budget of the state should reflect the priority of the climate agenda in SDGs development framework.”

On the same occasion, Joojin Kim, Managing Director of Solution for Our Climate (SFOC), South Korea, presented the fact that currently, renewable energy is facing some curtailments in several regions to avoid ‘unsold’ energy.

“Globally, there is a significant increase of renewable capacity but mostly built in either the US or Europe. To keep the balance between supply and demand in electricity, some areas start to apply curtailment to renewable energy,” he said.

Joojin said that this condition is not conducive to reaching the net zero target. To align with the 1.5-degree Celcius pathways, the G20 country must have 75% renewable energy in 2040. According to him both South Korea and Indonesia are not in a good situation to reach that if there is no urgent action taken.

According to Dennis Volk, Head of Division Bundesnetzazagenturn (BNetZa), Germany, political will from the government is the key to decarbonising the electricity sector.

“A strong political commitment is needed to drive the electricity sector to the decarbonization path. The second important thing is the supporting scheme including financing,” said Dennis.

Youngjin Chae, Vice President of Strategy and Planning Korea Power Exchange (KPX), South Korea, explained that currently there are around 19% of renewables in South Korea. Issues related to flexibility, storage, and feasibility are what become a concern as renewable energy is locally concentrated.

Indonesia is planning to achieve carbon neutrality in 2060 or sooner. PLN as the nation’s power utilities company, through its Director of Corporate Planning, Evy Haryadi, said that PLN needs to build 413 GW of power capacity with around 75% renewables and 19 GW of interconnection for net zero in 2060.

“We (PLN) think that at least five major things should be transformed, from the battery storage system, interconnection, green industry cluster, coal retirement mechanism, to new technology development,” Evy concluded.

A couple of serious challenges are faced by countries in developing renewable energy. Considering each situation, every country must figure out the solution as the IPCC has warned that our carbon budget is limited.

“Every country must be able to answer the issue of solving climate change, customer demand for reliable and affordable electricity, workforce needs to upgrade their skills, regulation from the government, and more technology to provide green energy,” Fabby Tumiwa, the Executive Director of IESR concluded.

Significant Roles of Subnational Governments to Lead the Decentralization of Energy Transition

press release

Bali, 30 August 2022–The post-pandemic economic recovery by staying focused on making ambitious climate mitigation efforts through low-carbon development is a step that needs to be taken by local governments. The success of low-carbon development is also inseparable from planning for a just energy transition. The commitment of various parties, including local governments and communities to promoting the energy transition, is crucial considering that decentralization of the energy transition will have multiple impacts.

The Governor of Central Java, Ganjar Pranowo, said that through the Central Java Energy and Mineral Resources Office, he was actively pushing for energy transition efforts in his region. Energy transition policy instruments such as governor’s circular letters, regional secretaries, and various initiatives such as the declaration of Central Java to become a solar province in 2019, are ways to attract the private sector and the public to utilize renewable energy through the adoption of rooftop solar. Until Q2 2022, the total installed PLTS capacity in Central Java Province reached 22 MWp. The Central Java Provincial Government also supports the use of other renewable energy that is abundantly available, such as livestock manure biogas and micro hydro power plant(MHP), with government programs or encouraging community collaboration.

“Asymmetric decentralization by inclusion with (treatment-red) specifically in every location. With collective awareness, the potential for renewable energy in the area is checked and stimulated,” said Ganjar. This, according to Ganjar, will encourage a faster transformation.

Central Java’s climate commitment is also shown by starting to use electric vehicles as provincial government official vehicles.

Togap Simangunsong, Expert Staff of the Minister of Home Affairs for Social Affairs and Inter-Institutional Relations, Ministry of Home Affairs appreciated the good practices carried out by the Central Java Provincial government. He said that his party and the Ministry of Energy and Mineral Resources are currently drafting a Presidential Regulation that strengthens the authority of regional/provincial governments in the administration of government affairs in the field of energy, mineral resources, and sub-sector of new and renewable energy.

“Through this, it is hoped that local governments can provide support in efforts to achieve the target of the new renewable energy mix as an effort to reduce greenhouse gas emissions so that local government commitments are made to accelerate energy justice following their authority,” said Togap representing the Minister of Home Affairs, Tito Karnavian in a webinar entitled “Energy Transitional Decentralization: Increasing the role of communities and local government” organized by the Institute for Essential Services Reform (IESR) and the Central Java Provincial Government.

In addition, Chrisnawan Anditya, Head of the Planning Bureau, Ministry of Energy and Mineral Resources said that the utilization of renewable energy potential will open up opportunities in building a green national economy and as an effort to recover the economy after the pandemic under the G20 Presidency’s theme, “Recover Together, Recover Stronger”.

