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Breadcrumbs
Indonesia’s expansion of clean power can spur growth and equality
Raising renewables ambition and fair allocation of renewable energy projects can remediate emissions from fossils and help make transition more equitable.
Available in: Indonesia
Highlights
26%
Share of renewables generation in 2030, if Indonesia’s targets are met and no new coal on-grid between 2024-2030.
42 TWh
Electricity generation could surpass demand by 2030 if RUPTL targets are met and the coal capacity factor is increased from 49% to 64%.
96,000
High-skilled jobs created in coal producing regions, if all existing programs implemented and new coal-fired power plants are replaced with solar.
About
This report analyses Indonesia’s State Electricity Company (PLN)’s Electricity Supply Business Plan (RUPTL) 2021-2030 and the Just Energy Transition Partnership (JETP) Comprehensive Investment and Policy Plan (CIPP). This report also explores strategies for incorporating a just transition into energy plans at the provincial level.
Executive summary
Indonesia’s clean power capacity needs to grow rapidly to end fossil fuel dependence
Raising renewable ambitions will ensure no new coal additions are needed to meet Indonesia’s growing electricity demand by 2030, supporting energy transition in coal producing provinces.
Chairperson, The Indonesian Solar Energy Association (AESI)
The use of solar power (PLTS) can be the backbone of energy transition, not only in terms of the energy mix, but also the domino effect it creates, including increasing employment in the green job sector. In addition, if demand grows, the solar industry will also grow, and this is what gives Indonesia its strength.
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Starting point
Indonesia’s energy landscape after a decade shows a significant increase in coal use
Coal use in the electricity sector in the past ten years has nearly doubled, contributing to a sharp rise in overall power sector emissions, totalling 86 million tonnes of CO2 (MtCO2) from 2013 to 2023, mainly from coal.
In this chapter:
Currently coal power plants are running at around 49% capacity factor, much lower than the suggested capacity factor for coal power plants in the RUPTL in 2030 between 64-73%. Raising the coal power plants efficiency using 64% capacity factor in the benchmark suggests production will surpass demand. The excessive electricity generation from coal will be 42 TWh by 2030, if the coal targets in the RUPTL are met. This suggests new coal plants have high stranded assets risk and hence should not be considered.
The avoided cost from coal-generated electricity, which could be allocated to renewables, is between $1.9 billion USD and $2.4 billion USD, based on the levelised cost of energy calculation for coal power plants operating at 64% capacity factor.
This presents opportunities to grow clean power and avoid unnecessary coal investment, even with rising demand.
Maintaining JETP Momentum
Raising renewables ambitions will improve future energy security
The Just Energy Transition Partnership targets raising the renewables share to 44% by 2030 and further to 66% by 2035.
In this chapter:
Transition in coal producing regions
The heart of the deal
Indonesia’s coal producing regions may be impacted by the energy transition. However, various renewable energy programmes present opportunities to transform these coal-based economies by attracting clean technology investments and creating high-skilled job opportunities.
In this chapter:
These programmes will trigger a multiplier effect in these coal regions. The total investment required for these projects could reach an estimated amount of $9.4 billion USD. The projects are also expected to create around 95,000 high-skilled jobs, which could offset the job losses from mine closures. Investment opportunities in clean technology manufacturing, such as solar modules and other components, could further boost both investment and job creation.
Furthermore, implementing these programs will reduce energy sector emissions in these three provinces. Renewable electricity generation could avoid 18 million tonnes of CO2 equivalent emissions from fossil fuel power plants and keep 12 million tonnes of coal beneath the surface.
This could also lay the groundwork for investment in clean technology manufacturing in these regions.
Takeaways
Indonesia’s energy policy beyond 2024
Under Indonesia’s new presidency, affordability and accessibility will likely remain at the heart of transition.
