Indonesia’s Efforts at Energy Sector Do Not Go Far Enough

Indonesia’s Efforts at Energy Sector Do Not Go Far Enough

The most major change to Indonesia’s energy policy was Government Regulation #49 setting targets for the energy mix by 2030. These energy mix targets are: 30% coal, 22% oil, 23% renewables and 25% natural gas. By 2050, the targets are 25% coal, 20% oil, 31% renewables and 20% natural gas. The current target for 2025 is a far cry from these goals; coal stands at a whopping 55% of the energy mix, followed by renewables (23%) and gas (22%). 

The state power company, Perusahaan Listrik Negara (PLN), develops energy projects to reach these targets.  The Ministry of Energy and Mineral Resources will release a new energy procurement plan for 2020-2029, which will revise the 2019-2029 Electricity Business Supply Plan (RUPTL, Rencana Umum Penyediaan Tenaga Listrik) which set the 55% coal target. PLN is largely responsible for implementation. This plan was updated due to falling energy demand from slowing economic growth nationwide and the movement of Indonesia’s capital to Kalimantan, where energy requirements will increase. 

Green energy advocates are pushing PLN to phase out coal plants whose construction has been stalled by the COVID-19 pandemic. These plants have a 40-year lifespan which will crowd-out renewable investment. To drop coal from 55% in 2025 to 30% by 2030, shuttering plants must not be replaced.

The 2019 plan pushes to achieve the 2020 100% electrification. So far, it has helped develop communal solar electricity stations, solar home arrays and PV towers to provide energy to rural areas. Solar has significant advantages for rural areas, where power lines may be difficult to lay down and infrastructure generally is lacking. The development of rural energy is moving in a promising direction. Hopefully, it will be supplemented by other renewable resources as infrastructure improves. Ideally, rural electricity needs – independent from solar which can sometimes be unreliable – would be met by a green grid supplied by a mix of geothermal, hydro and wind.

The 2019 plan saw increases in renewables from 14.9 GW to 16.7 GW. It is unclear if the 2020 plan will expand on this. 

In a new energy procurement plan, PLN should lay out how it will achieve its current 23% renewable target. To be on track for this goal in 2019, PLN needed to reach 17.5% renewables. Indonesia only achieved 12.36%. In addition to increasing renewable investment and phasing out coal, PLN needs to improve the implementation of existing targets. This implementation will be more achievable if coal fired plants are phased out. While PLN is replacing 23 old coal plants with renewables in Java, coal plants – particularly those which burn low-grade lignite coal – are still under construction. PLN should phase out coal, particularly low-grade high-polluting coal plants. With the world’s greatest endowment of geothermal and extensive coastline that could generate wind power, PLN and Indonesia have many other energy source options. PLN is falling behind on renewable investment, with the country planning to double installed coal capacity by 2025.

PLN and other agencies responsible for the implementation of Indonesia’s cuts to GHG emissions in the energy sector must reduce overall CO2 emissions by 11%, according to Indonesia’s NDC. In line with these reductions, the parliament of Indonesia is considering new legislation to encourage renewable energy development. This legislation, alongside feed-in tariffs for renewables and cost recovery from geothermal exploration, will help PLN reach its 2025 23% target and may encourage more ambitious renewable contribution to the national energy mix. 

The legislation, currently being drafted, could include a new renewable energy market and incentives to make renewables competitive with coal which benefits from policies such as price caps. Power producers may enjoy new incentives to incorporate renewables into the grid. The bill includes “new and renewable” energy sources. New energy sources could include nuclear, gasified and liquefied coal, and biofuel, sourced from palm oil. These latter two new sources are problematic for GHG emissions. Hydroelectricity development also threatens protected areas which are crucial for maintaining biodiversity and sequestering atmospheric carbon. The bill is not entirely sustainable.

Activity Rating:  ** Standing Still 

Indonesia’s continued investment in coal plants decreased investment in renewables. The lack of financial incentives for adopting renewables is inconsistent with the goal to reduce coal as a percentage of the energy mix by 25% from 2025 to 2030. Even as coal plants retire, new mine mouth plants are under construction. Renewables, meanwhile, suffer from inconsistent pricing schemes, high upfront costs, barriers to procuring investment and must compete with preferential coal policies. 

Take Action:  

Contact the Ministry of Energy and Mineral Resources of the Republic of Indonesia (EDMR, Kementerian Energi dan Sumber Daya Mineral Republik Indonesia) and encourage them to increase renewables as a percent of the energy mix by 2030. As Indonesia’s energy needs increase, the increased percentage of renewables in the energy mix will not achieve the 11% GHG reduction target set for the energy sector. While renewable plants expand – even as a greater percentage of the overall mix – so too do the plants of  GHG-emitting sources. Renewables should replace coal for current energy needs, not only rise to meet future needs. EDMR should set a threshold of total energy production of coal, determined by a baseline year’s energy production and decrease from that threshold. This would be an ambitious plan to phase out coal, not just decrease its percentage of the overall energy mix in Indonesia’s rapidly expanding, energy-hungry developing economy. 

Contact Information for EDMR:

This Post was submitted by Climate Scorecard Indonesia Country Manager Tristan Grupp

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