This year was another difficult one for Indonesia’s energy transition, with both targets and policies falling short of expectations, and analysts say the same stumbling blocks could hinder President Prabowo’s ambitious new energy pledges.

As of early December, the country had attracted US$1.49 billion in new and renewable energy investment this year, according to the Energy and Mineral Resources Ministry. If the ministry had not slashed the target to $1.23 billion, it would have missed its goal, which was set at $2.62 billion in January.

Indonesia has installed a total of 547.41 megawatts (MW) of additional renewable energy capacity this year, while it had hoped to add over 730 MW. The country has fallen short of similar targets in recent years, and in January, the Energy and Mineral Resources Ministry announced it was considering slashing the targeted share of renewables in the national energy mix to between 17 and 19 percent by the end of 2025 from the previous 23 percent.

“The government must provide regulations to encourage the use of renewable electricity to replace coal-fired captive power plants,” Shabrina Nadhila, Southeast Asia electricity policy analyst at climate consultancy Ember, told The Jakarta Post on Dec. 19.

President Prabowo has vowed to phase out all coal and other fossil-fueled power plants in the next 15 years, a pledge he made on Nov. 19 during the Group of 20 Summit in Brazil. He also committed to adding 75 gigawatts (GW) of renewable energy capacity to the electricity grid in the same period. To realize the goal of completely phasing out coal by 2040, Indonesia must close several coal plants each year and significantly increase its renewable energy capacity, adding 8 GW a year, Ember wrote in a report on Dec. 4. 

Indonesia added a total of only 3.3 gigawatts of renewable energy between 2018 and 2023, according to the consultancy.

Shutting down the country’s coal-fired power plants a decade earlier than previously planned could cost over $27.5 billion, according to Institute for Essential Services and Reform (IESR) estimates from November. That figure excludes the costs of building renewable power plants to replace the energy capacity, which could amount to $1.2 trillion.

Even though analysts have suggested international assistance will play a pivotal role in the transition given its massive costs, aid has been difficult to come by. For instance, only a fraction of the funds under Indonesia’s $21 billion Just Energy Transition Partnership (JETP) have been unlocked since its signing in 2022. 

Meanwhile, the Asian Development Bank (ADB) has missed its target to reach a deal this year on the early retirement of the Cirebon-1 coal-fired power plant in Cirebon, West Java, but it still hopes to reach an agreement with the stakeholders at the “earliest possible time”.

Putra Adhiguna, managing director at the Energy Shift Institute, lauded Prabowo’s ambitious targets on renewables, but warned it would be a challenge to achieve them. Putra told the Post on Dec. 19 that the government would have to focus on formulating a short-term target within three years for state-owned electricity company PLN and the energy ministry.

He also suggested that PLN, for planning purposes, start using the actual market coal price instead of the capped price under the Domestic Market Obligation (DMO), which has resulted in artificially low electricity costs from coal-fired plants.

Analysts and businesses had previously placed hope in a planned new and renewable energy bill that came under discussion in 2022, but lawmakers missed their target to pass it into law before President Joko “Jokowi” Widodo left office on Oct. 20. Current House of Representatives members say they hope to conclude the deliberations on the bill by the end of February of next year.

One stipulation in the bill would have paved the way for private power producers to transmit electricity directly to their customers through the state grid, but it faced backlash over privatization concerns and was altered. Some of the changes were seen as safeguarding PLN’s interests and creating increased uncertainty for would-be private energy investors seeking to make use of the rule. “All of the stumbling blocks, from the regulatory to licensing bureaucracy aspects, must be addressed.

If investors want to participate in grid transmission projects but the power-wheeling regulation is not established, then [the government should] finalize the rule soon,” Bhima Yudhistira, executive director of the Center of Economic and Law Studies (CELIOS), told the Post on Dec. 19.

The United Nations climate conference (COP29) in November resulted in a commitment from developed nations to fund climate change initiatives in developing nations to the tune of $300 billion a year, but it is unclear how exactly Indonesia might avail itself of that funding. Analysts say the agreement lacks the ambition needed to support the equitable energy transition to which Indonesia aspires, with concerns over high costs and complex negotiations stalling progress.

This article was published in thejakartapost.com with the title "". Click to read: https://www.thejakartapost.com/business/2024/12/27/past-failures-haunt-g....

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