Thursday, March 28, 2024

Indonesia’s Leadership in ASEAN: The Role in Energy Transition Issue

Reading Time: 5 minutes
Novi Nurmalasari

Journalist

Mahinda Arkyasa

Editor

Interview

After successfully hosting the G20 Bali Summit in 2022, Indonesia has continued to place itself in a global position by holding the ASEAN chairmanship in 2023. 

As the new ASEAN leader, Indonesia raises three priority issues namely electric vehicles, blue economy, and energy transition, as written in the press release of the 43rd High-Level Task Force on ASEAN Economic Integration (HLTF-EI), Friday, March 3, 2023. 

In the energy transition issue, Indonesia has a responsibility to achieve the 2025 ASEAN targets for Renewable Energy (RE) and Energy Efficiency (EE) as reflected in the ASEAN Plan of Action for Energy Cooperation (APAEC) Phase II: 2021-2025, as well as G20-initiated programs, such as the Just Energy Transition Partnership (JETP), which is intended to retire the country’s coal power plants. 

Moreover, looking into Indonesia’s condition, with its population making up 40 percent of the total ASEAN population, the country has brought energy consumption equal to 22 million tons of oil, which is the highest among all ASEAN countries. 

The above condition indicates that Indonesia should take the lead in enhancing renewable energy and energy efficiency, reducing gas consumption, as well as improving energy security, both nationally and in the ASEAN region. 

Domestic Efforts to Enhance the Energy Transition

In addition to its leadership in the regional forum, Indonesia itself has taken significant steps to accelerate the energy transition at the national level.

The data from the International Renewable Energy Agency (IRENA) shows about 86 percent of Indonesia’s total primary energy supply in 2020 is still dominated by fossil fuels. Coal’s share of the total primary energy supply has increased from around 21 percent to 37 percent. While gas fluctuates between 17 percent and 23 percent.  

Still, there are signs of concern regarding this condition, as in 2020, renewable energy constitutes 14.4 percent of Indonesia’s energy use. 

Moreover, according to the International Energy Agency (IEA), Indonesia has the potential to develop up to 788 GW of renewable energy, which is much higher than its current installed capacity of around 11 GW. If the country managed to tap into this potential, Indonesia can, not only reduce its dependence on fossil fuel but also achieve its 23 percent renewable energy target by 2025 and 31 percent by 2050, as set by the APAEC.

In addition, Indonesia has committed to reducing its greenhouse gas emissions by 29 percent by 2030, as it has outlined in its Nationally Determined Contribution (NDC) under the Paris Agreement. 

To this end, the government has focused on the following areas:

  • In November 2020, President Jokowi enacted the Omnibus Law on Job Creation that provides ease of licensing to entice investors including those involved in green industries. In that regulation, the government has also provided several incentives for investors in the renewable sectors, namely tax holidays, tax allowance, and import duty facilities. 
  • At the beginning of 2022, the government launched Indonesia Green Taxonomy Edition 1.0 as the basis for incentive and disincentive policies for various ministries and institutions, as well as the financial service authority. It also provides guidelines for information disclosure, risk management, and the development of sustainable finance products or services.
  • President Jokowi officially issued President Regulation No 112 of 2022 to push the establishment of large-scale renewable energy plants by both the state electricity company (PT PLN) and the private sector.  The Regulation prohibits the construction of new coal-fired power plants, with the exception of national strategic projects, and provides fiscal and non-fiscal incentives to encourage investment in the renewable energy sector.
  • In march 2023, the government unveiled a subsidy program in a bid to boost Electric Vehicle (EV) adoption, as part of its broader efforts to reduce the consumption of costly imported fuel (energy security). According to Energy and Mineral Resources Minister, Arifin Tasrif, the incentive is given for two-wheeled vehicles, in the form of cash amounting to Rp7 million.

