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Policy Breakthroughs Will Accelerate the Takeoff of Indonesia’s Energy Transition
Jakarta, December 15, 2023 – The Institute for Essential Services Reform (IESR) assesses that the energy transition is already in full swing in 2023, and it is ready to take off if the government can create the necessary supporting conditions.
IESR comprehensively discusses the development of the energy transition and opportunities to accelerate the energy transition in Indonesia in its main report, Indonesia Energy Transition Outlook (IETO) 2024.
The IETO 2024 report found that fossil energy supply still dominates despite government targets and commitments to energy transition and higher targets for greenhouse gas emissions mitigation; in the power sector, the total capacity of on-grid and captive coal plants is around 44 GW and is projected to increase to 73 GW by 2030. This will increase GHG emissions to around 414 million tons of carbon dioxide equivalent (MtCO2e) by 2030.
Fabby Tumiwa, Executive Director of IESR, said that the government needs to limit the development permit of captive power plants after 2025 and mandate the owners of industrial estates to optimize the usage of renewable energy and reduce emissions from operating power plants. The target is to reach the peak emissions in the electricity sector by 2030 and achieve net-zero emissions by 2060 or earlier.
IETO noted no significant increase in renewable energy capacity and contribution to the renewable energy mix. Renewable energy capacity and contribution to the mix only reached 1 GW in 2023, failing to meet the 3.4 GW target set in the 2021-2030 RUPTL.
Fabby explained that a shared vision among the President and policymakers is crucial for Indonesia’s energy transition to be successful. A shared understanding will determine political commitment and a cost-effective roadmap to sustainability.
Fabby emphasized that the energy transition in Indonesia is progressing slowly due to weak political leadership, insufficient capacity of actors, and the burden of past policies. Therefore, Fabby mentioned the importance of implementing a ‘no-regret policy’ that guarantees overall socio-economic benefits regardless of the changes that may occur, as well as public budget reforms and PLN reforms to accelerate the energy transition process.
“Indonesia needs a coherent roadmap to achieve NZE 2060 or sooner. The electricity sector has made significant strides, but the transportation and industrial sectors are still developing. The government must also involve the public to create a just transition. With Indonesia’s values and history, the energy transition should be done with gotong-royong,” he said.
The government has made a political commitment to transition to renewable energy, resulting in increased funding for renewable energy projects both bilaterally and multilaterally. However, despite these efforts, the renewable energy investment target still needs to be met. One of the reasons for this is that there is a need for more bankable projects, and investors are hesitant to invest due to the quality of policies and regulations that do not meet their needs. Despite this, renewable energy utilization has only reached 1 GW in 2023.
IESR believes that to attract investment, it is necessary to review the renewable energy price policy in Perpres No. 112/2022, taking into account technological developments and funding interest rates. Other reforms are also needed to encourage the development of bankable and profitable renewable energy projects for investors. To entice investors, efforts can be made to improve the tariff structure, ensure a fair risk-reward profile for private power producer partners, and consider power-wheeling schemes.
“In addition, a solid collaboration between PLN, regulators, project developers, and financiers, both private and government, is needed to prepare a robust project pipeline and increase projects that are eligible for funding,” explained His Muhammad Bintang, The Energy Storage Technology and Battery Materials Analyst at IESR, who is also an IETO author.
On the transportation side, the adoption of electric vehicles is increasing. The number of electric motorcycles is expected to increase 2.4 times by September 2023, from 25,782 units in 2022 to 62,815.
“Despite government incentives and assistance to adopt electric vehicles for the public, other issues become barriers to adopting electric vehicles. For example, on the two-wheeled vehicle side, there are mileage and performance limitations compared to fuel-based two-wheeled vehicles. In contrast, on the electric vehicle side, other issues hinder the adoption of electric vehicles,” said Faris Adnan Padhilah, Electricity System Analyst at IESR.
IESR believes that to attract investment, it is necessary to review the highest renewable energy price policy in Perpres No. 112/2022 by technological developments and funding interest rates, followed by other reforms to encourage the development of bankable and profitable renewable energy projects for investors. Efforts to attract investors can be made by improving the tariff structure, ensuring a fair risk-reward profile for private power producer partners, and considering power-wheeling schemes.
