Energy transition in Indonesia

Will renewable energy power plants be able to meet peak load when replacing coal fired
power plants?
How to integrate renewable energy power plants in Indonesia's existing electricity grid?
What are the incentives to phase out coal fired power plants?
There has to be inter-ministerial efforts to replace coal fired power plants

Climate change is a global emergency that goes beyond national borders. It is an issue
that requires international cooperation and coordinated solutions at all levels.
To tackle climate change and its negative impacts, world leaders at the UN Climate
Change Conference (COP21) in Paris reached a breakthrough on 12 December 2015:
the historic Paris Agreement. The aim of Paris agreement is to provide financing to
developing countries to mitigate climate change, strengthen resilience and enhance
abilities to adapt to adverse impacts of climate change.
The Agreement sets long-term goals to guide all nations:
 substantially reduce global greenhouse gas emissions to limit the global
temperature increase in this century to below 2 degrees Celsius above pre-
industrial levels while pursuing efforts to limit the increase to 1.5 degrees above
pre-industrial levels;
 Increasing the ability to adapt to adverse impacts of climate change and create
climate resilience and low greenhouse gas emissions development
 Making finance flows consistent with a pathway towards low greenhouse gas
emissions and climate resilient development.
(Article 2 of Paris Agreement)
The Agreement is a legally binding international treaty. It entered into force on 4
November 2016. Today, 194 Parties (193 States plus the European Union) have joined
the Paris Agreement.
The Agreement includes commitments from all countries to reduce their emissions and
work together to adapt to the impacts of climate change, and calls on countries to
strengthen their commitments over time. The Agreement provides a pathway for
developed nations to assist developing nations in their climate mitigation and adaptation
efforts while creating a framework for the transparent monitoring and reporting of
countries’ climate goals.
The Paris Agreement works on a five- year cycle of increasingly ambitious climate
action carried out by countries. Every five years, each country is expected to submit an
updated national climate action plan - known as Nationally Determined Contribution, or
NDC (Article 4 of Paris Agreement).
In their NDCs, countries communicate actions they will take to reduce their greenhouse
gas emissions in order to reach the goals of the Paris Agreement. Countries also
communicate in the NDCs actions they will take to build resilience to adapt to the
impacts of rising temperatures.

In Indonesia’s initial NDC, the country is committed to reduce unconditionally 29% of its
greenhouse gasses emissions against the business-as-usual scenario by 2030.
However, Indonesia’s Enhanced NDC increases unconditional emission reduction target
of 31.89% by 2030, compared to 29% in the first NDC.
Moreover, Indonesia can increase its contribution up to 43.20% reduction of emissions
in 2030 conditionally in the country’s Enhanced NDC, compared to 41% in Indonesia’s
first NDC, subject to availability of international support for finance, technology transfer
and development and capacity building.
Indonesia announced its ambitious objective to reach net zero emissions by 2060
during the UN Climate Change Conference (COP 26) in 2021.

In 2021, the government announced in its NDC the goal to meet net zero emissions by
2060, or sooner with support from developed countries. Five strategies were identified
to achieve this target: 1) increasing the share of renewables, 2) reducing the use of
fossil fuels, 3) promoting electric vehicles, 4) electrification in the residential and
industrial sectors and 5) utilizing carbon capture, utilization and storage (CCUS). 1

1
Enhancing Indonesia’s Power System Pathways to meet the renewables targets in 2025 and Beyond, page 16
Coal’s share in electricity generation has almost doubled since 2000 and bioenergy,
geothermal and hydro boosted the share of renewables in generation.
Over the 2000‐21 period, Indonesia’s CO2 emissions from the energy sector increased
by slightly more than two‐times and GDP increased by a little more than two‐and‐a‐half‐
times. The growth of CO2 emissions has therefore been relatively tightly coupled to the
growth of GDP. Coal, by far, is the largest driver and accounted for almost three ‐
quarters of increased emissions. More oil and natural gas demand, in roughly equal
measure, account for the additional increase in emissions. By sector, power drove
about half the emissions increase and industry, including process emissions, about one‐
fifth.2
Indonesia’s total energy sector emissions were around 600 million tons of carbon
dioxide (Mt CO2) in 2021, slightly less than from Korea’s energy sector. A little less than
half of the emissions were from coal combustion, one‐third from oil, and the remainder
from natural gas combustion (around 15%) and process emissions (around 5%). The
power sector made up about 40% of total CO2 emissions in 2021, while transport and
industry each accounted for around one‐quarter of total emissions.

