IEP Presentation Dec 2021 Part B

Energy Transition
in Indonesia
Indonesia Economic Prospects, December 2021
Download the Report at

www.worldbank.org/iep
Indonesia’s energy sector’s past success
has come at the cost of natural capital
Energy sector has been a fundamental enabler but has become a leading GHG emitter
• Access: Near universal electrification achieved (34 million • Coal power capacity: doubled in just 10 years (16 GW added)
customers connected to the grid in 10 years) • Coal usage: 105 m tons; comparing EAP region: China 3.8 b tons,
• Growth: increased installed capacity from 40 GW in 2011 to Vietnam 85 m tons, Philippines 34 m tons
61 GW in 2020 • Emission: increased by 140% between 1990 and 2017 (excl. land use)
• Presence: PLN is present in over 600 islands and is • Emissions intensity: 804 gCo2/kWh (compared to 449 for G20
considered one of the strongest utility in the region average)
Electrification GHG Emissions From Energy Sector
100% 95% 97% 98% 99%
91%
88%
90% 84%
80%
80% 76%
72%
70%
60%
50%
40%
30%
20%
10%
0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2
Indonesia’s energy sector is facing several challenges
PLN’s financial sustainability is challenged by inadequate tariff and revenue

structure. Large investment will be needed for the energy transition which
will require a financially sustainable utility.
The fragmented sector regulation challenges effective coordination of sector
policies and energy transition goals.
Indonesia is lagging behind peers in Variable Renewable Energy
deployment and has yet to adopt standards of automation and digitalization.
Despite some progress, the grid quality stays low with poor reliability.
Coal and fuel subsidies as well as renewable energy pricing distortions
constrain the mobilization of private investments in RE.
The coal phasedown is likely to have measurable economic and social
impacts, including in coal-dependent regions
In the wake of COP26, Indonesia’s government made new climate
commitments
2010
1,335 Climate commitments:
MT CO2/Year
▪ NDC: 26% reduction from BAU (unconditional) and 41 %

reduction from BAU (conditional)
▪ RE targets: 23% by 2030 (from 12%)
▪ Net zero: by 2060 or earlier
▪ Coal:
BAU 2030 ➢ no new coal-fired power plants committed after 2022
2,870 ➢ no more coal after 2056 (but might be accelerated in the
MT CO2/Year 2040s)
▪ Accelerated retirement of coal plants: retirement of a
Energy sector increasing
from 34% to 58% of total
minimum of 8 GW of coal projects by 2030
emissions
Power sector decarbonization is now a priority for the government
New RUPTL master plan significantly reduces the planned coal capacity, but more needs to be done
2020 : 61.1 GW Target 2030: 100.7 GW
Diesel: RUPTL 2019 – RUPTL 2021 –

5 GW Technology difference
2028 targets 2030 targets
Diesel: Hydro:
5 GW 4.9 GW Hydro: Hydro (and
Geothermal: pump 14.5 15.4 6%
2.4 GW 15.4 GW
Geothermal: storage)
5.8 GW Geothermal 5.2 5.8 12%
RE: 0.3 GW RE: RE (PV,
Coal: 6.5 GW
Gas: wind, 2.6 6.5 145%
44.8 GW biomass)
Coal: 17.4 GW
31 GW Gas: Gas 28.8 23.2 -20%
23.2 GW Coal 56 44.8 -20%
Diesel 5 5 -
Total 112.1 100.7 -10%
But decarbonization faces several challenges in Indonesia and all
options need to be explored
Power sector decarbonization is facing technical but options are available

and economic constraints
• A scenario-based analysis focused on the Java-Bali grid was
• Limited space to integrate RE carried out to assess decarbonization options for the next two
• Complex island grid situation limiting potential for decades.
imports • Three scenarios were assessed: Phasing down coal and scaling up
• Excess power and potential carbon lock-in RE are central to reducing the carbon footprint of the power
sector.
• Regulatory impediments
• Under the Coal Phase down scenario coal power generation would
Average Cost of Electricity Generation under the three Transition scenarios
move from 30% of the mix in 2040 in the baseline scenario to 5%
and emissions would be cut by 40% while the generation cost
would increase by 6% in 2040* compared to the baseline
scenario.
• Under the more ambitious decarbonization scenario (emissions
cut by 70% in 2040 vs the NDC Scenario), coal is fully phased-out
in 2040 and the generation cost is 27% higher* than in the NDC
scenario.
6
*Not including the cost of coal plant retirement
Policy Recommendations:
Decarbonization Planning, Sector Efficiency and Performance
➢ Decarbonization planning:
▪ Aligning strategies and targets across Government agencies will be critical to minimize
the costs and risks of stranded assets in the future.
▪ To that end, appropriate pathways to phasing-down coal with innovative
financing mechanisms will need to be carefully assessed.
▪ Solutions to decarbonize the grid such as interconnections (domestic and international),
Carbon Capture and Storage (CCS) or hydrogen need to be explored further.
➢ To improve sector coordination, a new inter-ministerial commission could be created to align

environment, financial and fiscal targets.
➢ To improve sector efficiency, separating system planning, generation procurement and

system operations from PLN’s other activities could increase transparency and reduce
conflicts of interest.
Clean Energy Deployment
➢ Develop clear medium-term VRE deployment

targets with associated tender timelines
would help PLN benefit from low PV and wind
power prices.
➢ Three regulatory changes can help Indonesia

boost private investment in RE: reducing local
content requirements, phasing out coal and
fuel subsidies and lifting RE price controls.
➢ New investments in grid flexibility are needed

to integrate RE and appropriate pricing
mechanisms and regulation is critical for their
viability.
Financial Sustainability
➢ Setting the appropriate revenue

requirements is critical for the
financial viability of PLN.
➢ Increasing the share of revenue

received from tariffs through a
subsidy reform will improve
PLN’s financial health.
➢ PLN could explore new financing

schemes and sources and
develop an ESG framework
Coal Phase-Down
➢ Phasing down the use of coal would require a just transition for the people,
communities, and businesses which rely on Indonesia’s coal industry.
11
Thank You
Indonesia Economic Prospects, December 2021
Download the Report at

www.worldbank.org/iep
Decarbonization options for Indonesia
Installed Electricity Generation Capacity in 2021 and 2040 under Different Transition
Scenarios

IEP Presentation Dec 2021 Part B

Uploaded by

Copyright:

Available Formats

IEP Presentation Dec 2021 Part B

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

IEP Presentation Dec 2021 Part B

Uploaded by

Copyright:

Available Formats

Energy Transition

Download the Report at

PLN’s financial sustainability is challenged by inadequate tariff and revenue

▪ NDC: 26% reduction from BAU (unconditional) and 41 %

2020 : 61.1 GW Target 2030: 100.7 GW

Diesel: RUPTL 2019 – RUPTL 2021 –

Power sector decarbonization is facing technical but options are available

➢ To improve sector coordination, a new inter-ministerial commission could be created to align

➢ To improve sector efficiency, separating system planning, generation procurement and

➢ Develop clear medium-term VRE deployment

➢ Three regulatory changes can help Indonesia

➢ New investments in grid flexibility are needed

➢ Setting the appropriate revenue

➢ Increasing the share of revenue

➢ PLN could explore new financing

Download the Report at

You might also like