“In addition, a solid collaboration between PLN, regulators, project developers, and financiers, both private and government, is needed to prepare a robust project pipeline and increase projects that are eligible for funding,” explained His Muhammad Bintang, the Energy Storage Technology and Battery Materials Analyst IESR, who is also an IETO author.
On the transportation side, the increase in electric vehicle adoption saw a 2.4-fold increase for electric motorcycles by 2023, from 25,782 units in 2022 to 62,815 in September 2023.
“Despite government incentives and assistance to adopt electric vehicles for the public, other issues become obstacles to adopting electric vehicles. For example, on the two-wheeled vehicle side, there are mileage and performance limitations compared to fuel-based two-wheeled vehicles. In contrast, on the four-wheeled vehicle side, there are higher prices for electric cars, limitations on vehicle types, and the lack of SPKLUs,” explained Faris Adnan Padhilah, IESR Electricity System Analyst.
On the other hand, local governments in Indonesia face challenges in finalizing the Regional Energy General Plan (RUED) and implementing it to meet renewable energy targets. The recent regulation Perpres No. 11/2023 expands the authority of local governments in renewable energy development. However, one of the implementation challenges is the limited local government budget, which needs to be balanced with other priorities.
“In addition to the expansion of authority, the provincial government also needs to detail the regional energy plan regulations into various measurable instruments and schemes, for example, the priority of regional financial allocations for renewable energy and specific rules for decarbonization of various sectors (transportation and buildings) in the region. In addition, with the ongoing revision of the national general energy plan (RUEN) document, local governments need to update the provincial RUED in the future to reflect regional ambitions in energy transition better and integrate more ambitious renewable energy targets,” said Martha Jesica, the Social and Economic Analyst, IESR.
Information for the media
Indonesia’s Energy Transition Status in 2023
- IESR assesses Indonesia’s 2023 energy transition readiness as unchanged from 2022. Of the eight variables measured, the lowest score is political will and commitment, which must still be aligned with the greenhouse gas mitigation needs by the 1.5 C roadmap.
- Indonesia’s current energy policy is inadequate to reduce greenhouse gas emissions, will only reduce 20 percent of projected emissions in 2030, and will continue to increase until 2060.
- Renewable energy development in the electricity sector is slow, characterized by a total additional installed capacity of only 1 GW until 2023, far from the target set in 2021 of 3.4 GW.
- Coal production is increasing. As of the end of October 2023, coal production has stood at 619 Mt and is expected to surpass 700 Mt in 2023, exceeding the government’s 2023 target of 695 Mt.
- Indonesian government policies still favor the fossil industry. The update of the National Electricity General Plan (RUKN) does not include an option for early retirement of coal-fired power plants, even though it is economically feasible and profitable.
- For low-carbon fuels, green hydrogen development is gaining interest. Thirty-two green hydrogen projects are underway, although most are in the early development stage.
- In terms of transportation, motorcycles are the largest emitter in 2022, accounting for 36% (54 MtCO2e) of total transportation emissions.
- Electric vehicle adoption is expected to experience a significant surge in 2023. The number of electric cars adopted increased 2.3 times, from 7,679 units in 2022 to 18,300 units in September 2023. In the same period, the number of electric motors increased 2.4 times, from 25,782 units in 2022 to 62,815 in September 2023.
- As of the second quarter of 2023, the installed capacity of cumulative rooftop solar PV only reached 100 MW, far below the target of 900 MW by 2023. The slow growth of rooftop solar is mainly due to a decline in solar PV adoption in the residential and business sectors, by 20% and 6%, respectively.
- By 2023, seven provinces had exceeded the 2025 renewable energy target: North Sumatra, South Sumatra, Bangka Belitung, West Java, Gorontalo, South Sulawesi, and Maluku. Meanwhile, the other 31 provinces are still hampered by fiscal capacity and central policies to achieve the regional renewable energy mix target.
- Total funding in the new and renewable energy sector reached USD 1.7 billion from the first quarter of 2022 to the third quarter of 2023. These funding commitments generally focus on energy efficiency project preparation and renewable energy development. Perpres 112/2022 has increased funding commitments for renewable energy.
- Launched in September 2023, the carbon exchange recorded transactions of IDR 29.2 billion. However, after the opening, transactions
- Launched in September 2023, the carbon exchange recorded transactions of IDR 29.2 billion. However, after the opening, carbon exchange transactions were quiet. By the end of October 2023, total transactions had only increased by Rp200 million.