“Each region has a special new renewable energy potential that can be used to improve the welfare of local communities. The difference in the potential for new and renewable energy between regions is a technical challenge, as well as a great opportunity for our energy system. This condition allows the sharing of energy based on new and renewable energy when the area experiences energy abundance or scarcity. For this to happen, an integrated electric power system (smart grid and super grid) is needed,” explained Chrisnawan on the same occasion.

Furthermore, strong leadership at the regional level will be able to mobilize the community to make the cooperation of energy transition. This was stated by Fabby Tumiwa, Executive Director of IESR. He said the initiative and leadership of the local government will be able to answer the problem of access and security of energy supply by utilizing the abundant renewable energy potential in the area.

“Indonesia’s energy transition requires the construction of hundreds or even thousands of gigawatts, renewable energy generation, transmission and distribution infrastructure and energy storage systems. But by starting to divide it into small units, the big problems can be more easily solved and carried out by more parties,” said Fabby.

He added, based on the IESR study, that the decarbonization of the energy system in Indonesia will cost USD 1.3 trillion by 2050, with an average investment requirement of USD 30-50 billion per year. This amount is 150%-200% of the current total investment in the entire energy sector.

“This investment need is costly and cannot be borne solely by the government and SOEs. But this large investment can be met if we take into account the potential of the contribution and innovation power of the community as well as the capabilities of local governments. Citizens’ contributions and innovations can mobilize funding from the government, local government and village governments, as well as funding from the private sector and non-governmental institutions,” he added.

Bali is the first province in Indonesia to have a special governor regulation for clean energy and electric vehicles. In the Governor’s Regulation on Bali Clean Energy, the Governor of Bali encourages the use of renewable energy for various sectors, especially rooftop solar power plants. This effort is carried out to realize the vision of low carbon development in Bali and concrete steps for sustainable tourism.

“Due to the pandemic, Bali’s tourism has stumbled, after the pandemic, Bali has started to rise. Several tips have been implemented, such as the governor’s regulations and circulars regarding the adoption of rooftop solar power plants. Actually, the main target is tourism, but first, do a pilot in the government,” said Ida Ayu, Expert Staff to the Governor of Bali.

The plans and steps for achieving renewable energy targets in the Regional Energy General Plan (RUED) are also carried out by the Jambi Provincial government. The Governor of Jambi, Al Haris, through the Deputy Governor of Jambi, Abdullah Sani, emphasized his commitment to work together with the central and private parties to develop regional energy transitions because the resources they have are very sufficient, only to use and transform natural resources into energy that can be enjoyed by the Jambi community in particular.

The Jambi Provincial Government through the Department of Energy and Mineral Resources has also collaborated with IESR for the implementation of RUED and energy conservation efforts within the local government. Currently, the Governor of Jambi is in the process of issuing a governor regulation for the use of PV mini-grid as a substitute for energy subsidies.

The use of CCS needs careful consideration

Author : Aditya Perdana Putra Purnomo (Research team intern 2022)
Editor: Pamela Simamora

The use of fossil fuels since the beginning of the industrial revolution has been shown to increase anthropogenic1 carbon dioxide emissions that are responsible for an upsurge in the earth’s surface temperature by 1.07 °C from 1850 to 1990.The increase in temperature harms the environment, causing events such as droughts, forest fires, flooding, and erosion of some coastlines. 

Besides using renewable energy, Carbon Capture and Storage (CCS) is considered capable of helping in reducing world carbon emissions. CCS is a technology used to capture carbon dioxide from exhaust gasses, then transport and store the carbon dioxide gas in particular storage locations (usually underground) to avoid its negative impact released into the atmosphere.2 . 

 Figure 1. CCS Schematic Diagram (Choudary,2016)

By 2021, there are 31 CCS projects in commercial operation worldwide, and more than 90 other projects are still under development. This figure continues to increase and is the highest for the last 5 (five) years. Beside being caused by ongoing research, the increase in the number of projects is also inseparable from the support from various countries for CCS technology as an option to reduce carbon emissions.

Indonesia, as one of the largest carbon dioxide emitting countries in the world, has also begun to plan the use of CCS, especially in the electricity sector. This strategy is questionable given that CCS prices are and will remain uncompetitive against renewable energy plus storage. If CCS is installed, supercritical CFPP LCOE will double from EUR 40 per MWh to EUR 80 per MWh (USD 92 per MWh) even if transport and storage costs of CO2 remain low at around EUR 10 per tonne. In this case, the avoided CO2-eq cost is more than EUR 55 per tonne (USD 64 per tonne).

 

Figure 2. CCS Schematic Diagram of a Coal-fired Power Plant (Global CCS Institute, 20213 )

One of the CCS projects in the electricity sector, the Petra Nova project in the United States, is predicted to be the trigger for the development of CCS in the electricity sector around the world. Unfortunately, the CCS at this 240 MW power plant experienced a 30% blackout before it was finally discontinued in 2020. Since its inauguration in 2017, from the target of capturing 4.2 million metric tons of carbon dioxide for 3 years of operation, the Petra Nova project has only succeeded capture 3.54 million metric tons of CO2, or 16% of the target.

