Indonesia’s Aggressive Renewable Energy Policies and Programs

In 2023, Indonesia has been able to make progress with policies and actions in several sectors in order to align emission reduction targets with the Paris Agreement’s 1.5C temperature limit. International financial agreements, as well as Presidential Regulation 112/2022 on the Acceleration of Renewable Energy Development, enabled the expansion of renewable energy projects while also putting in place a coal phase-out strategy. Two major renewable projects were developed in 2023 -1) the largest floating solar PV plant in Southeast Asia and 2) Indonesia’s first green hydrogen refinery.

The floating solar project, Cirata, is currently built with a 192 megawatt peak (MWp) capacity and can be expanded to 1000 (MWp). It is built with an investment of $100m (Rp1.57trn) and is powered by 340,000 solar photovoltaic panels. The project was developed by a unit of Indonesia’s state utility company, Perusahaan Listrik Negara (PLN), in collaboration with United Arab Emirates renewable energy company Masdar, a unit of Mubadala Investment Company. The plant is the third-largest floating solar plant in the world. The project is expected to meet the energy needs of 50,000 households in Jawa and Bali annually. In terms of carbon emission reduction, it is expected to lower emissions by 214,000 tonnes annually. The plant was inaugurated just a week after Indonesia completed the first draft of its comprehensive investment and policy strategy under the Just Energy Transition Partnership (JETP) to expedite renewable energy adoption and coal power phaseout. International organizations such as Sumitomo Mitsui Banking Corporation, Société Générale, and Standard Chartered contributed to the funding for the project’s success.

Furthermore, the Green Hydrogen Plant (GHP) is a notable step in clean energy generation as it relies entirely on New Renewable Energy and has the capacity to produce 51 tons of hydrogen annually. PLN also develops the project, and the energy is sourced from solar power plants. The hydrogen produced can power 147 vehicles covering a daily distance of 100km. It also has applications in various industrial sectors, such as steel manufacturing, heavy vehicles, and shipping. There is a plan to expand and develop more such projects. Following a contract made on the sidelines of the COP28 climate meeting in Dubai, Saudi Arabia’s ACWA Power Company has committed to giving $1 billion (AED 3.67 billion) for a green hydrogen project in Indonesia.

Both these projects are a step towards increasing Indonesia’s share of renewable energy from 15% to 23% by 2030 and aligning with the ambitious goal of reaching net zero by 2060. These projects were possible due to collaborative partnerships between countries and international funding. The Indonesian government regulates the project implementation, and third-party audit organizations such as DNV, RINA, and INNOSEA are responsible for scrutinizing the project and the Dam Safety Committee (DSC) of Indonesia further validates it.

The Renewable Energy Acceleration goal and projects are backed by three critical reforms made in the Presidential Regulation 112/2022, which are: (1) a new electricity tariff regime (no longer tied to existing local generation costs determined by fossil fuel subsidies), (2) a streamlined power purchase agreement procurement process, particularly for dispatchable renewables, hydro, and geothermal, and (3) a moratorium on new coal power plants (with some exceptions and conditions) and the development of a coal phase-out plan.

However, development in the renewable energy industry is a small victory, and more effort is needed to put Indonesia on a low-carbon emission path. Efforts in this approach could include 1) Adherence to essential changes recommended in the Just Energy Transition Partnership (JETP) and the Comprehensive Investment and Policy Plan (CIPP). 2) Development and implementation of a bold decarbonization strategy for off-grid power. 3) Enactment of a bold forestry policy aligns with the national aim of net negative forestry and other land use emissions. 4) Strict requirements for bioenergy production must be met to reduce the environmental and social implications of feedstock farming. We can say there is a ray of hope for the coal phase-out and accelerated renewable energy generation in Indonesia’s future.

This Post was submitted by Climate Scorecard Indonesia Country Manager Netra Naik.



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