Indonesia is one of the most populous countries in the world, with substantial emissions resulting from forestry and industrial activities. The country relies heavily on coal-powered generation and has plans to install over 6GW of coal power by the end of 2020 and 27GW by 2028. Smart Energy International takes a closer look at key aspects of this emerging economy’s energy transition.
Shifting the investments in coal planned for the next five years towards renewable, zerocarbon solutions is crucial to put Indonesia on a pathway compatible with the Paris Agreement and sustainable development. Furthermore, the country’s growing pollution problem is creating urgency to establish a green pathway to a decarbonised, cleaner future.
The government has published its medium-term development plan (RPJMN) covering the period between 2020 and 2024. The plan sets more ambitious renewable electricity targets aiming for capacity over three times higher between 2020 and 2024 than anticipated in the electricity supply plan published early in January. If the RPJMN is fully implemented, emissions could be reduced beyond current policy requirements. The challenge, however, is that there are no policies in place to support such targets and it is uncertain to what extent Indonesia will adjust existing plans to reach them.
Recently, Indonesian Minister of Energy and Mineral Resources Arifin Tasrif and IEA Executive Director Dr Fatih Birol announced the launch of a new joint project on electricity and renewable energy in Indonesia [page 52].
The project will focus on optimising the design and implementation of a new flagship scheme to encourage private investment in renewable power sources, as well as strategies to enhance renewables integration and power system operation.
The work will be carried out in partnership with the Indonesian national power utility PT Perusahaan Listrik Negara (PLN).
The new venture will align with the country’s COVID-19 recovery while ensuring the provision of free or discounted electricity to 33 million of the most vulnerable families in the country. Furthermore,the government has ambitious plans to significantly scale up investments in renewable energy and to enhance the operation of its electricity sector.
Despite the availability of natural resources, electricity access remains a challenge in Indonesia. In spite of government efforts to increase electricity access to 98.3% in 2018, 4.5 million Indonesians still don’t have electricity, as many are too poor to afford the connection or live on remote islands or hinterlands. There is also a high cost of lastmile electrification.
In Eastern Indonesia, achieving universal access is particularly challenging as power grids are small, isolated, and less reliable.
Coal production is predicted to increase, especially to meet base-load domestic demand and export requirements, as well as provide jobs and energy security. Coal production reached 557 million tons in 2018. Of the total production, 63% is mostly exported to meet the demand in China and India. Domestic coal consumption averages 115 million tonnes annually.
The country has indicated that it plans to replace coal plants older than 20 years, the majority of which are owned by PLN.
According to Carbon Tracker analysis, this includes 15 coal-fired plants (6.4GW) and represents 22% of the country’s total operating coal capacity. The date when the capacity will be retired is unknown.
That said, funding for the expansion of the Java 9 and 10 coal units has recently been secured, which will increase coal generation capacity in the country by 2GW.
Indonesia’s National Energy Policy calls for 23% renewables in the national energy mix by 2025. This is an ambitious target considering it missed its 2019 target by just over 5%, achieving only 12.36% last year.
However, the Indonesian government is pushing ahead with reforms to jump-start the transition to renewable energy and green power.
The declining fossil energy production and commitment to reducing greenhouse gas emissions have encouraged the government to increase the role of new and renewable energy to maintain energy security and independence.
There is no doubt that Indonesia has the available natural resources for new and renewable energy (NRE) to help the country meet energy mix targets. The total power plant renewable energy potential is equivalent to 442GW, while 200 thousand BPD (barrels per day) of biofuel and biogas are used as fuel in transportation, households, commerce and industry.
However, renewables face challenges in terms of high production costs (especially compared to fossil fuels), a lack of support for the domestic components industry and difficulty in obtaining low-interest financing. NRE utilisation in transportation, especially biodiesel, has increased following the biofuel mandatory policy.
Indonesia’s biofuel blending mandate is one of the most ambitious in the world. Since 2016, the electricity sector must have 30% of its energy supplied by biofuels.
However, while Indonesia’s biofuels targets are ambitious, they are not without controversy due to concerns around the production of palm oil. Plantations for biofuel production are exempt from a key sustainability certification, resulting in unsustainable farming and production methods being utilised.
Great potential exists for the development of rooftop solar PV. The Indonesian government has announced plans to install rooftop solar panels on at least 800 public buildings across the country in 2020. The allocated $13 million will be used toward the installation of solar panels on boarding schools, clinics, orphanages, government offices and police stations across 17 provinces.
For electricity generation, hydro remains one of the biggest sources of renewable electricity, reaching a total installed capacity of approximately 5.5GW at the end of 2018.
According to the Asian Development Bank, Indonesia has abundant sources of renewable energy, but it lags behind many of its Asian neighbours in converting renewables into electricity. The 72MW Tolo Wind power project is seen as a way for the country to demonstrate successful integration of variable renewable generation into the main power grid run by PLN.
Smart Grids will facilitate the transition to renewable energy, and drive economic growth, while also helping to ensure a more reliable supply of power to a country plagued by blackouts.
In 2015, the Prakarsa Jaringan Cerdas Indonesia (PJCI) or Indonesia Smart Grid Initiative was launched to prepare technology, regulation, education and entrepreneurial institutions as well as forming a systematic roadmap for smart grid implementation as a solution towards Smart Indonesia. This supplemented the Sustainable Energy for Remote Indonesian Grids (SERIG) project funded by the US Department of Energy (DOE) and implemented by the US National Renewable Energy Laboratory (NREL).
According to the NREL SERIG strategy document: “Bundling remote projects of similar scope or geography can boost economies of scale and help attract large investors who may otherwise ignore such small and remote projects. In some cases, it may be appropriate for the government to financially back remote renewable energy projects through mechanisms such as loan guarantees or by adjusting national budget priorities. Ultimately, though, widespread deployment will hinge on the ability of private enterprises and government to support innovative new business models tailored to community circumstances across the nation.”
Further developments saw PLN begin smart meter rollouts in 2019. The initial phase for the installation will take place in larger cities and tourist destinations, such as Jakarta, Bali and Labuan Bajo in East Nusa Tenggara, aiming to switch one million customers in the first year. Advanced metering infrastructure will support better integration of solar power and distributed energy resources into the energy mix, including the orchestration of DERs as an aggregate flexible resource.
A costing undertaken in 2015 by the Indonesian Ministry of Energy and Natural Resources estimated the required investment for the country to meet its 23% renewable energy target is at over 1 trillion Indonesian rupiah — over $70 million.
Introducing renewables also requires large swathes of land. One to two hectares of land will be needed, for example, for a megawatt of solar energy.
Meeting government’s energy transition goals requires significant investment from both domestic and international stakeholders. In the short-term, the availability and cost of capital have been impacted by the ongoing COVID-19 situation while longer-term, regulatory and legal frameworks will, of course, play a major role in investment decisions – with Indonesia competing against fellow ASEAN nations in one of the hottest energy markets globally.
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