Analysis from the Institute for Energy Economics and Financial Analysis (IEEFA) shows the poor performance has cost investors more than $23 million over the project’s three-year operation. In addition, during its lifetime, the Petra Nova project also generated more than 1.1 million metric tons of CO2 through the use of gas turbines for CCS power purposes. Learning from this case, Indonesia needs to reconsider the use of CCS in coal-fired power plants.

Another project, the Boundary Dam coal-fired power plant in Canada, also uses CCS to capture GHG generated from the electricity production of this 160 MW power plant. Equal to the Petra Nova project, the Boundary Dam project has also never operated according to its target of capturing 3200 metric tons of carbon dioxide annually. Judging from the achievement of annual carbon capture, the project is only able to capture carbon emissions of around 40 to 60% of the target. Even in the most productive year, the achievement was still far below the target of 3200 metric tons per year. This record was exacerbated by last year’s sluggish performance caused by a 3-month blackout of the CCS unit. The first outages took place from mid-June to July due to routine maintenance. However, shortly thereafter, a compressor failure4 brought the project to a complete shutdown from August to September 2021.

Figure 3. Achievement of Carbon Capture, Boundary Dam Project 2014-2021 (Schissel, 2021) 

In other sectors, such as industry, CCS is considered one of the most effective solutions to reduce GHG emissions. The use of CCS in the industrial sector started in 1971 when the world’s first commercial CCS was operated at Terrell Gas Processing5 in Texas, United States of America. CCS, which is valued at 7.6 million6 is still operating today. The project with a capacity of 0.4 MTPA7 is operated to capture CO2 emissions from the local gas processing industry and use this catch to increase oil well production through the Enhanced Oil Recovery (EOR)8 . Another CCS project in the United States is at a fertilizer plant called Enid Fertilizer, that has been operating for 40 years. This project utilizes CO2 from the manufacture of fertilizer/ammonia to sell to oil and gas production wells in Oklahoma that carry out the EOR process.

From the case study above, several things need to be considered by policy makers in Indonesia to apply CCS in Indonesia. First, the use of CCS in steam power plants, apart from being expensive, also often experiences technical problems, resulting in not achieving the CO2 capture target promised by the developer. Second, the revenue from the sale of CO2 for EOR is the prime driver of CCS projects in the industrial sector in America. Although there is no publicly available data, CO2 prices for EOR are closely related to oil prices. For instance, with an oil price of US$70 per barrel, the CO2 price for EOR is around US$30/tCO2 (Bliss, et al., 2010). Therefore, the implementation of CCS in the industrial sector (and other sectors) requires a high carbon value which can ensure that the carbon values covers the costs of capturing and transporting CO2.*** 

 

Footnote:

 

Indonesia Needs to Ramp Up Renewable Energy Installations up to 10 times to achieve Net Zero Emissions

Jakarta, 22 March 2022 – Indonesia through its LTS-LCCR (Long Term Strategy Low Carbon Climate Resilience) document states that it will achieve carbon neutral status in 2060 or sooner. The capacity of fossil energy in Indonesia’s energy system, especially electricity, is highlighted because with the aim of becoming carbon neutral, Indonesia must immediately retire most of its coal-fired power plants.

At the A Just Energy Transition: Matching Learning Curves from Germany and Indonesia Symposium held online on March 22, 2022, Ottmar Edenhofer, Director of the Potsdam Institute for Climate Impact Research, explained that in order to achieve the emission reduction target of the Paris Agreement, the Southeast Asia region must reduce coal capacity by 60% within this decade.

“Coal absorbs a large portion of our carbon budget, to maintain our carbon budget reserves, we have to significantly reduce the current coal capacity,” said Ottmar.

Holding the G20 Presidency, Indonesia has made a just energy transition one of its priority issues. Just like Indonesia in the G20-presidency, Germany, which holds the G7 presidency at this time, has also made the energy transition one of the main topics. The similarity of the main agenda of the two alliances of countries with the highest economic growth in the world must be an accelerator of the global energy transition in general, especially in Indonesia.

Patrick Graichen, State Secretary at the Federal Ministry for Economic Affairs and Climate Action, sees this common vision as a good thing, but also needs to be coupled with efforts to bring it down into action.

“We need strong leadership, a clear carbon-neutral vision in a country, and policy and financial support to quickly reach our carbon-neutral targets,” he explained.

The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, on the same occasion said that currently Indonesia needs to reconsider its relationship with coal. Dominating Indonesia’s electricity sector for more than 60%, coal retirement is one of Indonesia’s key decarbonization strategies as well as the key to achieving the Paris Agreement targets for Indonesia.

“Indonesia’s emission reduction actions referring to the LTS-LCCR document are not sufficient to meet the Paris Agreement targets, we need even more ambitious efforts,” explained Fabby.

