Indonesia Needs to Catch the Opportunity to Finance Transition

Jakarta, 22 Nov 2021 – As the COP-26 wrapped up a few weeks ago, more discussions about “what’s the next follow-up action?” are being conducted to keep reminding both the Government and the public that the pledge or commitment made during the conference should be implemented. 

Acting as the pre-opening of Indo EBTKEConnex 2021, FIRE (Friends of Indonesia’s Renewable Energy) hosted a dialogue to figure out how Indonesia is setting up its strategy to achieve the new target and commitment announced during the COP-26 in Glasgow.

Sripeni Inten Cahyani, the Special Staff of the Ministry of Energy and Mineral Resources explained the Indonesia standpoint during the conference. Earlier this year, Indonesia submitted its updated NDC to the UNFCCC Secretariat and committed to achieving net-zero emissions by 2060 or earlier. This is quite a progressive step since at the beginning of the year there is not even a word about it. 

“Indonesia signed The Global Coal to Clean Power Declaration, and one of its commitments is to retire coal power plants in the 2040s, in our initial plan of coal phase-out around the 2050s. The acceleration means we need more financial support to retire the currently operating power plant and replace it with renewables,” Inten Said.

Indonesia has been consistently urging the developed countries to distribute funds to the fewer capital countries to address climate change and energy transition. 

David Lutman of the British Embassy emphasized that the urge to take action can be translated into deploying renewable energy on a large scale and that means the phase-out of coal. “The faster Indonesia delivers the transition, there will be bigger economic growth to reap,” he said. 

The importance of materialised commitment is needed to showcase promising progress in the next 2-3 years as explained by Fabby Tumiwa, the Executive Director of IESR. “Transition is not only about Indonesia, but the international community is observing so we need to display our progress to keep our accountability, and later to attract more international assistance,” Fabby explained.

Fabby later said that  three key things that can be done by the Indonesian government to accelerate the energy transition in Indonesia i.e conducting coal early retirement, increasing RE project pipeline, and assisting PLN in terms of auction and procurement of renewable energy.

Sufficient financing is needed in transforming the energy system. During COP-26, the Government of Indonesia signed the Energy Transition Mechanism (ETM) Memorandum of Understanding (MoU) with Asia Development Bank to finance the early retirement of coal power plants. Another financing scenario is by reforming the subsidy scheme in Indonesia and diverting it for the deployment of renewable energy.

Fossil Energy Subsidies Hinder Energy Transition

press release

Jakarta, 12 November- Despite the commitment to step up climate action and achieve the Paris Agreement target of keeping the earth’s temperature below 1.5 degrees Celsius, the G20 countries, including Indonesia, are still providing significant fossil energy subsidies. The Institute for Essential Services Reform (IESR) views fossil energy subsidies as counterproductive to energy transitions and achieve decarbonization in the middle of this century.

At the early stage of the pandemic, the G20 countries disbursed at least USD 318.84 billion to support fossil energy. Meanwhile, according to Climate Transparency 2021 data, Indonesia has spent USD 8.6 billion on fossil fuel subsidies in 2019, 21.96% of which was for oil and 38.48% for electricity.

Indonesia had succeeded in reforming fuel and electricity subsidies in 2014-2017 but still allocated a fairly large fossil energy subsidy. Energy subsidies increased by 27% in the period 2017-2019.

“The provision of fossil energy subsidies not only hinders plans and efforts to cut greenhouse gas emissions and decarbonization but also results in inefficiency in energy use. It also creates loss due to untargeted subsidies, and makes renewable energy difficult to compete with,” said Fabby Tumiwa, IESR Executive Director.

Ending fossil fuel subsidies will create a level playing field for renewable energy. Moreover, in his opinion, fossil energy subsidy funds will be much more beneficial if they are diverted to the most vulnerable communities, building education and health facilities, developing renewable energy, and accommodating the impact of the energy transition for workers in the affected fossil energy industry. 

“Energy subsidy reform on the consumption side should not be carried out haphazardly so that the poor do not have access to quality energy at affordable prices. On the other hand, financial reforms need to be followed by collecting and applying the poor family databases and targeted subsidy distribution schemes,” explained Fabby. 

