INDONESIA’S SUSTAINABLE ENERGY TRANSITION PLAN

As the 2022 G20 approaches closer, President Jokowi has set global health architecture, digital transformation, and sustainable energy transition as priority issues to be discussed in the event scheduled for November 2022 in Bali. In sustainable energy transition priority, Indonesia is focusing on energy access, technology, and energy transition funding as points of discussion. 2022 is set to be the year of re-evaluation and a chance to correct course for Country-Governments and Businesses. The recent pandemic and the global events such as the Russia-Ukraine war has taught us that energy as a sector must be looked at differently and by doing so a lot of future vulnerabilities can be avoided.

In March 2022, the Ministry of Foreign Affairs of Indonesia hosted the Indonesia-Europe Business Forum that was studded with important members of the Indonesian Government, business representatives and other thought leaders. A topic of discussion was the way forward for Indonesia in achieving net-zero target by 2060 or before, a promise that the country made during the COP 26 meeting in Glasgow in 2021.

Edwin Nugraha Putra, the EVP of Electric Power System Planning for PLN (Indonesia’s state electricity company) was of the view that solar energy and solar powered batteries will change the fossil fuel dependence of Indonesia to a large extent. “Hope by 2025, will be 1.2 GW peak solar coming to the system and several batteries will be introduced to have 8-12 hours or even 24 hours to save load over there,” says Edwin Nugraha Putra. PLN has vowed to stop building coal power plants in the country by 2023.

The state’s electricity company hopes to achieve 23% renewable energy by 2028, 6% biomass and rest of the dependence on fossil fuels. PLN wants to support this transition by accelerating hydropower and geothermal energy too. It believes in advancing the battery technology to achieve this transition from fossil to green power plant.

PLN which has just opened tender process for the first phase of diesel power plant conversion, plans is to convert those plants into solar power plants with battery energy storage or into hybrid plants. The first tender winner is scheduled to be announced in October 2022.

To support the conversion, PLN is teaming up with Indonesia Battery Corporation to build a battery energy storage system. Indonesia is a nickel-rich country, a key ingredient of battery manufacturing. Chris Gower, CEO of Altilium Group, a power trading and renewable company, pointed out that the best technology must be sustainable technology – that ticks both efficiency and sustainability Meanwhile, Pertamina (Indonesian state-owned oil & gas company) has allocated US$11 billion in capital expenditure by 2026 to increase the renewables portion of energy mix to 17% by 2030.

Energy transition is complex, balancing cleanliness, reliability and affordability. Nikki Grady-Smith, SVP of City & Corporate Integrated Solutions of BP, says that key to success in energy transition is supporting transitioning companies as well as using multi-sectoral collaboration to share knowledge, fast track technology, and de-risking investment. The Energy and Mineral Resources Ministry earlier this year estimated that the investment required to meet the net-zero emission target by 2060 would be around US$1.3 trillion. The details are as follows:

The Asian Development Bank (ADB) estimated that 40% of clean energy infrastructure investment must come from the private sector to support Indonesia’s vision. However, it is not easy to attract investment in renewable since the 2021 figure is only US$1.51 billion or 74.01% of the US$2.04 billion target.

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To stimulate investment, Europe can assist Indonesia in formulating attractive investment framework, mentioned Antonio Sieira, CEO of IGNIS Group. According to Alper Kilic, Managing Director, Global Head of Project and Export Finance of Standard Chartered, there is abundant source of financing for conventional renewables (solar, wind, geothermal). For new technology (batteries, CCUS), collaboration between multi-lateral agencies and international financiers are sought to improve its bankability.

Indonesia is a key market for energy because of the quantum and quality of resources available in the country. Renewable sources will also help Indonesia become more self-sufficient. Experts project that green energy will reduce the demand for fossil fuels by approximately 10%. As a result, Indonesia would be able to reduce imports of fossil fuel products.

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