Fabby explained that currently one of the issues facing Indonesia is related to electricity infrastructure which is designed for coal-fired power plants. PLN itself still has an obligation to build a coal power plant which has entered the contract period as part of the 35 GW project launched by the government in 2015. One of the impacts of this mega-project is that several CFPP units are still relatively new, which results in higher retirement costs.

“The current situation for PLN itself is quite difficult, but we have to start anyway. With the support of the right policies, we can do it,” explained Fabby.

Energy transition is one of the main issues in global forums, one of which is the G20. If the G20 countries are serious about pushing for an energy transition, this must also be accompanied by policy support. It is important to provide a comprehensive energy transition package to ensure that the transition is fair and just and does not leave any party in trouble as a result of this transition. Stefan Schurig, Secretary General of F20, also highlighted the role of the G20 countries which is still not optimal in encouraging the energy transition.

“Keeping the temperature rise at 1.5 degrees is still an option for us right now, and we can still work on it together,” Stefan said.

Energy Crisis in UK and Europe: Lessons learned for Indonesia’s energy transition

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Clean, Affordable, and Secure Energy (CASE) for Southeast Asia (SEA) is a regional programme running in Indonesia, Thailand, Philippines and Vietnam. CASE’s objective is to change the direction of the energy sector in Southeast Asia to substantially shift towards an evidence-based energy transition, aiming to increase political ambition to comply with the Paris Agreement.

Through CASE Indonesia, we would like to organize a discussion with speakers from the UK, and Europe representative to discuss what happens and what are the lessons learned. Indonesia does not have winter and reliance on natural gas is still small. However, with more intermittent power plants (e.g. solar) are planned to be installed, the government looks at using gas-fired power plants to balance this intermittency. We also hope this discussion will help set the right direction for the Indonesian energy transition.

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The Role of Media in Indonesia’s Energy Transition Journey

In the course of economic recovery after the Covid 19 pandemic, Indonesia is currently at a crossroads to choose the path of green economic recovery, or the path of economic recovery that produces high emissions. The COVID-19 pandemic has hit the Indonesian economy hard, as can be seen from the negative economic growth we are experiencing. But on the other hand, Covid 19 opens an opportunity to change the direction of economic development to be greener and lower emissions. Based on the report from the Intergovernmental Panel on Climate Change Assessment Report 6 (IPCC AR6), we are running out of time to keep the earth’s temperature rise within safe limits. As one of the countries with the largest economic growth in the world as well as the largest emitter in the world, Indonesia has a responsibility to reduce its emissions, especially from the energy sector. In the post-Covid-19 economic recovery situation, Indonesia must find a way to get out of the economic crisis and at the same time overcome the climate crisis. Making an energy transition is a must if Indonesia is serious about ‘greening’ its economic recovery program.

 

In overseeing the process of Indonesia’s economic recovery, all levels of society need to participate in monitoring and voicing their opinions to ensure that the path taken by the government is the path that will lead Indonesia to a low-emissions economic recovery. It is important for Indonesia as a nation to carry out an economic recovery that takes into account the climate crisis because the crisis is the source of all future crises. The urgency of the climate crisis and low-emissions economic recovery needs to be conveyed to the public, one of which is through the mass media, so that people can ‘demand’ the government when the government does not choose a greener economic recovery path.

 

To help journalists provide comprehensive coverage of energy transition issues, the Clean, Affordable, and Secure Energy (CASE) for Southeast Asia program, IESR organizes training for journalists. This training includes material input on energy and energy transitions, as well as how to write coverage of energy transitions so that they can be better understood by the wider community. This program will take place in ten sessions lasting from September to October 2021, and will be attended by 20 selected journalists from various regions in Indonesia.

 

In his remarks, Fabby Tumiwa, executive director of IESR emphasized the importance of the media’s role in the energy transition process. “The community must be able to support, encourage, and voice their opinions to policy makers. This is where the media plays an important role in building community collective awareness so that Indonesia builds a greener economy,” said Fabby.

 

In the first session which took place on Tuesday, September 7, 2021, participants were introduced to the concept of energy and energy transition guided by three speakers from Agora Energiewende.

 

Tharinya Supasa, Project Lead Energy Policy South East Asia Agora Energiewende, stressed that it is important for all levels of society to understand the importance of the energy transition.

 

“Because energy is very close to us, from cooking, watching TV to working with computers or other electronic devices. So whatever happens in the energy sector will affect everyone’s life,” said Tharinya.

