Launch of Report on Identifying Financing Needs for an Equitable Transformation of Indonesia’s Electricity Sector

Background

As one of the largest coal consuming and producing countries, Indonesia is ranked 6th as a global greenhouse gas emitter with a share of 3.11% of total global emissions (Climatewatch, 2024). In 2020 alone, the energy sector became the largest contributor to emissions, following the forestry and land sectors that have almost always dominated in the last decade. This is influenced by the high consumption of fossil energy, which is still dominated by 80% fossil energy over the past decade (IEA, 2023). Recognizing this, Indonesia has set a target to reach net zero by 2060 or earlier, and increased the energy sector target in the National Determined Contribution (NDC) to 31.89% or at least 915 MtonCO2 reduction. The government has also decided to no longer build new power plants and plans to retire several power plants listed in Presidential Regulation 112/2022. This step is a signal for Indonesia to prepare for the impact of fossil energy dependence as soon as possible.

The growing narrative of energy transition raises concerns due to the transition risks posed. It is no longer just technical and economic constraints that are being discussed, but also considering the social, environmental and economic aspects of those affected by the transition. From this, the discussion of the energy transition narrative becomes inseparable from the principle of justice. This is in line with the Paris Agreement which encourages a just transition, especially in the labor sector in accordance with the priority development agenda (EBRD, 2024). Global and national discourses related to energy transition in recent years have been very intense, especially related to the dismissal of fossil power plants closely related to the practice of just transition for people and communities around PLTU and in coal mining areas. In addition, the energy transition also requires an equitable approach in areas that will also be affected to support the transition, for example coal mining areas, mines and critical mineral industrial areas, and renewable power plant development areas. This was further strengthened at COP 28 in 2023 where at the ministerial meeting it was stated that the transition would not occur unless it was carried out in an equitable manner. This momentum has made the equitable transition agenda the focus of discussion both at the national and international levels.

 

Objective

This activity was carried out with the following objectives

  • To collect information related to policies in building an equitable transition framework that is in accordance with aspects of national and regional economic development to be included in the medium-term development plan;
  • Identifying challenges and opportunities faced by various stakeholders, especially CSOs, think tanks and academia in bringing the issue of equitable transition;
  • Building partnerships with CSOs, think tanks, development partners, and academics to harmonize the messages delivered.

Making the Global Stocktaking Process More Relevant to Southeast Asia

Jakarta, 25 April 2024 – Global efforts to halt climate change by reducing emissions are entering a phase of global consolidation. Since 2023, the Independent Global Stocktake (iGST), a consortium of civil society actors gathered to support the first Global Stocktake in order to assess the progress of the Paris Agreement (2015).

In a webinar entitled Navigating the Outcomes of the First Global Stocktake in Southeast Asia, Arief Rosadi, Climate Diplomacy Coordinator of the Institute for Essential Services Reform (IESR) stated that the results of the first GST had not had much influence on the energy transition process in the Southeast Asia region.

“The most important thing about this GST process is that it must be able to be translated into more ambitious climate policies. Energy transition is the low hanging fruit for Southeast Asia, increasing renewable energy targets and climate ambitions will not only contribute to reducing emissions but provide a positive signal to encourage transformation towards a low carbon economy in the region,” said Arief.

Arief emphasized that efforts to double energy efficiency and triple renewable by 2030 (Double Down,Triple Up Initiative) are crucial stages for encouraging the energy transition in the Southeast Asia region. He also added that the next two year period is a crucial moment for Southeast Asia considering that ASEAN is currently preparing ASEAN Post Vision 2025 and the latest APAEC (ASEAN Plan of Action on Energy Cooperation) energy policy document. The first GST point regarding doubling and tripling of renewable energy efficiency needs to be reflected in both documents.

At the planning, implementation and policy evaluation levels, the role of experts or independent research institutions is important to provide alternative views and input for policy makers. It is necessary to ensure that there is meaningful participation by all parties involved and potentially affected by the policy.

Danize Lukban, climate policy analyst at the Institute for Climate and Sustainable Cities (ICSC), reminded the importance of (climate) policies based on scientific data in this transition process.