Fabby believes that the pricing policy for Domestic Market Obligation (DMO) coal and gas for PLN is a form of subsidy and has made the price of electricity from coal-fired power plants and gas-fired power plants not reflect the actual costs. This policy also makes PLN prioritize the use of coal-fired power plants over renewable energy, which is cheaper.

“The government should review the DMO price benchmark policy for power generation and make a plan to end this policy. This is in line with the government’s decision to not grant permits for the construction of new coal-fired power plants outside the 35 GW program and plans for early retirement of coal-fired power plans before 2030,” said Fabby.

Climate Transparency 2021 analysis shows that to achieve the Paris Agreement targets, all regions of the world must phase out coal-fired power plants between 2030 and 2040. By 2040, the share of renewable energy in power generation must be increased to at least 75%, and the share of unabated coal-fired power plants is reduced to zero. While in the National Energy Policy, Indonesia promised to reduce coal by 30% by 2025 and 25% by 2050. Meanwhile, to be in line with the Paris Agreement, electricity generation from coal must peak in 2020 and stop coal completely by 2037.

Based on IESR calculations in the Deep Decarbonization of Indonesia’s Energy System study, the cost to transform Indonesia’s energy system to achieve zero emissions in 2050 will reach USD 25 billion per year until 2030. It will escalate sharply thereafter to USD 60 trillion per year.

“Fossil energy subsidies increase the negative impact of GHG emissions as well as add the burden on the state due to economic losses and state financial expenditures to overcome disasters caused by climate change. These subsidies can be diverted to help accelerate the energy transition using renewable energy so that we can achieve the renewable energy mix target of 23% by 2025,” said Lisa Wijayani, Program Manager of the Green Economy, IESR.

At the G20 Declaration last October in Rome, the G20 countries agreed to extend their commitment to reducing inefficient fossil fuel subsidies. IESR views that Indonesia can use the opportunity of Indonesia’s leadership at the G20 in 2022 to encourage real action to exit the burden of financing fossil energy.

“The commitment of the G7 countries to provide climate finance of USD 100 billion by 2025 is still not enough. Therefore, G20 countries must contribute, one of which is by carrying out financial reforms towards renewable energy that supports a green economy. Indonesia as the leader of the G20 countries in 2022, can encourage G20 member countries to carry out financial reforms,” ​​said Lisa.

She said every financial policy that leads to support for fossil energy must receive attention and be strictly inventoried by the Global Stocktake (GST) as part of monitoring the climate action of the Paris Agreement. 

According to a report by the Independent Global Stocktake (iGST), a civil society consortium to support GST, the GST can offer a platform for countries to collaborate in reforming fossil fuel consumption subsidies.

“Information that is inventoried into the GST must also include social elements in it so that the objectives of climate finance in achieving economic growth and social inclusion can be achieved. This GST process must include organizations representing economic, environmental, energy, and social elements, especially gender issues and other vulnerable communities, to ensure that the just transition takes place,” said Lisa.

 

Showing Commitment, Indonesia is Ready for Early Retirement of Coal Power Plants

Throughout 2021, responding to the global demand for climate action to align with the Paris Agreement, Indonesia has updated several documents such as the NDC which targets carbon neutrality by 2060 or earlier and released the ‘green’ RUPTL which is claimed to provide more space for renewable energy. Recently, Indonesia stated that assessment about the opportunity to retire coal-fired power plants early will be conducted. Although it is not yet ambitious to comply with the Paris Agreement targets, Indonesia’s decision should be appreciated and its implementation carefully looked after.

Indonesian Minister of Energy and Mineral Resources, Arifin Tasrif, at the COP-26 Climate Change Summit, signed the Global Coal to Clean Power Statement declaration. The Minister of Energy and Mineral Resources approved 3 of the 4 points of the declaration, i.e (1) encouraging the development of renewable energy & energy efficiency; (2) Phasing-out coal in the 2040s; and (3) strengthening domestic and international efforts to support a just energy transition.

Arifin explained that Indonesia is currently conducting a simulation to retire PLTU of 9.2 GW before 2030. A total of 3.7 GW of the 9.2 GW of power plants will retire early and be replaced with renewable energy power plants. This progressive plan demands a comprehensive roadmap for the coal transition.

Met separately, Fabby Tumiwa, Executive Director of IESR emphasized that the transition to leaving coal in Indonesia needs to be carefully prepared.