Opportunities and Projections for Energy Transition in Indonesia in 2024
- Opportunities for increased government commitment to the energy transition will be seen from the results of the National Energy Policy (KEN) update outlining decarbonization targets in the energy sector, followed by the issuance of the National Energy General Plan (RUEN).
- The government has issued Government Regulation No. 33/2023 on Energy Conservation. Implementing this PP should be binding and mandatorily controlled to drive significant emission reductions in the building sector.
- The Ministry of Industry plans to create decarbonization roadmaps in 2023 and 2024 for nine high-energy-emitting industrial sectors and incentives for energy transition. This could be an opportunity to build a greener industry.
- The low renewable energy achievement in 2023 results from delays in various hydropower and geothermal projects such as Batang Toru Hydropower Plant, Baturaden Geothermal Plant, and Rajabasa Geothermal Plant. The government needs to support these projects’ sustainability by minimizing project preparation risks.
- Electric vehicle adoption is increasing, but there is still range anxiety. This needs to be addressed by increasing the number of charging infrastructure through incentives.
- The latest regulation, Perpres No. 11/2023, has given local governments more authority in developing renewable energy. However, the regions may face budget limitations, which could hinder their ability to utilize this additional authority fully. As a result, it will be necessary for the national government to provide additional support to ensure the success of renewable energy development in the regions.
Dissemination Webinar on Indonesia’s Transportation Decarbonisation Roadmap
Replay Streaming
Background
Indonesia has endorsed a commitment to keep global temperature below 1.5 OC in line with the Paris Agreement through regulation No. 6 of 2016. Although the Indonesian government has put its NDC targets (41% emission reduction in 2030 compared to BAU, and net-zero emissions in 2060), it is still not enough to fulfill the Paris Agreement goals. The energy sector is projected to dominate Indonesia’s future emissions. In addition, from a technical and economic perspective, the energy sector in Indonesia can achieve zero emissions by 2050.
The transportation sector accounts for 23% of Indonesia’s total energy consumption in 2021, replacing Industry as the largest energy-consuming sector since 2012. Energy consumption by the transportation sector is dominated by petroleum fuels such as gasoline, diesel and aviation fuel. In 2017, this sector contributed around 26% of the energy sector’s greenhouse gas (GHG) emissions, or around 147 million tons CO2e. This figure does not include GHG emissions lost in the upstream oil processing industry, which contributes about 7% of the energy sector’s associated GHG emissions. In 2021, the land transportation mode contributes about 90% of the total transportation sector emissions, followed by the air and maritime transportation sectors.
The government has undertaken several initiatives and policies in the transportation sector to reduce emissions, such as the use of biofuels, public vehicles (mode shift), and most recently the move to electric vehicles. One of the drivers is the high increase in fuel imports that has occurred since 2004. However, these policies have not been anchored by a common planning document (or so-called roadmap), and as such, there is potential to optimize efforts and costs in implementing existing initiatives and promoting new ones to support decarbonization of the transport sector. Therefore, in this program focus, IESR is currently modeling a roadmap that can provide guidance on what aspects or strategies to prioritize to effectively reduce emissions in the transportation sector, using system dynamics methodology.
Objective
To further disseminate the findings of the system dynamics modeling of the roadmap for decarbonization opportunities in the transportation sector of the Jabodetabek national and regional model structures
More specifically, the discussion in this meeting is expected to:
- Disseminate and share information on Indonesia’s transport decarbonization roadmap to relevant key stakeholders, including policy makers, transport actors, associations, and research institutions.
- Receive inputs and validate the transport decarbonization roadmap from relevant key stakeholders.
- Discuss key and actionable policies required to implement the transport sector decarbonization roadmap at national and regional scales.