“In the policy planning process (iGST derivative), the role of climate experts and institutions conducting research is crucial to provide alternative views and input for policy makers,” she said.

ASEAN as a consolidated body of countries in Southeast Asia is expected to become a consolidation forum for its member countries to produce more ambitious and collaborative climate action within the scope of the Southeast Asia region.

IESR: Indonesia’s Second NDC Needs to Reflect Ambitious Emission Reduction Targets

press release

Jakarta, April 25, 2024 – The Indonesian government, through the Ministry of Environment and Forestry (MoEF), is currently drafting the Second Nationally Determined Contribution (SNDC) document. In contrast to the Enhanced NDC document published in 2022, the emission reduction target in the SNDC document is no longer measured based on emission reductions from the base growth scenario (business as usual). The SNDC will compare greenhouse gas (GHG) emission reductions against the 2019 reference year based on GHG inventories. The government believes that this method of determining emissions is more accurate and will contribute to the global GHG emissions reduction target of 43% by 2030, compared to the 2019 emissions.

The Institute for Essential Services Reform (IESR) believes that updating scenarios that are no longer based on business as usual and instead use scenarios that reference historical emission reductions as a basis for setting targets is a positive development. This approach aligns with the recommendations made by IESR in the previous year.

“The emission reduction target in Indonesia’s SNDC must be aligned with the Paris Agreement target. The findings of the first Global Stocktake at COP 28 revealed that there is still a gap in the global emission reduction target of 20.3-23.9 gigatons of carbon dioxide equivalent. Therefore, it is crucial to consider this to set a more ambitious emission reduction target in 2030,” said Fabby Tumiwa, Executive Director of IESR.

Fabby added that expanding the renewable energy mix is one of the mitigation actions that can increase the emission reduction target in the SNDC. To align with the 1.5 degree Celsius pathway, the renewable energy mix in primary energy needs to reach 55 per cent by 2030. Unfortunately, the Draft Government Regulation (RPP) of the National Energy Policy (KEN), which was drafted by the National Energy Council (DEN), only aims for a renewable energy mix target of 19-21 per cent by 2030. Not only that but in terms of emission reduction targets for the energy sector, the KEN RPP suggests a target level of emissions in the energy sector that is still large, namely 1,074-1,233 million tons of carbon dioxide equivalent in 2030.

Deon Arinaldo, Program Manager of Energy Transformation, IESR, mentioned that if the energy sector emission reduction target in the SNDC refers to the KEN RPP, then it is certain that the target is still not in line with the Paris Agreement. In fact, according to him, the energy sector, particularly the electricity sector, can play a pivotal role in enhancing Indonesia’s emission mitigation ambition with the wide availability of renewable energy options and competitive economics.

“There are less than seven years left until the year 2030, which means that action to mitigate emissions in the energy sector needs to focus on strategies that can be rapidly implemented and accelerated. Renewable energy needs to be massively built in the electricity sector to optimize emission reduction through electrification of the transportation sector through electric vehicles and electric boilers and heat pumps in the industrial sector. All of the above options are commercially available and cost-competitive. The government should not be complacent with other options such as nuclear and CCS that can only be operational after 2030 so that strategies that can reduce emissions are stalled in their implementation,” Deon explained.

Delima Ramadhani, Coordinator of Climate Policy, IESR, said that the latest emission projection by Climate Action Tracker (CAT) reveals that the Enhanced NDC is expected to increase emissions to 1.7-1.8 Giga tons of carbon dioxide equivalent by 2030, which is 70-80% higher than the emissions recorded in 2019. It is important to note that this projection does not include emissions from the forestry and land sectors. To align with the 1.5 degrees Celsius target, Indonesia must reduce emissions between 829-859 million tons of carbon dioxide equivalent by 2030. Alternatively, for a target below 2 degrees Celsius, Indonesia should aim to reduce emissions between 970-1060 million tons of carbon dioxide equivalent, excluding forestry and land sector emissions.

“The government needs to include aspects of fairness and explain why the emission reduction targets listed in the SNDC are considered a fair share of Indonesia’s contribution to global climate mitigation efforts. Thus, it can be seen if the SNDC already reflects the “highest possible ambition” in emission reduction,” Delima added.