According to him, a comprehensive coal transition roadmap needs to be prepared to ensure that the transition that occurs is a transition that takes into account the needs of all parties involved and affected by the abandonment of coal for energy supply, and ensures that everyone has access to reliable and affordable energy.

In the event “From Coal to Renewables: the Energy Transition in Emerging Markets” organized by Accenture in the COP-26 series in Glasgow, Fabby Tumiwa explained, as one of the largest coal producers in the world, 60% of Indonesia’s coal is destined for export. Another important thing to note is that 85% of Indonesia’s coal production is only concentrated in 4 provinces.

“Coal’s role in Indonesia is not only as income for the state, but also as basic income for coal-producing provinces. When there is a transition, and coal will slowly be abandoned, these areas need to be considered because otherwise they will be in danger of collapsing,” explained Fabby.

As a country that relies heavily on fossil energy and with a fairly complex situation, the government’s openness to decarbonization by 2060 or earlier is seen as a step forward and achievable by Fabby Tumiwa.

“86% of electricity in Indonesia is generated by coal-fired power plants. Making the transition to renewable energy in this situation is certainly not easy. But that doesn’t mean it’s impossible,” said Fabby. 

Signed the Global Declaration to Phase Out Coal, Indonesia Needs to Prepare a Coal Transition Roadmap

Jakarta, 05 November 2021- At the 26th World Leaders Summit on Climate Change or COP-26, Indonesia signed the Global Coal to Clean Power Transition declaration. On the same day, the Minister of Energy and Mineral Resources, Arifin Tasrif, also stated that the government was reviewing the opportunity to early retire coal-fired power plants with a total capacity of 9.3 GW before 2030 (4/11/2021) which could be done with funding support reaching $48 billion.

Although Indonesia has decided to exclude the third point of the Global Coal to Clean Power Transition, which demands to cease the issuance of new permits and the construction of unabated coal-fired power plants, the Institute for Essential Services Reform (IESR) appreciates the steps taken by the Indonesian government, especially the leadership shown by the Minister of Energy and Mineral Resources at COP-26, to encourage a just energy transition through the development of renewable energy as widely as possible and to phase out coal-fired power plants as part of Indonesia’s action to prevent a global crisis.

“The openness of the Indonesian government to make an energy transition, through one of which is reducing the power plant in stages, should be appreciated. Post-Glasgow, the government, and the National Energy Council must accelerate the preparation of a comprehensive roadmap and strategy for the energy transition in Indonesia. Dependence on fossil energy will end if we do not rapidly increase the capacity of renewable energy. The policy focus is no longer coal as the first option, but renewable energy must be the main choice. So the energy transition needs to be carefully designed, with the priority of developing and utilizing renewable energy as much as possible and optimizing energy efficiency,” said Fabby Tumiwa, Executive Director of IESR.

Fabby emphasized that the decision to gradually stop fossil fuels, especially coal-fired power plants, is inevitable, not only from the perspective of the climate but also from the economic side of technology.

“Remarkably, with innovation and the price of renewable energy and storage technology is more competitive than fossil energy, the use of renewable energy to ensure the reliability of energy supply to achieve net-zero emission is becoming more feasible,” said Fabby.

The results of the IESR analysis from the study of Decarbonization of Energy Systems in Indonesia projected that renewable energy complemented with storage batteries will increase significantly by 2045. The share of batteries will reach 52% of the total storage system, followed by hydrogen at 37% and other storage systems around 11%. The share of electricity demand covered by energy storage increases significantly from around 2% in 2030 to 29% in 2045. The main users of battery storage will come from utility-scale systems, and to a lesser extent from commercial and industrial areas, and housing systems.

Concerning the early 9.3 GW of coal-fired power plants with details of 5.5 GW of early retirement without replacement to renewable energy power plants and 3.2 GW of early retirement with the replacement of renewable energy plants, Deon Arinaldo, Manager of the IESR Transformation Program, views this as a progressive step for decarbonization of energy system in Indonesian. However, according to IESR’s calculations, to implement the Paris Agreement targets and keep the global average temperature rise below 1.5C, there is around 10.5 GW of steam power plants that need to be retired before 2030.

“There is still a difference of 1.2 GW that needs to be retired and can be targeted for coal-fired power plants outside PLN’s business area,” said Deon.