In the course of economic recovery after the Covid 19 pandemic, Indonesia is currently at a crossroads to choose the path of green economic recovery, or the path of economic recovery that produces high emissions. The COVID-19 pandemic has hit the Indonesian economy hard, as can be seen from the negative economic growth we are experiencing. But on the other hand, Covid 19 opens an opportunity to change the direction of economic development to be greener and lower emissions. Based on the report from the Intergovernmental Panel on Climate Change Assessment Report 6 (IPCC AR6), we are running out of time to keep the earth’s temperature rise within safe limits. As one of the countries with the largest economic growth in the world as well as the largest emitter in the world, Indonesia has a responsibility to reduce its emissions, especially from the energy sector. In the post-Covid-19 economic recovery situation, Indonesia must find a way to get out of the economic crisis and at the same time overcome the climate crisis. Making an energy transition is a must if Indonesia is serious about ‘greening’ its economic recovery program.

 

In overseeing the process of Indonesia’s economic recovery, all levels of society need to participate in monitoring and voicing their opinions to ensure that the path taken by the government is the path that will lead Indonesia to a low-emissions economic recovery. It is important for Indonesia as a nation to carry out an economic recovery that takes into account the climate crisis because the crisis is the source of all future crises. The urgency of the climate crisis and low-emissions economic recovery needs to be conveyed to the public, one of which is through the mass media, so that people can ‘demand’ the government when the government does not choose a greener economic recovery path.

 

To help journalists provide comprehensive coverage of energy transition issues, the Clean, Affordable, and Secure Energy (CASE) for Southeast Asia program, IESR organizes training for journalists. This training includes material input on energy and energy transitions, as well as how to write coverage of energy transitions so that they can be better understood by the wider community. This program will take place in ten sessions lasting from September to October 2021, and will be attended by 20 selected journalists from various regions in Indonesia.

 

In his remarks, Fabby Tumiwa, executive director of IESR emphasized the importance of the media’s role in the energy transition process. “The community must be able to support, encourage, and voice their opinions to policy makers. This is where the media plays an important role in building community collective awareness so that Indonesia builds a greener economy,” said Fabby.

 

In the first session which took place on Tuesday, September 7, 2021, participants were introduced to the concept of energy and energy transition guided by three speakers from Agora Energiewende.

 

Tharinya Supasa, Project Lead Energy Policy South East Asia Agora Energiewende, stressed that it is important for all levels of society to understand the importance of the energy transition.

 

“Because energy is very close to us, from cooking, watching TV to working with computers or other electronic devices. So whatever happens in the energy sector will affect everyone’s life,” said Tharinya.

The Jakarta Post | Government issues regulation to jumpstart stalled renewable energy projects

The government aims to jumpstart stalled renewable energy projects through a recently issued regulation as it races against time to catch up with Indonesia’s green energy commitments.

The Energy and Mineral Resources Ministry issued last month a regulation that scraps the unpopular build, own, operate, transfer (BOOT) scheme. Many renewable energy players have said the scheme undermined their projects’ bankability.

The new regulation also enables Indonesia’s sole off taker, state-owned PLN, to sign power purchase agreements without conducting a bid under certain conditions.

The ministry’s various renewables director, Harris, told The Jakarta Post on Wednesday that these “few changes” were meant to get stalled renewable projects going before a more powerful presidential regulation (Perpres) on renewable electricity pricing – slated to be issued this year – put new projects on the table.

“Passing the Perpres will take time but if we don’t issue regulations immediately, the growth of renewables will be stalled,” he said.

The government is aiming for renewables to contribute 23 percent of power production by 2025, yet regulatory headwinds are setting the country back from achieving its goal.  Regulation stipulates that Indonesia should have reached a 17.5 percent renewable power mix by 2019 yet the country only hit 12.36 percent that year.

Among the frequently complained headwinds is Ministerial Regulation No. 50/2017 – dubbed “Permen 50”. This was the regulation that introduced the BOOT scheme and erased a feed-in-tariff pricing policy, which is widely considered to be a very effective means of boosting green energy growth.

As a result, out of 75 renewable energy projects signed between 2017 and 2018 in Indonesia, 27 remain without financial close and five have been terminated as of October last year, according to records from Jakarta-based energy think tank Institute for Essential Services Reform (IESR).

“This revision is temporary by nature. It gives a legal basis for stalled projects and is a stop-gap measure while waiting for a new pricing scheme under the Perpres,” IESR executive director Fabby Tumiwa told the Post.

Indonesia did not sign any new renewable energy contracts last year and industry investment shortfall – the difference between actual and targeted funding – was the greatest compared to the mining, electrification and oil and gas industries.

The new regulation also introduces guarantees for government-backed renewable plants “in improving their economics.” The regulation authorizes the energy minister to order state-owned power firm PLN to buy electricity from hydropower plants attached to government-built reservoirs from state-funded waste-to-energy power plants and from state-funded renewable energy power plants.

The guarantees assume such government-backed projects operate in the best public interest. Hydropower and waste-to-power plants, for instance, serve a secondary role of providing irrigation and waste management systems, respectively.

Harris also said the energy ministry was in talks with PLN. However, the electricity company’s spokesman, Dwi Suryo Abdullah, told the Post he was unaware of the changes.