On the other hand, IESR highlights that the SNDC document must prioritize justice and good governance. These aspects of fairness and transparency need to be reflected in the SNDC drafting process, which includes promising practices, relevance to national circumstances, involvement of domestic institutions, and public participation.

Facing the Escalation of the Iran-Israel Conflict: Challenges and Solutions for Indonesia’s Energy Stability

Direktur Eksekutif Institute for Essential Services Reform (IESR), Fabby Tumiwa

Jakarta, April 24, 2024 – The escalation of the conflict between Iran and Israel has created tensions that could destabilize the global economy, including in Indonesia. The significant issues of concern are likely supply disruptions and an increase in oil prices, particularly since the Strait of Hormuz in Iran is a crucial trade route for global oil exports. These concerns were shared by Fabby Tumiwa, the Executive Director of the Institute for Essential Services Reform (IESR), during the KBR Public Space Talk Show on Wednesday, April 24, 2024, titled “World Oil Prices Rise: What’s Up Electric Vehicles?“

“For this reason, we need to be aware of the dynamics of fossil energy prices by reducing the risk of crude oil imports and finding ways to diversify energy imports. Furthermore, the depreciation of the rupiah exchange rate vis-a-vis the US dollar is a significant factor that may impact the cost of producing fuel oil (BBM) in Indonesia,” Fabby said.

Reflecting on this, Fabby emphasized that the Indonesian government should be more aggressive in encouraging renewable energy development to substitute fuel. For example, diesel power plants in Disadvantaged, Frontier, and Outermost (3T) areas can be replaced with renewable energy plants. Indonesia can also increase the use of biofuels (BBN) by paying attention to environmental sustainability in its production. 

“Indonesia has abundant sources of biofuels, including palm oil, jatropha, sampling, kemiri sunan, and microalgae. The country is currently working on developing bioethanol as a fuel mixture with gasoline. If Indonesia succeeds in this endeavor, it will help to decrease the need for fuel imports,” Fabby said. 

However, Fabby said several challenges are faced in developing renewable energy. First, the interest factor from certain circles. Second, various inconsistencies in policies and regulations make businesses hesitate to invest in renewable energy. For example, renewable energy is constrained in the electricity sector because only PLN can buy electricity from Independent Power Producer (IPP), and the IPP cannot sell it to consumers. Third, the business aspect of renewable energy by considering risk. 

“Overcoming the challenges of transitioning to renewable energy requires a strong political will from governments and other involved parties to prioritize and develop renewable energy more aggressively. This transition is crucial to achieving the net-zero emission (NZE) target set in the Paris Agreement by 2060, or even earlier,” Fabby said. 

Kontan | RI Renewable Energy Investment still Low in Early 2024, Here’s the Cause

The realization of new renewable energy (NRE) investment at the beginning of this year is projected to remain quiet. The implementation of the General Election (Pemilu) and the absence of an auction of renewable energy plants by PLN are reasons for realizing NRE investment until the first quarter of 2024, which still needs to look promising.

Read more on Kontan.

Request for Proposal (RFP) Strategic Communication and Advocacy Plan in Promoting Low Carbon Solutions Adoption for Indonesia’s Large Industries & Small-Medium Industries

Background

Achieving the national economic development targets in 2045 would drive capacity expansion in several key industries in Indonesia, such as iron and steel, cement, ammonia, pulp and paper, and textile industries. According to the latest IESR study, the five industries are responsible for about one-third of the national industry emissions in 2020 or about 102 MtCO2. This is because many of those industry players use outdated production technologies that work inefficiently and consume fossil fuels either as feedstock or fuel sources. In other cases, the industry plan its capacity expansion utilizing the carbon-intensive technology which could create emission lock-in for decades to come. Also, the currently low adoption of sustainable raw feedstock materials in cement, iron and steel, and papermaking industries drive the emissions to increase its emission by an additional 50 MtCO2 per year by 2050, and collectively with other industry subsectors, will increase the sector emissions to double in the same year.