Referring to the study of Indonesia’s Energy Decarbonization System, at least it requires investment in renewable energy and other clean energy of USD 20-25 billion per year until 2030 and increasing thereafter for the gradual financing of coal and the development of renewable energy for emission-free by 2050. However, phasing out coal-fired power plants will avoid the risk of financial loss from the stranded assets which reached USD 26 billion after 2040.

With large funding requirements for the gradual cessation of coal-fired power plants, Indonesia is working with ADB to launch the Energy Transition Mechanism (ETM) program, which is expected to raise around $3.5 billion to launch 2-3 coal-fired power plants per country.

“The existence of ETM, which will provide a financing platform, is expected to be able to provide a source of funds to retire the steam power plant and encourage the larger investment flows in renewable energy. This is crucial so that Indonesia can optimally plan the transformation of its energy system,” concluded Deon.***

COP26: A “Soundless” Recital by Jokowi

Many parties are waiting for President Joko Widodo’s speech at COP26. Jokowi is expected to declare more ambitious commitments to reduce emissions and deal with climate change as well as to outline concrete steps towards net-zero emissions. Indonesia’s strategic position as the leader of the G20 countries in 2022 should make Indonesia take one step ahead to lead efforts to reduce emissions for G20 member countries.

Unfortunately, in his speech at the High Level Segment for Heads of State and Government COP26 session, President Jokowi did not announce a higher climate ambition target nor a concrete commitment to support the Paris Agreement target to limit the increase in the average temperature of the earth below 1.5 degrees Celsius and achieve carbon neutral by the middle of the century. The IPCC AR6 report has stated clearly that we have less than a decade left to keep the earth’s temperature rise at 1.5 degrees Celsius. The opportunity to increase Indonesia’s climate ambitions is still open and of course the Government must take it and make the best use of it to save the earth from the damage caused by climate change.

Efforts to reduce emissions and address climate change must be seen as both a responsibility and an opportunity to transform Indonesia’s economic system from a carbon-intensive one to a more sustainable low-carbon economic system. According to the IESR Deep Decarbonization study, the transformation of the energy system will create 3.2 million new jobs in the renewable energy sector. An ambitious commitment by setting targets for reducing ambitions that are larger than the current NDC and building a comprehensive energy transition roadmap will send a good signal for investors to invest in Indonesia. This will encourage Indonesia’s economic strength to become more globally competitive.

Previously at the G20 Summit which took place on October 30-31 2021, the leaders of the G20 countries agreed to achieve net-zero emissions by the mid of this century. However, this commitment has not yet been accompanied by a target for the phase-out of coal-fired power plants. Holding a strategic role in the G20 leadership, Jokowi could actually take the opportunity to encourage G20 countries to stop operating coal-fired power plants and switch to renewable energy. Of course, in this case, Indonesia also needs to implement a policy of abandoning coal so that it can set an example for other G20 countries.

In addition, there is a difference between actions and facts on the ground in Jokowi’s speech at COP 26. He mentioned that he would build the largest PLTS in Southeast Asia and encourage the use of renewable energy to reduce emissions in the energy sector. However, until COP 26 took place, supportive policy support for the PV mini-grid ecosystem, such as the Revised Regulation of Ministerial Regulation 49/2018 concerning the Use of Rooftop Solar Power Generation Systems by Consumers of PT Perusahaan Listrik Negara (Persero) as well as Presidential Regulations concerning new and renewable energy, had not been officially issued.

More ambitious climate action is urgently needed now as the effects of climate change are becoming more frequent as La Nina returns. The Climate Transparency report 2021 states that changes in La Nina and El Nino patterns will have an impact on the onset and duration of the rainy season in Indonesia. This affects the agricultural sector such as rice production. The World Bank’s global risk analysis places Indonesia in the twelfth of 35 countries that face a relatively high risk of death from exposure to floods and extreme heat. Ranked as the fifth country with a population that lives in areas lower than the coastal zone, Indonesia is also vulnerable to sea-level rise.

Indonesia is able to make a significant contribution to tackling climate change and preventing worse impacts from the climate crisis. Utilizing vast forests as carbon sinks, having renewable energy potential reaching 7879.4 GW, and playing a strategic role in the G20 Indonesia should be able to achieve and exceed the current NDC target of reducing emissions by 29% on its own and up to 41% with international support from business as usual in 2030. By doing this, Indonesia will not only save the environment but also transform the economic system, as well as demonstrate leadership innovation to the members of the G20 countries.

