Renewables in Indonesia: Contradicting and Unaccommodating Legislation
by Yohannes Maria Vianney Widoputranto
The advent of climate change and the climate crisis have fundamentally changed how countries are planning on sustaining an ever-increasing need for energy and electricity. This situation has given rise to debate about energy sources in Indonesia, especially since this pandemic has caused the share of new and renewable energy in Indonesia to be estimated at around 11.51%, lower than the target set by the government for 2021, which was set at 13.4%. This will force the Indonesian government to speed up efforts to achieve the target of 23% share of new and renewable energy sources by 2025.[1]
In order to achieve the target of 23% renewables by 2025, the government has released regulations that define New and Renewable Energy in the form of Law Number 30 of 2007 concerning Energy. This bill defines new energy as “an energy source that can be produced by new technology, both from renewable and non-renewable energy sources, including nuclear, hydrogen, methane gas, coal, liquefied coal, and gasified coal.”[2] Renewable energy sources are defined as “energy sources produced from sustainable energy resources, including geothermal, wind, bioenergy, sunlight, water flow and waterfall, as well as movement and differences in sea layer temperature.”[3] Based on the definition of the Energy Law, it can be seen that the definition of new energy still includes the use of fossil energy in its development, while renewable energy solely emphasizes on the sustainability of the sources of energy.
This combination of definitions creates a contradicting situation when addressing the use of renewables in Indonesia’s energy mix. While new and renewable energy are considered as two energy sources that must be prioritized for development, even being explicitly stated as such in regulations other than the Energy Law, such as Law Number 30 of 2009 concerning electricity,[4] recent developments have seen the government emphasizing the development of “New Energy” instead of renewable energy. This situation means that for the foreseeable future, Indonesia’s energy mix will continue to be powered predominantly by fossil fuels, resulting in a would-be betrayal of the 23% renewables in the energy mix by 2025 target.
Under the Net-Zero carbon plan submitted by Indonesia to the UNFCCC (United Nations Framework Convention on Climate Change) 34% of Indonesia’s energy will come from coal in 2050, followed by new and renewable energy at 33%, and gas at 25%. This means Indonesia will still consume over 290 million tons of coal in 2050, only offset by the reduction of deforestation and the increase of reforestation. Government policies now favor fossil fuels, with coal-fired companies receiving substantial subsidies, while there are no incentives to stimulate investments in renewable energy. Newly implemented regulations also provide even greater incentives for coal that have exacerbated the disparity. One of them is a major rewrite of mining legislation that exempts coal-mining corporations from paying royalties if they build downstream infrastructure like gasification plants or coal-fired power plants. Coal gasification, a process where coal is turned into the liquid methanol and dimethyl ether (DME), has been touted as the next big thing for the industry because DME can replace imported liquefied petroleum gas (LPG). Coal proponents say that these gasification projects will benefit the economy by enabling the use of more domestic energy, preserving jobs and investment in the coal industry.[5]
This situation is unfortunate and unnecessary because Indonesia has a fairly large renewable energy potential, 450 Megawatts (MW) for mini/micro hydro-power, 50 gigawatts from biomass, and 4.80 kWh/m2/day for solar.[6] As with most qualms in developing countries, a major concern regarding renewables in Indonesia pertains to the initial investment needed to kickstart construction of renewable power plants. Estimates from the International Renewable Energy Agency (IRENA) stated that an energy transformation scenario that could limit global temperature rise would cost US$19 trillion, but could generate benefits of up to US$50–142 trillion by 2050 and could also save costs through reducing health and social costs due to reduced air pollution.[7] In Indonesia alone, Ernst and Young (EY) estimated that the potential for renewable energy investment in Indonesia reached US$ 12 Billion, with projects in this sector having the potential to create 34 thousand jobs, and reduce emissions by up to 19 metric tons of CO2.[8] With that being said, it can be seen that renewables have the close to the same amount of benefits economically to the continued development of coal. It only needs government incentives and a clearer regulatory framework to be attractive to investors.
For context, ASEAN member states have agreed to a five-year sustainability plan under the second phase of ASEAN Plan of Action for Energy Cooperation (APAEC) 2021–2025, the regional blueprint for the energy sector in the framework of the ASEAN Economic Community (AEC).[9] Under this, ASEAN member states agreed to set a target of 23% share of renewable energy in total primary energy supply in the region and 35% in ASEAN installed power capacity by 2025.