Other than that, with the industry and commercial sectors’ landscape in Indonesia are dominated by smaller businesses of about 99%, it is also imperative to consider these smaller businesses’ role in Indonesia’s emissions portfolio. From the IESR study, it has been revealed that with the number of MSMEs reaching 65 million businesses in 2021, the least approximation of total estimated energy-related emissions could reach up to 216 MtCO2 per year in 2023, or about half of the industry sector’s emissions, including emissions generated from burning fuel, industry processes, and waste. Such high CO2 emissions are caused largely due to the very low understanding of MSME actors on how to implement energy efficiency measures as well as the lack of financial and technical capacities to tap into renewable fuel and electricity to support their businesses.

Understanding the timely urgency of decarbonizing industries of all sizes, Institute for Essential Services Reform (IESR) intends to formulate a strategic communication and advocacy plan to increase public awareness on the topic and drive the industry’s transformational change and increase the adoption of lower carbon technology and sustainable practices among large industries and SMEs. It is expected that the consultant develops the communication and advocacy plan following the Specific, Measurable, Achievable, Relevant, and Time-Bound (SMART) principle with at least a one-year timeframe. The successful consultant will provide input on methods, content, and implementation strategies. The strategy must include the use of online tools and new media outlets, including IESR’s existing social media accounts and website.

Requirement

  1. Proposal
  2. Mandatory required documents
    • Statement Letter of Compliance with Pre-Qualification Provisions
    • Statement Letter of Not Involvement in Probitied Organizations
    • Statement Letter of Not Claiming Compensation
    • Business Entity Qualification Form
    • Statement Letter Not Under Court Supervision
    • Expression of Interest
    • Statement of Willingness to Deploy Personnel and Equipment
    • Statement of Overall Commitment
    • Field Capability Statement Letter
    • Statement of Authenticity of the Document
    • Integrity Pact

All required documents can be downloaded through this link (s.id/documentsrfpcommsiesr), and expected to be received to IESR until 10:00 p.m. Indonesian Western Standard Time (WIB, GMT+0700) on Friday, 19 April 2024. Any proposals received after this date and time will be regarded as inadmissible. All proposals must be signed by an expert, official agent, or company representative submitting the proposal.

Proposals will be accepted until 10:00 p.m. Indonesian Western Standard Time (WIB, GMT+0700) on Friday, 19 April 2024. Kindly address the Program Manager Energy Transformation IESR at deon@iesr.or.id and the Coordinator of Industrial Decarbonization Project at faricha@iesr.or.id for inquiries. 

For more detail :

RFP-IESR-Strategic-Communication-and-Advocacy-Plan-in-Promoting-Low-Carbon-Solutions-Adoption-for-Indonesias-Large-and-Small-Medium-Industries.docx-1

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Building Low-Emission Cities in Indonesia

Jakarta, April 2 2024 – Urban areas are centers of carbon-intensive activities. High population, dense buildings and intensive energy use contribute to increased greenhouse gas emissions. Climate Transparency 2022 noted that direct and indirect emissions from the building sector in Indonesia accounted for 4.6 per cent and 24.5 per cent of total energy-related carbon dioxide emissions in 2021, respectively. For this reason, the decarbonization of urban areas is one of the crucial efforts to reduce carbon emissions and create sustainable areas, by the Paris Agreement to achieve zero carbon emission targets.

The Government of Indonesia through the Ministry of Energy and Mineral Resources (MEMR) in collaboration with the German Federal Ministry for Economic Affairs and Climate Action (Bundesministerium für Wirtschaft und Klimaschutz/BMWK) and supported by various other ministries by the recommendations of the Ministry of Energy and Mineral Resources agreed to support urban decarbonization efforts through the Sustainable Energy Transition in Indonesia (SETI) program. This program involves consortium members consisting of Gesellschaft für Internationale Zusammenarbeit (GIZ) in Indonesia, Yayasan Indonesia Cerah, Institute for Essential Services Reform (IESR), and WRI Indonesia.

