Encouraging the Decarbonization of MSMEs in Indonesia

press release

Jakarta, March 14, 2024 – Micro, Small, and Medium Enterprises (MSMEs) have become one of the important pillars of the Indonesian economy. Based on data from the Ministry of Cooperatives and Small and Medium Enterprises (Kemenkop), the MSME sector contributed to the Gross Domestic Product (GDP) by 60.5 percent and contributed to employment reaching 97 percent of the total workforce in 2021. 

On the other hand, MSMEs produce greenhouse gas emissions that are responsible for the climate crisis. Based on a study by the Institute for Essential Services Reform (IESR), estimated energy-related emissions from MSMEs reached 216 MtCO2 in 2023, equivalent to half of the national industrial sector emissions in 2022. For this reason, the Institute for Essential Services Reform (IESR) encourages MSME players to make efforts to reduce emissions to achieve greener and more sustainable businesses. 

The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, said that MSMEs have a significant role to play in achieving Net Zero Emission (NZE) by 2060 or sooner. According to him, reducing emissions or decarbonizing the entire supply chain in the MSME sector will open opportunities for Indonesian MSMEs to compete at the global level.

“Our study found that 95 percent of emissions from MSMEs come from burning fossil energy. Reflecting on this data, the government needs to start identifying opportunities and challenges in decarbonizing MSMEs. The government also needs to propose strategies and provide assistance in the form of financial and technical assistance to MSMEs so that they are able to plan and encourage investment to reduce greenhouse gas (GHG) emissions,” Fabby said in a webinar on Decarbonization Opportunities for Small and Medium Enterprises (SMEs) in Indonesia and Learning from Global Experiences.

 

In collaboration with Lawrence Berkeley National Laboratory (LBNL), IESR formulated a study that offers solutions to decarbonize MSMEs, especially in the Small and Medium Industry (SMI). SMEs were chosen because the subsector emits higher emissions than other SME subsectors. In addition, SMEs can employ up to 100 people, potentially providing jobs for local residents. This can be a reference to ensure a just transition, both at the local and national level.

The IESR and LBNL analysis recommends technology upgrades and electrification to decarbonize SMEs. The study takes three examples of SMEs with their decarbonization solutions First, electrification for the textile and clothing sector. Second, the construction sector that needs to increase the use of low-carbon cement, innovative concrete formulations and propose eco-friendly equipment to building owners. Third, the tanning industry sector to encourage the penetration of variable renewable energy (VRE), such as solar panels and domestic wind turbines.

Energy Data Analyst of IESR, Abyan Hilmy Yafi, mentioned, through the initial strategy of decarbonizing SMEs, several economic benefits will be obtained such as the creation of new business opportunities, increasing brand value, and attracting customer trust. Not only that, decarbonization will also improve production processes, profitability, and competitiveness while reducing climate change risks and ensuring a positive impact on the environment.

“MSMEs need to get more assistance because many MSME players do not know about energy, its units and how to make it efficient. With collaboration between the government, private sector, and the community, MSMEs can become agents of change that drive the transition to a clean and sustainable economy for a better future for all,” Abyan said. 

Head of the Green Industry Development Program Team, Ministry of Industry, Achmad Taufik, said that his party is working on green funding/investment for SMEs from banks, private and international sources. In addition, his party is exploring several models and preparing studies to strengthen green industry service providers. 

“For small and medium industries in an effort to transform towards green industry, we will help with training and capacity building, access to green technology, access to markets or creating new markets,” said Achmad. 

Highlighting decarbonization opportunities in the Small and Medium Enterprises (SMEs) sector, Energy and Environmental Policy Researcher, LBNL, Bo Shen stated that the application of energy efficiency is an attraction for the market in choosing SME products. In China, energy efficiency certification for SMEs is the basis for large companies to take SME products, he said. Meanwhile, learning from the United States, a number of universities have created government-funded industrial assessment centers to determine the estimated energy consumption and emissions of SMEs. 

“There are several effective ways to encourage energy savings in SMEs in Indonesia that can be applied. Among them, the availability of a standardized and transparent system to track, assess and communicate the energy performance of SMEs. Second, the existence of a government-supported evaluation scheme in business image improvement. Third, the existence of clear decarbonization targets for the government, multinational companies and SMEs,” said Bo Shen. 

Note to Editors:

MSMEs are all micro, small and medium-sized enterprises/businesses. 

Small and Medium Enterprises (SMEs) means excluding micro enterprises.

Small and Medium Industry (SMI) is a business that has a production process/conversion of raw/half-raw goods to finished goods that has a small to medium business size.

The type of micro, small, medium can be seen from the capital/income/number of employees.