- Identify future challenges, opportunities, and support from relevant key stakeholders
Materi Presentasi
Dissemination Webinar on Indonesia’s Transportation Decarbonisation Roadmap: Emission Reduction Projection and Policy Intervention in Modal Share and Electric Vehicles – Rahmi Puspita S, Fauzan Ahmad & Arij Ashari N
Slide-deck-Presenter-Diseminasi-Dekarbonisasi-Transport-5-Oktober-2023-Pemodelan Dinamika Sistem (System Dynamics) Transportasi: Dekarbonisasi – Dr Muhammad Tasrif
Slide-deck-Presenter-Pengantar-Model-Diseminasi-Dekarbonisasi-Transport-5-Oktober-2023Emission Reduction Projection and Policy Intervention in Modal Share and Electric Vehicles – Prof. Dr. Agus Taufik Mulyono
Slide-deck-Penanggap-Prof.-Agus-TM-Diseminasi-Dekarbonisasi-Transport-5-Oktober-2023-Air Pollution: Economic Impacts and Steps Towards Clean Air
Jakarta, October 5, 2023 – Air pollution is a major environmental challenge society faces today. With increased industrial activity, population growth, and human mobility, air pollutants have drastically increased, causing severe impacts on human health and ecosystems. The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, emphasized that air pollution is a significant issue that also has an economic impact. For instance, when someone falls sick and cannot work, they lose the opportunity to earn money. Similarly, when the same person has to visit the doctor, they lose a lot of money.
“Air pollution significantly impacts the economy at a national level. In Jakarta, we have tracked the days with clear blue skies over the past decade. However, there has yet to be a comprehensive study on the national level. The government must conduct such a study to determine the economic impact of air pollution, including the loss of productive days due to illnesses caused by exposure to pollutants. By taking proactive measures, we can work towards cleaner air and a healthier workforce, thereby ensuring a positive impact on our economy,” explained Fabby Tumiwa in a Special Stage program entitled Synergistic Efforts in Overcoming Air Pollution, which was broadcast on TV One on Thursday (5/10/2023).
Quoting data from the Ministry of Environment and Forestry (KLHK), Fabby said three sources mainly cause air pollution in Jakarta. Vehicles account for 44%, Coal-fired power plants (CFPP) located around Jakarta account for 34%, and the remaining percentage comes from household burning and other activities. These sources produce different types of pollutants, with transportation being the largest source of PM2.5 and PM10. Agricultural activities and open burning also contribute significantly to PM. Furthermore, sulfur dioxide (SO2) is produced by 93% of power plants.
“Air pollution is a serious issue that needs to be tackled effectively. It is important to understand the different pollutants that contribute to air pollution. However, it is equally important to address the root cause of the problem, such as the smoke emitted from vehicle exhausts. This means that we need to reduce the amount of pollutants released into the air by reducing the use of fossil fuels. Encouraging people to use public and eco-friendly modes of transportation like bicycles can help achieve this goal. Besides that, the fuel quality also plays a crucial role in reducing air pollution. Fuel with higher quality emits fewer pollutants, which needs to be adopted as the standard. Unfortunately, Indonesia’s fuel quality is still below the EURO 4 standard,” said Fabby Tumiwa.
A researcher from the Faculty of Medicine, University of Indonesia (FK UI), Erlina Burhan, mentioned that there has been an increase in cases of acute respiratory infections or ISPA in the Jabodetabek area, which is believed to be caused by high levels of PM 2.5 pollutants. Erlina, who works at Persahabatan Hospital, has observed a growth of about 20% in the number of patients treated for ISPA, which could even increase by 30% during specific periods. Therefore, Erlina Burhan stresses the importance of clean air quality as it directly affects people’s lives.
“We have no control over the air we breathe. If the air contains pollutants, it can harm our health. Although our respiratory system has a natural filtration system to prevent harmful particles from entering our lungs, there are tiny particles that are too small to be filtered. These small particles can directly enter our respiratory tract and cause harm,” explained Erlina Burhan.
Erlina Burhan has appealed to people to take their health seriously, especially regarding air pollution. She suggests checking the air quality index before engaging in outdoor activities. If the index shows red, it is advisable to avoid outdoor activities. Erlina Burhan recommends a comprehensive approach to dealing with air pollution. This approach should not be limited to a single sector, such as transportation, conducting emission tests, or promoting the use of electric vehicles. Instead, it should involve concrete policies collaborating with all parties to overcome air pollution.
“Although many regulations have been implemented, their implementation seems lacking. For instance, smoking regulations have been in effect for a long time, yet individuals are still observed smoking in public areas. This highlights that monitoring and evaluation of regulations are not functioning effectively,” said Erlina Burhan.