Prior to the NDC formulation, Indonesia implemented residential Government

Regulation No. 79/2014 on the National Energy Policy in 2014 where Director General
for Electricity (“DGE”) set the goal to increase the share of new and renewable energies
(NRE) by at least 23% in the electricity mix by 2025 and 31% by 2050. Furthermore, the
National Energy Plan (Rencana Umum Energi Nasional or RUEN) established in 2017
is the current strategic document prepared by the Ministry of Energy and Mineral
Resources (MEMR), aims to achieve the objectives of the National Energy Policy and
national goals for economic growth, energy independence and energy security, and
serves as a guideline for energy planning. The National Energy Plan is incorporated in
sectoral and regional planning documents, notably:
 National Electricity General Plan (Rencana Umum Ketenagalistrikan Nasional) which
establishes long‐term goals for the electricity sector, and the Regional Electricity
Plan (Rencana Umum Ketenagalistrikan Daerah), developed by the MEMR.

2
An Energy Sector Roadmap to Net Zero Emissions in Indonesia, page 35
 Electricity Supply Business Plan (Rencana Umum Penyediaan Tenaga Listrik
[RUPTL]) of the state‐owned electricity corporation, Perusahaan Listrik Negara
(PLN). It is considered the guiding document for the development of the national
electricity system. It details investment plans and the power plant construction
pipeline.
 Regional Energy Plans (Rencana Umum Energi Daerah) developed for each
province.3

In the current electricity supply plan (RUPTL 2021‐2030), PLN envisages substantial
growth in renewables generation capacity. Between 2021 and 2030, renewables are
planned to make up more than half of capacity additions. 4

Presidential Regulation Number 112 of 2022 on Accelerated Development of

Renewable Energy for Electricity Supply (“PR 112”)
In line with Indonesia’s international climate-change commitments, the President has
finally issued a long-awaited regulation that maps out the road towards cleaner power
generation in Indonesia.
Under PR 112, the government formally bans the development of new coal-fired power
plants by means of the following measures:
 Roadmap to phase out coal-fired power plants
In coordination with the Ministry of Finance (“MOF”) and the Ministry of State-
Owned Enterprises (“MSOE”), the MEMR is required to prepare a roadmap to
accelerate the termination of coal-fired power plants operated by PLN and IPPs. 
 Restrictions on new coal-fired power plants:
The development of new coal-fired power plants is prohibited, except for:
1. coal-fired power plants that were identified in PLN’s RUPTL prior to the
enactment of this Presidential Regulation;
2. coal-fired power plants that fulfill the following requirements:

3
An Energy Sector Roadmap to Net Zero Emissions in Indonesia, page 40
4
Ibid
 a. integrated with industries that are being developed in order to increase
the added value of natural resources, or which are designated as
national strategic projects and which provide a major contribution to job
creation and/or national economic growth;
b. Commitment given to reducing greenhouse gas emissions at the coal-
fired power plants by at least 35% within 10 years from the start of
operation of the coal-fired power plants, compared with average coal-
fired power plants emissions in Indonesia in 2021. Such commitment
may be realized through the application of new technology, carbon
offsetting, and/or a renewable energy mix; and
c. To be operational until 2050 at the latest.
 Accelerated termination of coal-fired power plants
In an effort to increase the proportion of renewable energy in the electrical
energy mix, PLN is required to accelerate:
1. The decommissioning of its own coal-fired power plants; and/or
2. The termination of power purchase agreements (“PPA”) with independent
power producers for the supply of electricity by coal-fired power plants,
while taking into account electricity supply and demand conditions
Should the accelerated termination of coal-fired power plants require the
replacement of electricity, this may be done from renewable energy generators,
having regard once again to power supply and demand conditions.
This will be determined by the MEMR after obtaining written approval from the
MOF and the MSOE.
 Fiscal Support for Accelerated Energy Transition
In order to accelerate the decommissioning of coal-fired power plants and early
termination of coal-fired power plants PPA contracts with IPPs, the Government
may provide fiscal support through a funding and financing framework that
includes blended finance sourced from the state budget and/or other sources
aimed at accelerating energy transition in Indonesia.
Pricing of Renewable Energy Purchase
Prior to PR 112, the ceiling price for power sourced from renewable energy generators
was determined using PLN’s base electricity generating cost (biaya pokok pembangkit
tenaga listrik / BPP), By contrast, PR 112 establishes two different purchase price
mechanisms: the ceiling-price mechanism and the agreed price mechanism (taking into
account, or not, a location factor (F), as the case may be). The ceiling prices are to be
evaluated on an annual basis following the coming into force of PR 112 on 13
September 2022, having regard to the latest average contract price with PLN.
Agreed price to be determined by negotiation and price approval of MEMR required.