Report Launch Nusa Penida 100% Renewable Energy

Replay Event


Background

The Bali Provincial Government set a vision for 2023,2023,Bali Net Zero Emissions by 2045 in August 2023 supported by non-governmental organization partners. This vision covers the electricity, transportation, and climate entrepreneurship development sectors. This ambitious target can be achieved by the Bali Provincial Government through an effective and collaborative strategy and a targeted and accountable roadmap. To ensure the achievement of these targets, the roadmap to Bali NZE was developed to formulate policies that support the growth of an optimal renewable energy development ecosystem and prepare a green workforce that will drive the transition.

According to Kemenko Marves, Nusa Penida Island, located in the south of Bali, holds five national titles, namely as a National Tourism Strategic Area (KSPN), one of the Outermost Islands, an Aquatic Conservation Area, a Bali Cattle Breeding Center, and a Renewable Energy Development Tourism Area. Nusa Penida’s strategic role can be encouraged as a pilot project to supply electricity powered by renewable energy to supply all electricity needs independently on one island. The existence of the senseinpilot project and the strategic predicate of Nusa Penida is expected to change the paradigm of renewable energy-based energy provision at a broader sense.

To support this initiative, IESR, in collaboration with partners, analyzed the potential of renewable energy (RE) in Nusa Penida that can be developed. Based on the results of the analysis, the potential for RE in Nusa Penida includes rooftop solar power plants worth more than 10.9 MWp, biodiesel power plants (castor plants and seaweed) of more than 2 MW, small-scale wind power plants, and Pump Hydro Energy Storage (PHES) capable of reaching more than 120 MW. Apart from renewable energy, the energy potential in Nusa Penida can also utilize wastewaste (Waste to Energy/WtE) at 700 kW.

After knowing the renewable energy potential of Nusa Penida, IESR also analyzed Nusa Penida’s electricity system in more depth to determine the optimal configuration of generation, transmission, and distribution systems to supply regional energy needs, including the capacity of potential renewable energy power plants, proposed locations, and network adjustment needs. The results of this analysis and study can be encouraged and are expected to become a blueprint for renewable energy-based island development and become part of the Bali NZE 2045 roadmap.

Objective 

This event was organized with the aim of disseminating the results of the Nusa Penida 100% study.

 


Presentation

Potential Mapping for 100% Renewable Energy Nusa Penida

Pemetaan-Potensi-untuk-Nusa-Penida-100-Energi-Terbarukan

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Industry’s Role in a Clean Future

Bandung, January 25, 2024 – Indonesia is blessed with abundant natural resources and committed to achieving the Net Zero Emission (NZE) target by 2060 or earlier. The industrial sector is crucial in this energy transition towards a sustainable future. Based on data from the Ministry of Industry (MoI), greenhouse gas (GHG) emissions from the industrial sector in Indonesia reached 238.1 million tons of CO2 in 2022. 2015-2022, it reached 8-20% of the total national GHG emissions. The most significant contributor to emissions comes from industrial energy use. 

Reflecting on these conditions, the West Java Energy Exploration team continued to visit several industries on the third day to see the utilization of renewable energy. PT Kahatex, PT Surya Energi Indotama, and Pertamina Geothermal Energy Area Kamojang show how industry can be central in utilizing renewable energy.

Reducing Emissions from the Garment Industry Production Process with Renewable Energy

The apparel and garment industry, particularly those involved in the global brands’ supply chain, must improve their production processes. The Carbon Border Adjustment Mechanism (CBAM) requires the industry to measure the carbon emissions produced during manufacturing.

Dedi Supriadi, Sustainability Compliance of PT Kahatex Majalaya, mentioned that the textile industry is competing with international brands to reduce emissions and increase the use of clean energy technology.

“From 2021, we (Kahatex Majalaya, red) installed rooftop solar power plants as much as 15% of the installed power capacity. From installing this solar PV, we managed to reduce emissions by around 40%-50% from 7,567e-1 CO2/unit to 3,190e-1 CO2/unit,” explained Dedi.

Kahatex has significantly reduced its greenhouse gas emissions and is now looking into utilizing other renewable energy sources to reduce its carbon footprint further. Since 2022, the company has been exploring biomass as a source of heat energy, which involves co-firing with coal. Since 2023, PT Kahatex Majalaya has been using 100 percent biomass to meet its heat energy requirements for production.

Solar Energy Illuminates the Earth of Indonesia

Director of Engineering & Operations, PT Surya Energi Indotama (SEI), Fajar Miftahul Falah, explained that SEI, as a subsidiary of PT Len Industri (BUMN), is responsible for developing renewable energy, particularly solar energy. Fajar stated that the business itself was the most significant challenge SEI faced since its establishment. Many people doubted its existence as a solar company at the beginning of its establishment. The high price of solar power and the belief that Indonesia was not ready to accept the offer made it even harder. However, with the acceleration of solar energy technology development, the price of solar PV has become more affordable. SEI has been in the solar power plant industry for over 15 years, with a total installed capacity of over 60 MW throughout Indonesia.