PLN, the company responsible for offtaking power under the new regulation, has been experiencing financial constraints due to competing ambitions of developing 35,000 megawatts (MW) worth of new power plants while also keeping electricity selling prices at a minimum. Both ambitions are at the behest of the government.

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This Week in Asia | Asia’s next clean energy battle isn’t in China or India. It’s in Indonesia

Southeast Asia’s largest economy and democracy is approaching a demographic shift.

In the next 10 years, almost half of Indonesia’s population will enter the work force. Only three in 10 people will not be of working age by 2030. Conventional poverty rates are declining, millions are moving into cities each year. The island nation’s labour force will surge, and with it, disposable income and energy demands.

The picture is similar elsewhere in Southeast Asia, but while its neighbours have spent years developing clean energy options,

Indonesia has not negotiated a new renewable energy contract in three years.

Indonesia’s room for growth means it will be the largest contributor to the region’s ballooning energy demand, joining India and China as a global hotspot for power needs. Indonesia, which is Southeast Asia’s most populous nation with more than 250 million people, expects its electricity needs to almost double in the next 10 years, tripled from 2010. But its heavy reliance on fossil fuels, the highest in the region, means it may offset the rest of the region’s positive growth toward renewable energy.

But there’s some hope in sight. Indonesia expects an end to stalled clean energy growth in March, when a ministry regulation aims to attract renewables investment that has so far preferred the welcoming arms of neighbours like Malaysia and Vietnam.

It’s the “deciding year” for Indonesian clean energy, says Fabby Tumiwa, director of the think tank Institute for Essential Services Reform in Jakarta. Indonesia’s lag behind its neighbours has made much more difficult its goal to reach 23 per cent renewables from 12 per cent in its energy mix by 2025, he says.

“If you want to accommodate this 23 per cent target by 2025, starting in 2020, 80 per cent of the new energy capacity has to come from renewables,” Tumiwa says. Currently, less than 10 per cent of annual added power capacity is renewable.

President Joko Widodo hinted last year that reducing coal would become a national policy and has indicated in public speeches that sustainability is a national goal. For the 23 per cent goal to be met, however, the country may also need to cancel coal projects already in the construction pipeline, Tumiwa says.

A worker at the Tarahan coal port in Lampung province, Indonesia. Photo: Reuters
A worker at the Tarahan coal port in Lampung province, Indonesia. Photo: Reuters

Researchers also note that some grids are already at capacity but continue to see coal development, such as the Java-Bali system seeing the addition of a Chinese-owned 2,000 MW coal plant.

The March regulation aiming to reignite the interest in renewables is expected to address previous regulations that were seen to make clean energy financially unviable. In September, parliament also has an option to advance the country’s first unified renewable energy law that would guide policies on clean development.

For Tumiwa, it was the regulations in 2017 that “killed” incentives for investors to create clean energy projects. Without a renewables law, investors await ministerial regulations that can change multiple times within a year.

“It was anticipated,” says Tumiwa. “We already said in 2018 that we didn’t expect any new [project agreements] in 2019 because the regulations are crap, so no one would really like to invest.”

In a 2018 PwC report, 94 per cent of investors believed that regulatory uncertainty was a major barrier to investing in new large-scale power generation.

In 2017, two regulations shook interest in energy investment in the country, as they mandated that the state-owned power company, PLN, buy renewable energy only up to 85 per cent of the standard price of energy.

“What renewable can meet that price?” Tumiwa asks. That, in addition to shifting risk management from PLN to private companies, made many projects unbankable.

The Indonesian government believes that as a developing country, cheap electricity takes priority over environmental concerns. Coal provides 58 per cent of the country’s power, targeted at boosting the electrification ratio, which officials say now stands at 98 per cent, although some doubt the figure. Elrika Hamdi, an energy finance analyst at think tank International Energy Economics and Finance Analysis, doubts the price of coal reflects its true cost.

A coal mine worker in Tanjung Enim, South Sumatra, Indonesia. Photo: EPA
A coal mine worker in Tanjung Enim, South Sumatra, Indonesia. Photo: EPA

“It is often heard from the ministry that coal is cheap and renewable is expensive, which means they expect renewables to play on the same level as coal. The claim is not exactly right, and coal is only cheap because there are certain costs that haven’t been included in the price calculation,” Hamdi says.

“Indonesia does not yet have any carbon tax or carbon pricing mechanism. If we had, like in OECD countries or even in developing countries like Chile and Mexico, where they make polluters pay for each ton of CO2 emitted, then all these coal power plants would be paying more.”

The March regulation will balance the interests of investors who want to build clean energy in the country and PLN, which Hamdi describes as a “big, old, heavy dinosaur”. Electricity generation falls under the purview of PLN, including off-grid power, across 17,000 islands and remote mountainous hamlets.