IESR Launches the Study of Renewable Energy Technical Potential Map Study in Indonesia

Jakarta, October 25, 2021 – A comprehensive renewable energy potential map needs to be prepared to support the energy transition towards utilizing 100 percent renewable energy and achieving zero emissions in Indonesia by 2050.

Indonesia’s renewable energy technical potential data still refers to the General National Energy Plan (RUEN) of 443.2 GW. This data has not been updated since 2014. Moreover, the RUEN data is also much lower than the actual potential of renewable energy.

“The suboptimal data on the potential for renewable energy will affect the perspective, strategy, and decision making on the use of renewable energy in Indonesia. This data confusion will make the government and business actors unable to plan optimally the energy transition in Indonesia, and formulate policies to accelerate the use of renewable energy. Updating data is significantly strategic for the executives to plan Indonesia’s energy transition,” explained Fabby Tumiwa, Director of the Institute for Essential Services Reform (IESR).

IESR uses GIS to update solar, wind, and water technical potential data. Considering the variability and intermittent issues of these three types of renewable energy, IESR also examines the potential of biomass and pumped hydro energy storage (PHES) for complementing it. As a result, Indonesia has a total technical potential of solar, wind, hydro, and biomass energy of 7,879.43 GW and 7,308.8 GWh for PHES. 

“Biomass and PHES can be used as complementary sources to overcome the intermittent and variability issues of solar, wind, and water energy. Our calculation results show that the biomass potential reaches 30.73 GW. However, its efficiency is only 20-35%, so it requires PHES,” said Handriyanti Diah Puspitarini, Senior Researcher and Lead Author of the Study “Beyond 443 GW Indonesia’s infinite renewable energy potentials”.

This magnificent potential if utilized optimally will be able to meet all energy needs in Indonesia. The study of Decarbonization of Energy Systems in Indonesia, conducted by IESR and published last May, projected that energy capacity needs will reach 1600 GW by 2050. By utilizing 100% renewable energy, Indonesia can meet the electricity demand of 1600 GW and achieve zero emissions by 2050. Based on the study, its main contribution comes from 1,492 GW of solar PV (88% of the primary energy mix), 40 GW of hydropower, and 19 GW of geothermal and supported by optimal storage capacity.

The study “Beyond 443 GW Indonesia’s infinite renewable energy potential” also contains detailed data on the technical potential of solar, wind, water, biomass, and PHES in 34 provinces in Indonesia. This data can be adopted by the central and provincial governments to more aggressively promote and develop renewable energy projects that are decentralized according to their most prominent potential. Yet, it is still interconnected between islands and provinces to balance their energy supply.

“This renewable energy potential map can be further developed by considering the development to operational costs so that it can provide a more precise outline to stakeholders about the optimal location of renewable energy to be developed. Furthermore, the development of renewable energy can be realized with the support of the right policies and regulations,” added Handriyanti.

Through this study, IESR recommends that the government, first, improve data on renewable energy potential as the reference for planning in the energy and development sector, and conduct regular reviews as renewable energy technology matures. Second, the government and experts need to complete the technical potential map with a brief analysis of the network’s intermittent, variability, and grid readiness, including predictions of climate conditions in the next few years. Third, the government and stakeholders should start considering the development of the decentralized system and inter-island connections as a way to provide electricity from renewable energy that is accessible to communities throughout the island, especially remote areas. Fourth, the government needs to give more support to various renewable energy technology innovations so that they can open up opportunities for utilizing the huge potential of renewable energy.

Table : Technical Potential of Renewable Energy in Indonesia

Type

Technical potential

Scenario 1

Scenario 2
Solar photovoltaic (rooftop, ground mounted, and floating)

7,714.6 GW

6,749.3 GW
Micro- to small-hydropower, with capacity ≤ 10 MW

28.1 GW

6.3 GW
Onshore wind power

106 GW at 50 m hub height and 88 GW at 100 m hub height

25 GW at 50 m hub height and 19.8 GW at 100 m hub height
Biomass power (only from crop wastes and wooden biomass)

30.73 GW
Pumped Hydro Energy Storage

7,308.8 GWh

The study “Beyond 443 GW Indonesia’s infinite renewable energy potential” can be downloaded at the link s.id/Beyond443GW

