Indonesia’s six-month plan for investment opportunities for transition to renewable energy

Financing will go to building renewable power generation, transmission cables and power storage system, says Mr Rachmat Kaimuddin, an Indonesian deputy minister. - The Straits Times/ANN

JAKARTA, Nov 26 (The Straits Times/ANN): Indonesia has targeted to complete within six months a plan that will spell out investment requirements and opportunities to accelerate its transition to renewable energy.

It is part of the initial US$20 billion (S$27 billion) Just Energy Transition Partnership (JETP) public and private financing deal signed with countries including the US and Japan, during the Group of 20 summit held in Bali on Nov 15 to Nov 16.

It will help Indonesia pursue energy transition in the next three to five years and is also aimed at making the global warming limit of 1.5 deg C above pre-industrial levels within reach.

The plan will also outline policy reforms needed to address any regulatory barriers in the energy sector that hinder private investment in renewables, said Mr Rachmat Kaimuddin, an Indonesian deputy minister assigned to lead the follow-up of the deal.

The Indonesian government will be more keen about investing in renewables with a higher use of locally made materials, according to Mr Rachmat, who did not provide details on the regulatory barriers.

“In the next six months, we will work out the details and set up criteria to ensure this partnership works smoothly, Mr Rachmat told The Straits Times after the deal was signed last week.

He said financing will go to projects to build renewable power generation, transmission cables and power storage system.

Indonesia’s power generation is about 80 per cent reliant on fossil fuel, mainly coal. Under the JETP deal, some of the coal plants will be closed before the end of their operational life, Mr Rachmat added.

Coal plants typically have a 40- to 50-year operational life.

Retiring them early and replacing them with renewables will incur costs. Renewable energy uses more expensive technology and retiring coal plants will lead to job transitioning. So all these aspects need to be addressed, with JETP financing coming into play, Mr Rachmat said.

But Ms Elrika Hamdi of the Institute for Energy Economics and Financial Analysis in Jakarta said retiring them would not be easy.

She said: ”The first hurdle... is to get the (owner of the coal-fired power plant) to agree and also get a nod on the valuation of the assets. This will not come easy nor will it be fast... Negotiations could take years.”

Under Indonesia’s Nationally Determined Contribution, a climate action plan to cut emissions and adapt to climate impacts, the South-east Asian country will continue developing its economy while staying in line with net-zero emission commitments.

This commitment is notable given that Indonesia’s annual per capita carbon dioxide emissions from burning fossil fuels is 2.3 tonnes, smaller than the global average of 4.5 tonnes and much lower than the 14 to 15 tonnes value seen in some developed nations, Mr Rachmat pointed out.

“Despite this, Indonesia is committed to achieving net-zero emissions by 2060,” Mr Rachmat said during a panel discussion on Friday. “Indonesia is one of the largest archipelagic countries. If global warming worsens, we are probably one of the first countries that will get impacted in a big way. This is why we take this issue very seriously in the government.”

Its share of global coal-powered electricity generation is at 2 per cent, or 190 terrawatt hours, according to government data citing BP Statistical Review of World Energy 2022. Indonesia is home to 3.5 per cent of the world’s population, or 270 million people.

The top three coal-powered electricity generation countries are China with a 52 per cent global share (5,339 terrawatt hours), India with 12 per cent (1,271 terrawatt hours) and the US with 10 per cent (978 terrawatt hours). - The Straits Times/ANN

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Indonesia , Plans , Renewable Energy


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