Under the 2021 RUPTL, the government is planning to construct around 13,819 MW
capacity of coal-fired power plants between 2021 and 2030. Due to this inclusion in the
RUPTL, these new plants will be exempted from the ban. With the ban on new power
plants (subject to limited exceptions), it is interesting to see how the government plans
to replace the load peaker role that has been traditionally placed on coal-fired power
plant. In addition, one wonders whether the ban will affect Indonesia’s coal mining
production and causes volatility to the commodity price that we have seen in other
countries that introduced the same ban or whether there will be an increase in the
electricity price paid by end consumers.

Reliance on coal and coal‐fired power plants is maintained in the transition, facilitated
by
several strategies to reduce emissions. Equipping coal plants with carbon capture,
utilization and storage (CCUS), co‐firing with low‐carbon ammonia and repurposing
plants to focus on flexibility, allow them to retain a key role in the electricity system while
contributing to meeting emissions reduction targets. Older plants that are less suited for
such transformations may be retired early as low emissions sources scale up.

Biomass co-firing is the process of burning biomass and fossil fuels in coal- and gas-
fired power plants. Biomass can alternatively be gasified and burned in separate
burners by gas or steam fuel then mixed with boiler streams from coal-fired power
plants. Biomass co-firing in coal power plants typically involves the mixing of biomass
with coal before the burning process. The benefit of biomass co-firing is that it lowers
greenhouse gas emissions as normally emitted by coal-fired power plants while also
enabling high efficiency power generation from biomass, which is much higher than that
of dedicated 100 percent biomass power plants. This efficiency is only achieved in
large-scale modern coal-fired power plants.

In the 2019-2038 National Electricity General Plan (“Rencana Umum Ketenagalistrikan

Nasional, “RUKN”), PLN plans to implement co-firing method on 52 (fifty two) units of
Coal-Fired Power Plants in Indonesia. Basically, co-firing program is a plan to substitute
coal with biomass materials such as wood pellets, palm shells and sawdust (sawdust) at
a certain ratio. In 2024, the total co-firing capacity at PLN’s Coal-Fired Power Plants is
estimated to reach 18 (eighteen) Gigawatt hours (“GWh”). The co-firing plan is intended
to support the development of EBT in Indonesia.

https://www.lowyinstitute.org/the-interpreter/how-indonesia-can-afford-cut-coal-fired-
power-faster
https://www.adb.org/news/adb-and-indonesia-partners-sign-landmark-mou-early-
retirement-plan-first-coal-power-plant

https://greennetwork.asia/news/indonesias-energy-transition-mechanism-aims-to-
accelerate-the-retirement-of-coal/

https://100re-map.net/conditional-and-unconditional-climate-action-in-ndcs/

https://www.iea.org/news/iea-welcomes-indonesia-s-just-energy-transition-partnership-
as-key-step-forward-for-international-cooperation-on-energy-and-climate

https://www.iea.org/news/at-g20-ministerial-in-indonesia-executive-director-highlights-
need-for-clean-energy-action-in-response-to-energy-crisis
https://penerbit.brin.go.id/press/catalog/book/562