Malindo Wardana, Program Manager of Sustainable Energy Transition in Indonesia (SETI), Institute for Essential Services Reform (IESR), explained that one of the important initiatives of SETI is the Urban Energy Lab. The Urban Energy Lab aims to develop a sustainable local energy ecosystem in urban areas, especially in selected cities. It aims to support a better and more sustainable built environment.

“The selection criteria for the cities that will become SETI projects include the potential for renewable energy in the region, existing sustainability programs, and the willingness of the cities to implement energy decarbonization in the building sector,” Malindo said.

Malindo in the SETI Urban Energy Lab Focus Group Discussion event held on Tuesday (2/4/2024) said, the process of determining the pilot city for the SETI program through the stage of forming a network of potential cities. Cities that are members of the potential city network will then be selected by the Directorate General of New Renewable Energy and Energy Conservation (EBTKE) of the Ministry of Energy and Mineral Resources & the SETI consortium as pilot cities. These pilot cities will receive additional support in the form of matchmaking activities between building owners/managers and energy service companies, capacity building such as energy manager/energy auditor certification, integrated energy planning modeling, and energy conservation.

Coordinator of the Energy Conservation Technical Guidance and Cooperation Group, Ministry of Energy and Mineral Resources, Hendro Gunawan said that the government has revised Government Regulation (PP) No. 70 of 2009 into Government Regulation (PP) No. 33 of 2023 concerning Energy Conservation which is a concrete step by the government to regulate the use of energy that is economical, rational and wise. In this regulation, the building sector with an energy use limit of more than or equal to 500 TOE (Ton Oil Equivalent) per year is obliged to carry out energy management. 

 

“Local governments also should implement energy management in buildings that are owned, managed and financed through the state revenue and expenditure budget (APBN) or regional revenue and expenditure budget (APBD),” Hendro said. 

Hendro also mentioned the existence of rules that strengthen the authority of provincial regions in utilizing renewable energy in the regions through Presidential Regulation (Perpres) Number 11 of 2023 concerning Additional Concurrent Government Affairs in the Energy and Mineral Resources (ESDM) Sector in the New Renewable Energy Sub-Sector. 

He hopes that the existence of these regulations and the implementation of the SETI program will be able to support local governments in implementing energy efficiency in buildings, as well as efforts to increase the use of renewable energy in buildings, to reduce the impact of climate change and build a sustainable environment.

Carefully Designing Indonesia’s Energy Policy Framework

Jakarta, March 28, 2024 – The National Energy Council (DEN) plans to adjust the renewable energy mix target. Currently in the draft Government Regulation on National Energy Policy (RPP KEN), DEN plans to reduce the national renewable energy mix target to 17-19 percent by 2025. Previously, the renewable energy mix target was 23 percent by 2025.

The Institute for Essential Services Reform (IESR) considers this a step back from the Indonesian government’s commitment to overseeing the energy transition.

Raditya Wiranegara, IESR Research Manager, in a hearing with the National Energy Board expressed his concern behind the setting of the renewable energy mix target.

“IESR has previously conducted modeling that has been published in our annual report, Indonesia Energy Transition Outlook (IETO). Our modeling results show differences with the modeling results that form the basis for the formulation of the KEN RPP. This is especially evident in the final energy growth, where in the modeling for IETO we used Bappenas’ GDP growth assumption for Indonesia Emas 2045,” Radit said.

This was clarified by Retno Gumilang Dewi, ITB’s modeling team, who assisted DEN in the modeling, that the figures currently circulating are adjusted figures.

“The model we produced can be said to be an ideal model. The modeling was then brought for FGD (focused group discussion) and received various inputs, so it was adjusted,” said Retno Gumilang.

Fabby Tumiwa, Executive Director of IESR on the same occasion said that in preparing a country’s energy planning, it is important to ensure the choice of technology that is most relevant and tested with the latest technological developments.

“This step is important and crucial to avoid being locked-in by high-carbon technologies,” Fabby said.

Fabby added that if we are already trapped in the choice of high-carbon technology, it will require even greater investment to get out of the high-carbon technology. IESR also encourages the achievement of renewable energy targets that have been set in the RUPTL and national strategic projects as a driver of the growth of the domestic renewable energy industry.