“Legally, PLN retains the rights to manage the end-to-end power sector in Indonesia, from power generation to transmission-distribution to retail,” Hamdi adds. “However PLN’s capital is limited. Indonesia is so big, so vast, with so many people, it needs a lot of investment.”

Micro-hydropower and solar power, research says, have the greatest potential in Indonesia of all Southeast Asia, but combined make up less than 3 per cent of the energy mix. Small, off-grid power generators may be the cheapest way to spread electrification, but PLN has focused on expanding transmission lines. Reaching 100 per cent electrification may reduce the pressure in rural areas to migrate to cities.

To ensure laws and regulations accommodate both small and large power projects, Grita Anindarini, a researcher at the Indonesian Centre for Environmental Law, says community involvement is key. The country may rush to make up for lost time and neglect the input of civil society groups that would advocate for smaller projects that would be more appropriate for Indonesia’s difficult geography, she says.

“If you look at the scope of regulations, it’s not yet apparent how they can make community-scale power available. We need to open up as much public participation as possible.”

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Bagaimana Prospek Perkembangan Energi Bersih di Indonesia di 2020?

 

Pada Desember 2019 lalu, IESR meluncurkan laporan Indonesia Clean Energy Outlook 2020. Dalam laporan ini, disampaikan evaluasi perkembangan energi terbarukan dan efisiensi energi selama 2019, serta pandangan prospek pengembangan energi bersih di Indonesia pada 2020 ini. Bagaimana prospek perkembangan energi bersih, khususnya energi terbarukan di Indonesia pada 2020? Salah satu temuan dalam ICEO 2020 mengindikasikan investasi di bidang energi terbarukan mengalami penurunan.  Sejak 2015, realisasi investasi EBT terus menurun, padahal target investasi tahunan terus mengalami koreksi dari target Renstra KESDM 2015-2019. Bahkan target investasi EBT untuk 2019 sebesar $1,8 milyar hanya tercapai $1,5 milyar. Sepanjang 2015-2019 kapasitas pembangkit energi terbarukan (on-grid dan off-grid) bertambah 1,6 GW atau 11% dari total tambahan kapasitas terpasang pembangkit listrik sebesar 15,5 GW. Pencapaian ini jauh lebih rendah dari realisasi pada periode 2010-2014. Pada 2020 KESDM memasang target pembangkit energi terbarukan dapat bertambah 685 MW. Angka ini jauh lebih tinggi dari realisasi penambahan kapasitas pembangkit energi terbarukan pada 2019 sebesar 376 MW. Walaupun lebih tinggi tetapi sesungguhnya pertambahan kapasitas ini masih lebih rendah dari penambahan kapasitas pembangkit energi terbarukan yang ditargetkan dalam Rencana Umum Energi Nasional (RUEN). Untuk memenuhi target RUEN, setiap tahun sejak 2020, diperlukan penambahan kapasitas pembangkit energi terbarukan baru sebesar 4-5 GW.

Untuk dapat mencapai target tersebut maka diperlukan investasi yang cukup, kesiapan atau kemauan off-taker dan ketersediaan proyek-proyek yang feasible. Off taker yang terbesar adalah PLN yang memasok 95% energi listrik di Indonesia. Bagaimanakah status ketiga faktor ini di 2020?

Pertama, sejauh ini Indonesia belum menjadi target utama investasi energi bersih bagi investor asing. Daya tarik investasi untuk energi terbarukan tergolong biasa-biasa saja, tidak ada yang menonjol. Beberapa faktor utama antara lain: iklim investasi makro, kualitas kebijakan dan regulasi, rencana dan realisasi pembangunan energi terbarukan, ketersediaan pendanaan, serta akses pada teknologi dan rantai pasok domestik memiliki daya tarik yang lebih rendah bagi investor asing dibandingkan dengan negara-negara tetangga yang menjadi kompetitor kita. Investor berpandangan kebijakan dan regulasi tidak stabil, mudah berubah, kualitasnya rendah, dan ketidakjelasan dalam implementasinya. Hal-hal ini menyebabkan persepsi risiko investasi di sektor energi terbarukan sangat tinggi yang berakibat pada meningkatnya cost of money untuk investasi proyek energi terbarukan di negara kita.

Di 2020 ini, investor sepertinya akan mencermati langkah pemerintah memperbaiki iklim investasi energi terbarukan. Perubahan kebijakan dan regulasi yang menghambat perkembangan energi terbarukan selama tiga tahun terakhir ini ditunggu oleh para pelaku usaha. Rencana pemerintah menerbitkan aturan feed in tariff (FiT) untuk pembangkit listrik ET skala kecil dalam bentuk Peraturan Presiden menjadi angin segar bagi pelaku usaha swasta. Tapi FiT saja mungkin tidak cukup karena harga/tarif hanyalah sebagian dari hambatan pengembangan ET. Bagaimana pemerintah melalui instrumen regulasi mengalokasikan risiko-risiko tarif, kebijakan, teknologi, evakuasi daya secara berimbang untuk PLN dan pengembang, dan proses bisnis yang transparan juga menjadi perhatian para investor, khususnya investor asing. Sentimen positif akan terjadi di 2020 kalau ada realisasi komitmen politik dan produk perundangan yang signifikan di tahun ini. 