In this chapter:
Evidence suggests that Indonesia’s energy transition should be well under way. The government has set a target to support renewable energy development in the New Energy and Renewable Energy Bill through increasing on-grid renewable capacity, converting diesel power generation to solar and expanding rooftop solar. The new bill should clearly define the proportion of renewable energy generation in the total electricity mix, instead of the percentage of ‘new’ energy sources, such as nuclear and fuels derived from fossils.
Even though fossil fuels will continue to play a significant role, the demand for them will not peak and decline until 2030 under the JETP scenario. This timeline provides the government with the opportunity to adjust its power sector development plan and gives coal producing provinces time to develop new strategies. Both national and local governments will need to shape policies that support clean energy transition. Ultimately, a successful transition will depend on effective governance at various levels in Indonesia.
Given Indonesia’s multilevel and multi-sectoral governance structure, establishing a long-term sustainability goal that integrates energy transition, climate and development ambitions can align just transition with high-quality economic growth. This inextricably distributes the tasks of transition more dynamically across a wider spectrum of government actors. Indonesia stands a better chance of successfully driving its clean power growth, if these actors collaborate effectively.
As a coal producing country, Indonesia may have some advantage in shielding its population from sporadic price shocks that threaten energy affordability. While PLN and the government may continue the subsidy mechanism to keep energy services affordable, access to electricity remains a big challenge in the rural areas. Inevitably in the long run, shocks may arise from the depletion of finite resources.
Increased international and regional cooperation in energy transition will also provide incentives to help developing countries with their energy transition plans, under the principle of Common But Differentiated Responsibilities (CBDR). CBDR acknowledges that responsibility is unequally distributed due to historical contributions to climate change and economic capacities.
Renewables can improve energy access in rural areas. For Indonesia, where affordability and accessibility are top government priorities, well designed policies supporting renewable energy will be essential to buffer the shocks.
Supporting Material
Methodology
Generation, imports and demand
Annual data from 2000 to 2023 is taken from the Handbook of Energy and Economic Statistics of Indonesia 2023.
The 4.7% annual rise in electricity demand between 2023 and 2030 is calculated based on the historical demand data from 2023 and projected demand in 2030 as stipulated in the RUPTL 2021-2030.
Ember analyses
In Chapter 1, we calculate renewable energy generation by 2030, using coal capacity data in 2023 and RUPTL targets. The analysis is based on annual growth rates for electricity demand at 4.7%, and capacity factors for coal at 64%, solar at 20%, hydro at 52% based on the average capacity factor of hydropower across all types of plants in 2022 and wind at 35%.
The range for electricity cost generation from coal is calculated using PLN’s average generation cost for coal technology in 2023 (Rp. 737.52 per kilowatt hour) and a levelized cost of electricity in which the methodology is taken from NREL Annual Technology Baseline 2023.
Chapter 2 assessment compares capacity addition plans in the RUPTL 2021-2030 and JETP’s CIPP document.
In Chapter 3, we calculate emissions from coal power plants and coal mine methane. Emission factors are collected from the cap and trade regulation for CFPP and IPCC’s average emission factor for surface coal mines.
Renewable energy generations are estimated using capacity factors from the power sector’s technology catalogue. Job creation opportunities are calculated based on the number of jobs per Gigawatt hour of renewable energy generation. Investment opportunities are calculated based on IRENA’s average cost of electricity for renewables. Emission avoidance from new RE projects are calculated using PLN’s grid emission factors.
Acknowledgements
Our sincere gratitude to Mada Ayu Habsari, Edo Mahendra and David Silalahi for their invaluable support in peer reviewing this report.
Special thanks to Rini Sucahyo for her unwavering support through editing and structuring the report, Aditya Lolla for his valuable comments and insights, Neshwin Rodrigues for discussions on data assumptions and validity. A heartfelt gratitude to Libby Copsey, Oya Zaimoglu and Chelsea Bruce-Lockhart, for their support in data validation and visualisation.
Cover imageWorkers cleaning and checking solar panels installed on the balcony of the Gedhe market in Klaten, Central Java, Indonesia.
Credit: ZUMA Press, Inc. / Alamy Stock Photo