Strategy for ASEAN’s Energy Transition: A Look at the Chairmanship Agenda

In recent years, Indonesia has been taking an active role in driving the energy transition agenda in the ASEAN region. For example in 2020, Indonesia chaired the ASEAN Ministers on Energy Meeting (AMEM), where the country emphasized the importance of regional collaboration in achieving APAEC 2016-2025 targets. 

Indonesia also hosted the 38th ASEAN Ministers on Energy Meeting and Associated Meetings in 2021, where the country reiterated its commitment to promoting renewable energy and energy efficiency in the region.

Furthermore, Indonesia has actively involved itself in various regional initiatives to promote renewable energy and energy efficiency. For example, Indonesia is a member of the Renewable Energy Policy Network for the 21st Century (REN 21), a global network of policymakers, industry representatives, and NGOs dedicated to promoting renewable energy. 

Indonesia has also participated in the ASEAN-German Energy Programme (AGEP), which aims to support ASEAN member states in implementing their renewable energy and energy efficiency targets.

Similar to its chairmanship in 2023, Indonesia is expected to play a crucial role in advancing the region’s energy transition agenda. 

According to a foreign ministry spokesperson, Indonesia will carry over this priority issue from G20 presidency to ASEAN chairmanship. For example, the Bali Energy Transition Roadmap that lays out not only a set of inclusive voluntary principles for G20 members but also for countries outside the G20.

The Bali Roadmap is a path for the principles that include enhancing energy security, market stability, and energy transition that reflects the different national circumstances, needs, and priorities of many countries as they strive to lower net emissions to achieve carbon neutrality. 

Despite the fact that fossil fuel, coal, and gas still remain dominant in the next two decades (more than 359 GW of the region’s power capacity in 2040), ASEAN agreed to address environmental impact and emissions from the power sector through clean coal technology (CCT) by adopting high-efficiency low emission (HELE) coal-fired power plants. 

Indonesia has also already installed several supercritical and ultra-supercritical coal-fired power plants, which means other than exporting the feedstock, Indonesia can transfer its early-adopter expertise. 

As the current chair of ASEAN, Indonesia’s potential lies mainly in biofuels and electric vehicles. According to Coordinating Minister for Economic Affairs, Airlangga Hartarto, Indonesia is the largest producer of biofuels in the region even in the world, particularly biodiesel, with a production capacity of 137,000 barrels per day (bpd), more than 20 percent higher than the US in second place with 112,000 bpd and Brazil in third place with 99,000 bpd.

With this capacity, biofuels could make a significant contribution to the achievement of the 2030 Sustainable Development Goals agenda and carbon neutrality. The sustainable production and use of biofuels could also provide several socio-economic benefits such as increasing the diversity and security of energy supply, increasing access to modern energy services, improving air quality, and encouraging sustainable economic development.

Regarding energy security, the region’s total final energy consumption could climb to 473.1 Mtoe in 2025, and even further to 1,281.7 Mtoe in 2050, as reported by the 7th ASEAN Energy Outlook (AEO7). 

The Least Cost-Optimization (LCO) scenario by ASEAN Center for Energy (ACE) would enable ASEAN to meet its growing electricity demand while keeping costs in check. The LCO considers all viable technologies among others and takes into account interconnecting the member states’ electricity through the ASEAN Power Grid. 

Therefore, energy should be borderless, said ACE executive director, Nuki Agya Utama. The AEO7 also noted that Indonesia should try connecting its electricity system in Sumatra to Peninsular Malaysia by 2025 which would have a total construction capacity of 600 MW. 

Furthermore, Deputy for Coordination of International Economic Cooperation, Edi Pambudi also emphasized that it is necessary to adjust the timeline for archiving economic priority targets, especially those that will be submitted to the Head of State at the 43rd ASEAN Summit, which is planned to be held in September 2023. 

Deputy Edy also conveyed several keys that need to be considered for the success of the ASEAN Chairmanship in 2023, starting from intensive communication with stakeholders to maintaining cohesiveness by mutually supporting and assisting ministries/agencies. 

Novi Nurmalasari

Journalist

Mahinda Arkyasa

Editor

 

Interview

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