Vietnam, Thailand, the Philippines, Malaysia and Indonesia represent a share of 84% of the total installed renewable energy capacity among the Southeast Asian countries. Vietnam leads the sustainability change with a 34% share, followed by Thailand (17%), Indonesia (13%), Malaysia (10%) and the Philippines (10%).[10] One factor that allows Vietnam to excel in the adoption of renewables is the political structure of the country, with the Politburo serving as the highest decision-making body. The Politburo oversees the party and its resolutions have a significant impact on the government’s policies and strategies, including in the energy sector. The latest Politburo resolution, Resolution 55 (2020), came as the most comprehensive and leading-edge guidance in the rapidly changing energy field.[11]
Resolution 55 sets 5 main goals for the Vietnamese national energy strategy. Firstly, to maintain national energy security as a foundation for socioeconomic development while also sustainably developing the energy sector; secondly, based this system on a socialist-oriented market mechanism in order to quickly develop a competitive and transparent energy market, diversify forms of ownership (especially open up to the private sectors) and business models, and eliminate monopolies; thirdly, to develop and diversify energy forms; fourthly, accelerate digital transformation and R&D in order to become more technology self-sufficient; and finally, an emphasis on energy efficiency and environmental protection.[12]
Vietnam is now in the middle of an energy transition. The national energy policy is currently under review, which when implemented will form the backbone of the energy sector in the country for the next decade. Following the Vietnamese government’s commitments to a carbon neutral economy by 2050 at the UN Climate Change Conference in November 2021, this current and near future period becomes important for the energy sector to meet these ambitious targets. As part of this process, market liberalization with the participation of the private sector will be crucial to the sustainable development of the energy system. The private sector includes not only domestic enterprises but also domestic households on a large scale and foreign players.[13]
Indonesia can take a good example from how Vietnam handles this particular sector. Rather than having the definition and regulation of renewables scattered across different acts of legislation, we need a comprehensive Renewable Energy Law that states the main goals for Indonesia’s plan for the energy sector along with the easing of regulations so that private-public sector cooperation can manifest itself in the form of G2G, G2B, and B2B cooperation along with an easing on the regulations regarding foreign investment in this sector, all to create a situation where sustainability and access to clean and affordable energy is available to all Indonesians.
REFERENSI
[1] M Paschalia Judith, “Pandemi Covid-19 Tekan Capaian Energi Terbarukan.” https://www.kompas.id/baca/ekonomi/2021/01/15/pandemi-tekan-capaian-energi-terbarukan/.
[2] Indonesia, Undang-Undang tentang Energi, UU Nomor 30 Tahun 2007, LN Nomor 96 Tahun 2007, TLN Nomor 4746, Ps. 1 ayat (4).
[3] Ibid., Ps. 1 ayat (6).
[4] Indonesia, Undang-Undang tentang Ketenagalistrikan, UU Nomor 30 Tahun 2009, LN Nomor 133 Tahun 2009, TLN Nomor 5052, Ps. 6.
[5] Hans Nicholas Jong, “Indonesia’s Net-Zero Emissions Goal Not Ambitious Enough, Activists Say,” Mongabay Environmental News, 12 April 2021, https://news.mongabay.com/2021/04/indonesia-net-zero-emissions-target-coal-energy-2070/.
[6] Kementerian ESDM, “Potensi Energi Baru TERBARUKAN (EBT) INDONESIA.” ESDM, 24 August 2008,www.esdm.go.id/id/media-center/arsip-berita/potensi-energi-baru-terbarukan-ebt-indonesia.
[7] International Renewable Energy Agency, “Global Renewables Outlook 2020,” www.irena.org/publications/2020/Apr/Global-Renewables-Outlook-2020.
[8] Verda Nano Setiawan, “Riset: Potensi Investasi Energi TERBARUKAN Indonesia Capai Rp 175 t.” Energi Baru Katadata.co.id, 12 April 2021, katadata.co.id/happyfajrian/ekonomi-hijau/6073f5a942087/riset-potensi-investasi-energi-terbarukan-indonesia-capai-rp-175-t.
[9] ASEAN Center for Energy, “ASEAN Plan of Action for Energy Cooperation (APAEC),” 2022, https://aseanenergy.org/asean-plan-of-action-for-energy-cooperation-apaec/#.
[10] Miranda Mclaren, “Governments across Southeast Asia Accelerate Renewable Energy Investment to Revive the Pandemic-Hit Economies,” Power Technology, January 21, 2021, https://www.power-technology.com/comment/south-east-asia-renewable-energy/#.
[11] Nguyen Linh Dan, “Vietnam’s Renewable Energy Policies and Opportunities for the Private Sector,” The National Bureau of Asian Research (NBR), 19 May 2022, https://www.nbr.org/publication/vietnams-renewable-energy-policies-and-opportunities-for-the-private-sector/.
[12] Ibid.
[13] Huong Giang, “Viet Nam to Take Stronger Measures to Achieve Net-Zero Emissions by 2050,” en.baochinhphu.vn, 1 November 2021, http://news.chinhphu.vn/Home/Viet-Nam-to-takestronger-measures-to-achieve-netzero-emissions-by-2050/202111/46000.vgp.
