By: Muhammad Razin Abdullah
Research Assistant at Purnomo Yusgiantoro Center (PYC).
The Government of Indonesia’s target to increase the portion of the new and renewable energy (NRE) to 23% in the national energy mix by 2025 is currently being questioned. This is due to the low growth rate of NRE contributions over the past five years. Therefore, the government must evaluate its strategic plans, especially in the electricity sector. By accelerating several programs in the electricity sector, the 23% NRE target is still possible to achieve.
The global energy trend is heading towards clean energy. This common goal has been stated in the 2015 Paris climate agreement, which has been ratified by 190 countries, including Indonesia. The agreement states that the ultimate goal is to maintain the global temperature rise this century below 2°C above pre-industrial levels and even further to 1.5°C. This goal involved energy and climate policy including the so-called 20/20/20 targets. This policy aims to reduce carbon dioxide (CO2) emissions by 20%, increase renewable energy’s market share to 20%, and improve energy efficiency by 20%. Based on this global movement, the Government of Indonesia set a national renewable energy target through the Government Regulation No. 79/2014 on National Energy Policy. This policy states that Indonesia’s target of the new and renewable energy (NRE) contribution to the national energy mix is 23% by 2025 and 31% by 2050.
The Progress So Far
As shown in PYC Data Center, the contribution of NRE in 2015 was at 4.39%, while oil was at 46.56%, followed by coal at 27.94% and natural gas at 21.11% (Figure 1). Over time, the NRE mix had up and down and finally reached 9.15% in 2019. Simultaneously, the coal mix increased as well, while oil decreased, and gas relatively remained at the same level. The decrease in the oil mix was mainly because of the introduction of biodiesel and the reduction of fuel oil used in power plants. However, coal is seemingly still the favorite for producing electricity, mainly because of the low cost and its capability to provides a continuous supply of electricity.
Figure 1. Share of primary energy supply mix in 2008 – 2018 (PYC Data Center)
The realization of NRE contribution to the 2019 energy mix (9.15%) showed a slight improvement (0.6%) from 2018 (8.55%). This realization is still far from the expected target, which was set at 12.26%. In the national energy mix 2019, illustrated in PYC Data Center, coal was still the dominant energy type used in Indonesia, reaching 37.15%, followed by oil at 33.58% and natural gas at 20.13% (Figure 2). The issuance of Government Regulation No. 79/2014 has not yet resulted in a significant impact on NRE growth. The NRE mix only has an average growth of 1.19% per year from 2015-2019. It means if there is no intervention from the government, then the 2025 NRE mix target will be impossible to reach.
Figure 2. Share of primary energy supply mix in 2019 (PYC Data Center)
Improving the NRE Mix
Improving the NRE mix should be done by substituting coal and oil, thus the carbon emission from the energy sector could be lowered. However, substituting oil is more challenging than substituting coal due to the limited renewable energy alternatives for fuel oil substitution. In Indonesia, the most used type of renewable energy fuel is biodiesel, with the currently available type is B30 or 30% blended biodiesel. There is another option in the form of bioethanol for substituting fuel oil, particularly gasoline. If bioethanol development is successful, it will significantly reduce the use of fuel oil and boosting the NRE mix. Nevertheless, developing bioethanol will take a lot of time. For instance, biodiesel development has been running since 2006, by the introduction of B5. Besides, the government is still struggling with the economic aspect of bioethanol, as its price still could not compete with gasoline. Therefore, with the current limitation of fuel oil alternatives, the government should focus on boosting the NRE mix in the electricity sector, in other words, substituting the use of coal. There are so many renewable energy options available for generating electricity in Indonesia. The most notable potentials that could be further developed in Indonesia are hydropower, geothermal and solar PV.
According to the Ministry of Energy and Mineral Resources (ESDM), In 2019, the energy mix in power generation was still dominated by coal, at 60.5%, while natural gas was at 23.11%, NRE at 12.36% and fuel oil at 4.03% (Figure 3). Furthermore, the electricity procurement plan (RUPTL) 2016-2025 indicates that the 35,000 MW power plant mega project is also dominated by fossil fuel-based power plants, with coal power plant at 55.61%, followed by gas power plant at 36.23%, while renewable energy power plant only accounts for 8.16%. This mega project was targeted to be completed in 2019, but with the slow growth of electricity demand, the project was delayed until 2025. If there is no change in the original plan, then it is expected that for the next five years, the renewable energy contribution in the power generation mix might go even lower.
