October 16, 2024
JAKARTA – Indonesia has seen little progress in its energy transition over the past decade as President Joko “Jokowi” Widodo has straddled two diverging boats, trying to increase power generation from renewable sources but failing to phase out coal.
The administration’s efforts to provide clean power to industrial parks in Indonesia were overshadowed by the growing use of coal in captive power plants, whose total generating capacity has increased nearly eightfold from 1.4 gigawatts in 2013 to 10.8 GW in 2023, Global Energy Monitor (GEM) data show.
Putra Adhiguna, managing director at the Energy Shift Institute, said the main sticking point in Indonesia’s renewable energy development over the past decade was the absence of higher-level legislation as deliberations for the new and renewable energy bill drag on.
“The next administration must immediately pass the [new and] renewable energy bill to demonstrate the country’s commitment to the energy transition and attract high-quality investment to achieve 8 percent economic growth,” he told The Jakarta Post on Friday.
Persisting reliance on coal
“The coal lobby may have a huge influence in the slow growth of our renewable [energy] electricity generation,” Putra said.
Agung Budiono, executive director of renewables pressure group Yayasan Indonesia Cerah, said the government’s policies were still fully supportive of the coal industry.
Rules that support the use of coal include stipulations of the Job Creation Law and the Mining Law, the latter of which provides incentives for the development of downstream coal industries.
Speaking to the Post on Monday, Agung acknowledged that Presidential Regulation No. 112/2022 on the acceleration of renewable energy development for electricity supply prohibited the construction of many types of new coal-fired power plants.
He added, however, that “energy transition efforts in the last decade have not been optimal, because the government is trying to perpetuate [the use of its] coal [plant] fleet while encouraging renewables.”
Coal is set to remain a fundamental part of the nation’s energy mix for the foreseeable future.
It is currently unfeasible to “completely remove coal” from the energy system, according to Idris Sihite, the Energy and Mineral Resources Ministry’s expert staffer for strategic planning.
“We have 99.2 billion tonnes of coal. We have to take care of the coal industry,” he said during an event hosted by energy technology company Siemens Energy in Jakarta on May 17, as reported by Eco-Business. He noted that Indonesia was “always seen as the bad guy” at international climate conferences because of its heavy reliance on coal.
Southeast Asia’s largest economy relies on coal for around 61 percent of its electricity, has a young fleet of coal-fired power stations and is the world’s largest coal exporter.
In the last ten years, the government has been visibly wary of a hasty retreat from fossil fuels, considering the high cost of decarbonization, forcing the country to resort to reducing emissions through co-firing and carbon capture storage (CCS) technologies in fossil fuel power plants.
Read also: Captive power casts doubt on JETP emissions reduction goal
Unattractive renewables pricing scheme
Mutya Yustika, energy economist at the Institute for Energy Economics and Financial Analysis (IEEFA), noted that in the last ten years, the government had issued rules to promote renewable energy investment.
Aside from the partial prohibition of new coal-fired power plants mentioned above, Presidential Regulation No. 112/2022 also seeks to boost private-sector investment in renewable energy projects by introducing a more flexible pricing scheme for electricity generated from renewables, where the purchase price for certain projects can be negotiated rather than having to match a rigid feed-in tariff.
“But in reality, two years into its implementation, the regulation has yet to effectively improve the attractiveness of the renewable energy sector,” she told the Post on Thursday.
Read also: New rule on renewables pricing paves way for ‘greener’ EVs, NRE investment
Indonesia’s renewable energy investment had stagnated over the past seven years, Mutya said in a report published by the IEEFA in July.
In 2023, Indonesia recorded US$1.5 billion in renewable energy investment. The figure consisted of 574 megawatts of additional renewable energy capacity, including 145 MW from the Cirata floating solar power project in West Java hailed as the largest of its kind in Southeast Asia.
The levelized cost of electricity (LCOE) for renewable sources, including onshore wind, offshore wind and solar, has decreased by more than 60 percent over the past ten years, and will continue to decline.
Nevertheless, Indonesia has the lowest solar energy development rate in the Asia-Pacific region, according to Mutya, meaning the country has yet to fully capitalize on the opportunity.
“Vietnam managed to install around 13.04 GW and 6.47 GW of solar and wind power capacity, respectively, marking an increase of around 1.12 GW in solar and wind power in 2023 alone,” she said in the report.
Indonesian Geothermal Association (INAGA) secretary-general Riza Pasikki told the Post on Friday that prices for electricity from geothermal energy were simply not attractive enough for investors to participate in geothermal power projects.
Indonesia needed to add 500 MW to 600 MW of geothermal electricity capacity annually, he said, referring to the targets set in the General National Energy Plan (RUEN) and PLN’s Electricity Procurement Business Plan (RUPTL).
Riza pointed out that geothermal electricity generation had increased by just around 50 MW annually.
“The geothermal sector needs bureaucratic and regulatory breakthroughs from stakeholders and the government,” he said.