“Approximately 70% of the solar power plant construction projects we are currently working on are situated in Disadvantaged, Frontier, and Outermost (3T) areas or areas near them. Solar PV in these areas is challenging due to difficult terrain, making it hard to access the sites and creating safety concerns,” said Fajar. 

Operational room on PT SEI

Fajar mentioned that building solar PV in the 3T area is costlier than in other regions like Java. However, many believe the cost is the same in all areas. The fact is, while solar PV is affordable, the budget required to build it is expensive.

“We have been working on several solar PV projects, such as the Nusa Penida hybrid solar PV in Bali with a capacity of 4.2 kWp, the Merak Executive Terminal rooftop solar PV with a capacity of 324 kWp, and the Bakauheni Executive Terminal rooftop solar PV with a capacity of 192 kWp. Our main focus is on renewable energy, and we hope to contribute to Indonesia’s goal of achieving the NZE target by 2060 or earlier,” Fajar said.

 

Geothermal to Reduce Emissions

Raindrops welcomed the team from Jelajah Energi West Java upon their arrival at PT Pertamina Geothermal Energy (PGE) Kamojang Area. PGE is a PT Pertamina (Persero) subsidiary under the Upstream Directorate, which manages geothermal energy production from exploration activities to steam and electricity generation. The Kamojang geothermal energy sources are located in Ibun District, Bandung Regency, West Java, surrounded by beautiful pine forests.

Yustinar Uli, a representative of the PGE team, explained that PGE Kamojang Area became a pioneer of geothermal exploitation in Indonesia with the drilling of the first geothermal exploration well by the Dutch in 1926-1928. PGE Kamojang Area began operations on January 29, 1983, marked by the PLTP Unit 1 Kamojang operation.

“PGE constructed several units leading up to the PLTP Kamojang Unit 5 operation in 2015. Currently, PGE operates PLTP Kamojang Units 4 and 5 with a capacity of 60 MW and 35 MW, respectively. Meanwhile, PLTP Kamojang Units 1, 2, and 3, which have a combined capacity of 140 MW, are operated by PLN,” said Yustinar. 

Yustinar reported that the geothermal plants in the Kamojang area have a total installed capacity of 235 megawatts (MW). This is equivalent to reducing CO2 emissions by 1.2 million tons annually. The electricity generated from these plants is absorbed by PT PLN and distributed through the Java Madura Bali (Jamali) electricity interconnection system.

Koran Jakarta | Indonesia Must Continue to Intensify the Development of Solar PV

The operation of  Cirata floating photovoltaic (PV) power plant, West Java, is a milestone in the acceleration of solar PV development to decarbonize electricity in Indonesia. Going forward, Indonesia must optimize the potential of solar PV to support the achievement of the electricity sector’s peak emission target in 2030, at the lowest cost.

Read more on Koran Jakarta.

Awaiting Regulatory Certainty for Solar Energy Adoption

Fabby Tumiwa dalam konferensi pers Smart Transportation and Energy di Indonesia pada Kamis (9/11/2023)

Jakarta, November 9, 2023 – Solar power has the potential to accelerate renewable energy in Indonesia’s primary energy mix. However, developing the country’s solar power plants has proved challenging. The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, explained that Indonesia has the highest potential in solar energy. An IESR study shows that solar power in Indonesia could reach a technical potential and land suitability of 3,000-20,000 GWp. Despite this potential, there are regulatory challenges to developing solar energy in the country, particularly regarding solar PV. In 2022, the realized installed capacity of solar PV was only 271.6 MW, which was far below the planned capacity of 893.3 MW, based on data from the Directorate General of EBTKE of the Ministry of Energy and Mineral Resources.

“Solar PV utilization is currently limited to around 10-15% of its capacity, which makes the economics of solar PV low and unattractive. In 2021-2022, the growth of rooftop solar PV has stagnated. However, since the beginning of this year, there have been efforts to revise the regulations to prevent uncertainty. The revision process is long and has even been discussed at the Ministry of Law and Human Rights (Kemenkumham). Unfortunately, the process has not been completed yet and still requires further coordination between Ministries and Institutions,” said Fabby Tumiwa at Thursday’s Smart Transportation and Energy in Indonesia press conference (9/11/2023).