Figure 3. Share of the energy mix in power generation in 2019 (ESDM)
Moreover, if we compare RUPTL 2016-2025 and RUPTL 2019-2028, most of the renewable energy power plants target are delayed to 2025. The most concerning is the geothermal power plant and pump storage. In RUPTL 2016, there was a goal to have an additional 1,250 MW geothermal power plant by 2024 and another 1,250 MW in 2025. However, in RUPTL 2019, some of the geothermal power plants installation are delayed to 2025, and the target became 2,759 MW. Meanwhile, the 1,040 MW pump storage target by 2019, planned in RUPTL 2016, is also postponed by five years until 2024 in RUPTL 2019. In addition, the target to have total additional pump storage of 3,940 MW by 2025 in RUPTL 2016 is reduced to 1,983 MW in RUPTL 2019, with another 1,500 MW was again pushed to the end of the timeline, in 2028. Another negative indication is the plan to have an additional 201 MW diesel power plant in RUPTL 2019. Initially, in RUPTL 2016, there was no plan to increase the diesel power plant’s capacity until 2025.
In general, the RUPTL 2016 planned to have an additional 20,478 MW RE for the period of 2019-2025 or 34.4% of the total projected additional power plants. However, this plan was changed in RUPTL 2019, and the planned additional RE power plant was decreased to 14,293 MW or 29.38% of the total projected additional power plants. All the explanations above show that there is a tendency that the government will continue to increase the portion of fossil fuel-based power plant, at least until 2025. Additionally, there is still a possibility that the renewable energy project targets, which are already pushed back to 2025, to be delayed again. Therefore, it is quite likely that the current 12% of NRE contribution in the 2019 power generation mix would not increase by 2025, and worse, might even decrease. The causes of this concern are the 35,000 MW project, additional diesel power plants, and the possibility of another delay on the last-minute renewable energy target. If it happens, then it will negatively affect the 2025 NRE mix target as well.
The Need for Immediate Solutions
In facing this situation, the government is not just standing by, they already have eliminated some major concerns in developing renewable energy in Indonesia. First, they already change the build, own, operate, transfer (BOOT) regulation to BOO, thus there is no need to transfer the asset at the end of the contract. Second, the government is in the final phase of completing the Presidential Regulation on renewable energy, which is expected to improve the economic valuation of the renewable energy project. Third, they are currently formulating the renewable energy bill (RUU EBT). However, those efforts will rather have a long-term impact rather than short-term. Since there are only five years left before the intended target of RUEN, then the government should focus on projects that can be completed in a relatively short time period.
There are several solutions that could be considered to achieve the 23% NRE target in 2025. The government should study the possibility of developing a mega booster 50 GW solar power plant program. This program is claimed to have several advantages, namely (1) relatively short construction time (10 years), (2) low operating costs, and (3) decreasing technology costs. If only half of the program (25 GW) could be operating by 2025, then the renewable energy contribution to the power generation mix could reach around 38.5%, assuming the total capacity remains the same at 64.9 GW.
At the same time, the government, through the State Electricity Company (PT PLN), should revisit the plan to increase the diesel power plant’s capacity. The government should choose alternatives in the form of renewable energy. Generally, the diesel power plant is provided for an off-grid remote area. This is actually a suitable condition for implementing small-scale renewable energy.
Renewable energy is considered as an in-situ energy source, which means there is no need to transport the fuel for generating electricity. It could save a lot of operational costs if renewable energy is chosen rather than the diesel power plant. The government should identify the best energy source available in the targeted remote area and provide incentives for the renewable energy power plant. Also, it will be equally important to train the local people on how to operate and perform basic maintenance on the renewable energy power plant.
In addition, if a big portion of electricity comes from NRE, programs such as promoting the electric vehicle and electric stove will boost the NRE mix by reducing the use of fuel oil and liquefied petroleum gas (LPG). All of these solutions, developing a mega booster solar power plant, providing renewable energy power plants in remote areas and shifting to electric vehicle and electric stove, require political will from the government. If the government gives a great deal of commitment to run these programs, then it is still feasible to reach the 23% NRE target by 2025.
Disclaimer: This opinion piece is the author(s) own and does not necessarily represent opinions of the Purnomo Yusgiantoro Center (PYC).