Indonesia has a large target to reduce greenhouse gas emissions by around 29% from business as usual (BAU) emissions by 2030. Indonesia also has a renewable energy target of 23% by 2025 in the energy mix. Promoting the use of bio-energy which is currently in the Biodiesel 30 (B30) process and which will be increased to B50 or more in the coming years is a real effort to reduce dependence on fossil energy. Of course everything requires a consistent process, or not sudden and necessarily. It takes persistent efforts, as well as being adaptive to existing socio-economic conditions.
In other words, the transition to non-fossil energy must be done in stages and adjusted to the conditions of each country. Because there are still many countries whose source of income rests on fossil energy. This is mainly because the price and technology are currently more competitive, cheaper, and available abundantly as local natural resources. Forcing a drastic shift to new energy will cripple and impoverish many countries in the world. As a result, it can bring up new forms of injustice. Meanwhile, on the other hand the world has agreed that one of the vision of sustainable development goals is that no country should be left behind (no one country left behind).
Indonesia to this day continues to strive to increase the energy mix of renewable energy sector, such as solar power, hydropower, geothermal energy, wind power and bio mass. Indonesia’s natural conditions are mostly cloudy and rainy, winds which are unstable, and most especially in the East that are islands and far from energy sources, are still an obstacle. In this context, the use of fossil-based energy such as gas is still a mainstay that has commercial advantages, uninterrupted supply, and more practical.
That is, power plants are still dominated by fossil primary energy. In 2017, power generation capacity uses 85% of fossil energy, mainly coal. Several new plants under construction, such as the Indramayu # 2 Coal Power Plant project, received financial support from Japan’s Official Development Assistance (ODA). In 2025 primary electricity is projected at 102.6 MTOE, the largest portion is coal, 59%, followed by 27% renewable energy and 14.1% gas. The portion of coal in 2050 is projected to decrease to 52%.
In fact, domestic oil refineries (including expansion and construction of new refineries), still require a supply of crude oil, either through domestic production or import. Likewise, the wheels of the economy and state finances, including the fiscal stability of revenue-sharing funds that support regional budgets, are also still significantly dependent on fossil energy. So it is not easy to make radical adjustments, but efforts are still needed in that direction, so that in the future Indonesia will not be left behind from other countries and not be trapped in a state of energy scarcity when everything we have drained from nature then running low, even depleted .
Amid the constellation above, several strategies need to be undertaken by the government. For example, the Government of Indonesia together with other countries that have the same problem, conduct an effective joint diplomacy instrument for developed countries in the OECD so that it objectively considers conditions in each country. Then, collaborate systematically and sustainably with developed countries to improve technology for the use and utilization of primary energy that is efficient, clean, and affordable.
Finally, in structured, patterned and integrated strategies, Indonesia should be transforming the primary energy paradigm as a source of income. Energy must be used as development capital, increasing the added value of fossil energy by encouraging further processing and downstreaming. This should be a mindset in the general policy of preparing the state budget. Thus, Indonesia continues to take on its role and responsibility to safeguard the climate, while strengthening the structure of the country’s economy based on the added value of primary energy downstreaming.
Meanwhile, in terms of electricity and the use of coal, several programs and regulations are really needed that lead to the strategic plan above. First, synchronize and reorient the target of the electricity energy mix in Indonesia. This is related to Indonesia’s electricity energy mix plan in the National Electricity General Plan and the dynamic target of the electricity mix business plan for supplying electricity. Second, the certainty of regulations related to renewable energy. In Indonesia, regulations regarding renewable energy changed twice in 2017 with Ministry Regulation No. 12/2017 and No. 50/2017.
The built own operate transfer (BOOT) regulation for water and geothermal power plants poses a new risk to project viability. Changes in regulations, it is said, will make it difficult for renewable energy industry players to make long-term projections. Especially related to the issue of ownership prices and risk majors for extraordinary circumstances (force majeure). Therefore, clear regulatory certainty cannot but is an urgent need in a long-term strategic plan
Third, State Owned Enterprises of Electricity of Indonesia (PLN). PLN’s heavy losses and negative cash flow continue to make these state-owned companies have problems meeting operational obligations. Renewable energy tariffs are considered high. In order to encourage competitive renewable-based electricity generation rates, inevitably, the government needs to make green prices more attractive, especially for investment in the energy sector. Ideally, at least until the economic price of renewable energy falls below the price of fossil fuel economy.
Another important economic issue is the guarantee of price certainty in the power purchase agreement (PPA) for renewable plants. If the tariff changes are significant enough, it is estimated, it can affect investment decisions because investors need a long enough time from the business preparation period to get PPA. Given that areas that need electricity are many in areas with high population density, while renewable potential in sparsely populated areas, however, investment in interconnection networks is needed as a risk. Hopefully in the future the government will be more sensitive to this renewable energy and be more consistent in realizing it in the coming years.