Kedua, PLN sebagai satu-satunya off-taker listrik swasta, perkembangan energi terbarukan sangat dipengaruhi oleh visi, minat, perencanaan, lelang dan eksekusi dari BUMN ini. Beban pencapaian target energi terbarukan pun sebagian besar harus dipikul oleh PLN. Untuk mencapai target 23% sesuai Perpres No. 22/2017 maka dalam lima tahun mendatang, minimal 75-80% penambahan pembangkit listrik baru harus berasal dari energi terbarukan. Pada prakteknya untuk dapat masuk ke dalam sistem ketenagalistrikan, maka proyek energi terbarukan harus masuk dalam perencanaan PLN, yaitu Rencana Umum Penyediaan Tenaga Listrik (RUPTL).

Pada RUPTL 2019-2028, PLN merencanakan menambah 16,7 GW pembangkit energi terbarukan dimana 8 GW direncanakan pada kurun waktu 2019-2024. Untuk mencapai target RUEN, maka kapasitas pembangkit untuk energi terbarukan harus ditambah menjadi 12-15 GW pada kurun waktu tersebut dan dilipatgandakan pada lima tahun berikutnya. Konsekuensinya untuk dapat menampung kapasitas pembangkit energi terbarukan yang lebih besar maka PLN perlu melakukan pengurangan kapasitas pembangkit-pembangkit thermal yang direncanakan atau yang telah dioperasikan 5-10 GW dalam lima tahun mendatang.

Ada perbedaan antara target KESDM untuk penambahan kapasitas terpasang pembangkit ET di 2020 sebanyak 685 MW dengan RUPTL PLN sebesar 933 MW. Perbedaan ini merupakan sinyal bahwa ada persoalan dalam perencanaan kelistrikan dan koordinasi, khususnya untuk pembangkitan ET. Bagaimana perbedaan ini akan direkonsiliasi dalam RUPTL 2020-2029 yang kemungkinan akan terbit dalam beberapa waktu kedepan juga menjadi perhatian para investor dan pengembang.

Ketiga, ketersediaan proyek-proyek energi terbarukan yang bankable dan siap didanai merupakan salah satu faktor yang penting dalam memenuhi target penambahan kapasitas pembangkit listrik. Selama ini ketersedian proyek-proyek pembangkit energi terbarukan yang bankable jumlahnya terbatas. Berbeda dengan pembangkit thermal yang berkapasitas besar, pembangkit energi terbarukan kapasitasnya bervariasi dari skala dibawah 5 MW, 5-10 MW, 10-50 MW, dan diatas 50 MW. Misalkan untuk PLTS yang direncanakan mencapai 0,9 GW, hingga 2025 nanti, dapat terdiri dari 20-50 proyek dengan ukuran rata-rata 20-50 MW per proyek. PLTB yang direncanakan hingga 0,85 GW hingga 2025 dapat terdiri dari 15-30 proyek dengan kapasitas 10-100 MW per proyek.

Jadi, prospek pengembangan energi terbarukan di 2020 sebenarnya lebih baik dibandingkan tahun-tahun sebelumnya dengan adanya komitmen politik dari Presiden, langkah-langkah merevisi kebijakan dan regulasi harga ET (FiT) oleh Menteri ESDM, dan dukungan jajaran direksi PLN untuk mengembangkan energi terbarukan untuk mencapai target RUEN. Walaupun demikian, aksi-aksi positif ini tidak serta merta langsung meningkatkan daya tarik investasi dan realisasi investasi pembangkit pada tahun ini. Apabila pemerintah melakukan langkah-langkah perbaikan di tahun ini, paling tidak untuk tiga aspek diatas, dampaknya pun baru akan terasa dua sampai tiga tahun mendatang, yang ditandai dengan meningkatnya minat investor dan meningkatnya stok proyek-proyek pembangkit yang siap dikembangkan secara komersial.

Pemerintah harus melihat bahwa 2020 adalah tahun untuk memulihkan kepercayaan investor, dan tahun untuk memperkokoh fondasi untuk transformasi energi yang berkelanjutan di Indonesia. Kegagalan untuk melakukan perbaikan di tahun ini dapat berujung pada hilangnya momentum positif, hengkangnya investor asing, serta hilangnya kesempatan membangun sistem energi modern yang berkelanjutan dan kompetitif secara biaya dalam jangka panjang. Kalau ini terjadi, perlu waktu lama untuk membalik keadaan.

Jakarta, 15 Januari 2020.