The video of launch of the study “Beyond 443 GW Indonesia’s infinite renewable energy potential” can be watched on Youtube IESR Indonesia at https://youtu.be/eS_PQD3gEIs

IESR: Renewable Energy Portion in “Green” RUPTL Could Be Bigger

Jakarta, 14 October 2021– Institute for Essential Services Reform (IESR) The Institute for Essential Services Reform (IESR) appreciates the government’s commitment to making an energy transition towards decarbonization in 2060 or earlier by issuing the PLN 2021-2030 Electricity Supply Business Plan  (RUPTL), which has a larger portion of renewable energy generation. The government claims that this RUPTL is the greenest because it contains a portion of new and renewable energy generation capacity (EBT) of 51.6% or 20.923 MW in 2030. However, the 2021-2030 RUPTL still indicates the dependence of fossil energy on the energy system in Indonesia.

Pamela Simamora, IESR Research Coordinator who is also the main author of the Deep decarbonization of Indonesia’s energy system study, believes that the 2021-2030 RUPTL still shows a small renewable energy electricity mix, which is only 24.8% in 2030. This means that from 2025 to 2030, the increase in the renewable energy mix was only 1.8%. This number is much lower than the target mix increase from 2021 to 2025 which is 8% (from 15% today to 23% in 2025).

“The renewable energy mix should be higher in 2030 considering that the price of renewable energy in that year is predicted to be more competitive than fossil energy,” she says.

Indonesia itself has declared to achieve decarbonization by 2060 or earlier. IESR Executive Director, Fabby Tumiwa said that the target will be realized if, by 2030, around 70% of power generation capacity or around 80-85 GW comes from renewable energy so that energy sector emissions can reach their peak in 2030.

“To achieve this mix, it is necessary to reduce fossil energy generating capacity to open up more space for renewable energy plants to be included in the electricity system. The reduction in thermal generating capacity must be followed by the development of renewable energy. With this need, renewable energy in 2022-2025 should ideally reach 25-30 GW and accelerate to 45-50 GW from 2025 to 2030, in line with the plan for early retirement of PLTU, “he explains.

Responding to the government’s plan in the 2030 RUPTL to retire 1.1 GW of subcritical steam power plants in Muara Karang, Tanjung Priok, Tambak Lorok, and Gresik by 2030, the Transformation Energy Program Manager, Deon Arinaldo assessed that this step is still following the business as a usual plan because the PLTU is entering retirement age.

Moreover, the government’s intention to maintain fossil fuels by co-firing biomass at PLTU will set a greater risk of stranded assets and the environment when compared to focusing on developing renewable energy such as solar energy. PLN has even identified challenges such as the sustainability of the required biomass supply of 8-14 million tons per year, the impact on the efficiency of the power plant, and the increase in the basic cost of electricity supply.

On the other hand, RUPTL 2030 has also planned the development of electricity interconnection within islands and between islands to improve electricity reliability and distribute new renewable energy whose sources are far from load centers. The government targets that by 2024 the interconnection within the islands of Kalimantan and Sulawesi has been accomplished in the super grid system to overcome the oversupply in a large system. The government is also reviewing the development of the interconnection network between Sumatra-Java and Bali-Lombok. Referring to the study of Deep decarbonization of Indonesia’s energy system, this within-island, and inter-island interconnection network plan is a good thing and should be monitored for its development.

Furthermore, the development of varied renewable energy (VRE), especially solar energy, is focused on three strategies: solar PV for rural electricity, de-dieselization, and network connection (both PLN and IPP). However, de-dieselization by converting diesel power plants to solar PV equipped with a battery with a total capacity of 1.2 GWp is only intended for isolated systems that are not possible to be connected to PLN transmission.

“If it is intended to encourage a more aggressive penetration of renewable energy, the use of local renewable energy, either solar or other renewable energy sources, should be the main strategy for providing energy access, not a substitute, and must concentrate on to aspects of sustainability and reliability,” said Marlistya Citraningrum, Manager Sustainable Energy Access Program, IESR

Besides, the target of 4.7 GW of PV mini-grid by 2030 listed in the latest RUPTL does not reflect the much larger potential and pipeline project of PV mini-grid. The Scaling Up Solar in Indonesia report even shows that it requires at least 18 GW until 2025 to realize the target of 23% of the renewable energy mix. Meanwhile, according to the IESR Deep decarbonization of Indonesia’s energy system study to pursue emission-free Indonesia in 2050, 107 GW of solar PV is needed in 2030 with a storage system.