 

Fabby Tumiwa mentioned the uncertainty must be resolved immediately with strong leadership from President Joko Widodo (Jokowi). Additionally, on Thursday (9/11/2023), Indonesia unveiled the Cirata Floating Solar Power Plant, which has a capacity of 192 MWp, making it the biggest floating solar power plant in Southeast Asia.

“The inauguration of the Cirata Floating Solar Power Plant signifies the Indonesian Government’s commitment to developing solar energy. This project could not have been completed without the use of advanced technology and innovation from China, the world’s largest producer of solar energy technology. Considering Indonesia’s plan to increase the usage of renewable energy, we anticipate a significant demand for solar power plants in the coming years,” explained Fabby Tumiwa.

Driving Solar Energy Towards Achieving an Energy Mix of 23% in 2025

Jakarta, July 26, 2023 – Solar energy must be accelerated to achieve a renewable energy mix of 23% by 2025 and reach net zero emissions by 2060 or earlier. Unfortunately, renewable energy had only made up approximately 12.3% of the national energy mix by 2022.

Director of Various New Energy and Renewable Energy, Directorate General of EBTKE, Ministry of Energy and Mineral Resources (ESDM) Andriah Feby Misna explained various programs are continuously being encouraged to utilize solar energy. Whether through a large-scale solar power plant (solar PV) program, floating solar PV, or rooftop solar PV. From a regulatory standpoint, said Feby, the revision to Minister of Energy and Mineral Resources Regulation No. 26 of 2021 concerning Rooftop Solar PV Connected to the Electric Power Network Holders of Business Licenses to Provide Electricity for Public Interest (IUPTLU) has been harmonized by the Ministry of Law and Human Rights.

“We have harmonized the revised ESDM Regulation 26/2021 with the Ministry of Law and Human Rights. Hopefully, it can be enacted shortly. Some of the content that has been changed in the revision of the Minister of Energy and Mineral Resources 26/2021 includes the provisions on the capacity that may be installed; in this revision, we do not limit the capacity they can install but must follow the existing quota. So as long as the quota exists, regardless of capacity demand, it must be met according to the existing quota,” said Feby in a panel discussion entitled “Solar regulations, implementation, plans” at the Indonesia Solar Summit event organized by the Ministry of Energy and Mineral Resources together with IESR.

In addition, Feby mentioned, the revision of the ESDM Permen also regulates changes related to exports and imports. Considering that currently, PLN is experiencing a surplus and PLN’s limitations in being able to accept intermittent generators, for this reason, there is no change to this Ministerial Regulation for exports. It remains connected to PLN, but when there are exports, this does not count as a reduction in consumer bills.

“With no export-import recognition in the revised ESDM Permen 26/2021, it is not interesting, but at least the current regulation opens an opportunity for the industry to be interested in installing rooftop PLTS because this is indeed market demand. In the future, the revision of this Ministerial Regulation will be reviewed again and can open up exports and imports again,” said Feby.

Member of the National Energy Council, Herman Darnel Ibrahim, criticized the contents of the revised ESDM Ministerial Regulation 26/2021 which removed the rules for exporting electricity to PLN. According to Herman, this shows Indonesia’s step towards the world where it will not develop a rooftop PLTS, even though the potential is enormous and there is no land lease.

“The projection is that solar energy will be the main one in the electricity sector. Solar energy figures (in the latest national energy policy (KEN)-red) are projected in 2060 to be around 500-600 GW. In the old national energy policy (KEN) in 2050 (solar energy-ed) 120 GW, but the realization is not fast enough,” said Herman.

Norman Ginting, Director of Projects and Operations of Pertamina New & Renewable Energy (Pertamina NRE) explained his party is committed to supporting the government to achieve the net zero emission (NZE) target in 2060 or sooner. One of these efforts is to start building a portfolio in solar energy, including solar cell technology.

“We have completed more than 50 megawatts of PLTS, one of which is the largest internal Pertamina Hulu Rokan with a total planned installed capacity of 25 megawatts. In addition, Pertamina has a great interest in how to run and implement green hydrogen from solar power because we see that green hydrogen is easier in the shifting process,” said Norman.

Furthermore, Norman highlighted that society and industry have been waiting for electricity based on renewable energy. Opportunities for developing solar PV are extensive, both on-grid and off-grid. For this reason, his party needs even more massive support in developing solar energy in Indonesia.

Ashwin Balasubramanian, Associate Partner of McKinsey stated that solar energy’s technical potential is significant, more than 3000 GW. The projection is that more than 400 GW will need to be built in 30-40 years. This is also a great investment opportunity and contributes to the gross domestic product (GDP) by opening up new jobs.

“If we look at Vietnam and Thailand, they have developed 10-15 times. India developed more than 16 GW. It shows it is possible with the right conditions and aspirations,” said Ashwin.