Energy Transition Finance: Possible Derisking Instruments on RE development to support the Decarbonization Process

Accelerating the decarbonization process in Indonesia will require a big amount of private and public finance, delivered in ways that respond to the needs of businesses and communities. On the public side, fiscal packages from governments are available opportunities to leverage the private sector in a transition to a low-carbon economy. Governments can also help mobilize capital from the private sector by improving investment frameworks, helping create bankable projects, and using international public financing effectively to accelerate the process. Some other derisking facilities need to be discussed to create a clean energy finance environment, reduce current perceived risks and bring down the high cost of capital. Private financial sector policies would also be crucial to channel financial flows into sustainable investments. The discussion will discuss what policies and practices are required to boost the investments needed on RE to support the transition into net zero-emission. It will start with a presentation showing the synthesis study of derisking facilities in Indonesia and some findings related to the issues. Subsequently, the discussion will respond to the results and identify how Indonesia can mobilize the capital needed to deliver zero emissions.

Measuring the Urgency of EBT Bill

Jakarta, 10 September 2021 – Since January 2021, the Indonesian House of Representatives Commission VII has prepared an academic paper for the New and Renewable Energy (EBT) Bill and is currently in the process of consolidation. This bill is considered important to provide legal certainty for the development of renewable energy in Indonesia. Even so, until now several parties have expressed objections to the substance or questioned the urgency of this law.

The development of renewable energy in Indonesia itself over the last five years has not been encouraging. The average additional installed capacity per year is only around 400 MW. In fact, Indonesia has a commitment to achieve 23% of renewable energy in the primary energy mix by 2025. Currently, Indonesia’s achievement is still in the range of 11-12%. As time is running out, various strategies are needed to accelerate the development of renewable energy in Indonesia. In collaboration with Soegijapranata Catholic University, the Institute for Essential Services Reform (IESR) held a webinar entitled “New and Renewable Energy Bill: for Whom?”. This webinar aims to explore the perspectives of various fields and hopes to formulate recommendations for this bill.

In his opening remarks, Fabby Tumiwa, Executive Director of IESR reminded the importance of the public knowing about the New and Renewable Energy (EBT) Bill and having the space and opportunity to provide their views on this Bill.

“In the midst of Indonesia’s current condition of pursuing net-zero emissions of 2060 or faster, the development of renewable energy is one of the keys to achieving this target. The role of the EBT Bill is important here,” explained Fabby.

Sonny Keraf, the Indonesian Minister of the Environment from 1999 to 2001, revealed that the problem of renewable energy which is slow in progress is not a problem in the regulations, but lies in the government’s seriousness in transitioning from fossil energy to clean energy.

“So if the big question is do we need this New and Renewable Energy Law? The answer could be no. Because we already have enough regulations that regulate energy in detail,” he said.

Irine Handika, Lecturer at the Faculty of Law, Gadjah Mada University, has a similar argument with Sonny. From the legal aspect, according to her, there are several things that are problematic about the New and Renewable Energy (EBT) Bill. One of them is the term ‘new energy’ which will make this law die before it is born. This is because the ‘new energy’ parameter itself is uncertain and unclear.

“We see that currently the main problem is at the implementation level of existing energy regulations, so making new laws may not be the right solution. Even if it is considered that there are things that have not been covered in existing regulations, the solution that can be taken is revisions or amendments to existing regulations or laws,” explained Irine.

On the other hand, Kardaya Warnika, DEA, member of the Indonesian House of Representatives Commission VII, explained that the EBT Bill aims to provide legal certainty for the development of new and renewable energy in the future. In the future, this law is projected to become a guideline for achieving national new and renewable energy targets.

“We see that the energy transition is very big, this law is a way for the state to be present to lead the energy transition process. I agree that the progress of NRE is bad because the government is not very supportive of renewables, even though the state must be present and lead the energy transition process. So it is hoped that this law will provide legal certainty forever for the development of renewable energy,” said Kardaya.

The partiality of the new law will really be seen when the draft law is finalized, but we need to ensure that the substance of the EBT Bill is not counterproductive to Indonesia’s decarbonization ideals to become net-zero emissions by 2060.