Raising Indonesia’s net zero ambition: the pivotal role of energy systems in setting and reaching a net zero target

Indonesia has pledged to reach net zero by 2070. But recent developments suggest Indonesia could raise its net zero ambition to 2060, or even sooner with international support. Guntur Sutiyono, Country Lead for Indonesia, and Jannata (Egi) Giwangkara, Senior Project Manager (Energy Systems), explain why accelerating decarbonisation of the energy sector is key to Indonesia reaching net zero.

In March 2021, the Indonesian Ministry of Environment and Forestry launched Indonesia’s Long Term Strategy for Low Carbon and Climate Resilience (LTS-LCCR). The strategy states that net zero emissions will be achieved by 2070, unconditionally once  submitted to the United Nations Framework Convention on Climate Change (UNFCCC), it will be an official net zero commitment.

Public response was generally positive, appreciating the effort from the government in indicating a net zero trajectory. There was also a sense of cautiousness, with some critical responses pointing out that that net zero by 2070 may not be ambitious enough – and incompatible with the Paris Agreement.

The good news is that, even in the short time since releasing the net zero by 2070 pledge, the Indonesian government has recognised that raising ambition further may unlock more opportunities. The Ministry of National Development Planning and the Ministry of Energy and Mineral Resources, along with the  state-owned electricity supplier ‘PLN’, are pushing existing scenarios to hit net zero closer to 2050. Just recently, the Coordinating Minister of Maritime Affairs and Investment, Luhut Pandjaitan, mentioned that the government will continue to strive and accelerate reaching net-zero, by 2060 or earlier if international financial and technology transfer support.

Accelerating decarbonisation of the energy sector is key to raising, and enabling, Indonesia’s net zero ambition.

As the largest economy in Southeast Asia, and an emerging market economy, Indonesia’s  annual energy consumption ramped up almost 2.5 times in the last decade, from 55.62 TWh in 2009 to 190.53 TWh in 2019 (a similar consumption rate to that of Australia, at 195.7 TWh for the financial year 2018/19). If this trajectory were to continue, emissions from energy – including transport – would surpass land use to become the country’s largest source of emissions by 2030.

Today’s energy planning will have wide-ranging ramifications for decarbonisation progress not only in Indonesia but also for the Southeast Asian region and global landscape. Given this urgency, the Ministry of Energy and Mineral Resources  is currently developing power and utility strategies to meet upcoming  demand of 1,600 TWh in a carbon-neutral manner as early as 2045 – in conjunction with the centenary of Indonesian independence. Other scenarios are also being developed, aiming at 2050 (‘moderate’) and 2060 (‘pessimist’).

Based on the latest draft, the Ministry  has translated the strategies into six milestones, between 2021 and 2050. Figure 1 summarises the planned measures within each period. The current strategies propose that coal will peak by 2030, gradually phasing out from the energy mix until 2050 (see Figure 2). A highly debated alternative – nuclear – once referred to as a ‘last resort’ (in the national energy policy) is to be included  into the current mix. Authors argue that this decision stems from the preservation of the baseload service instead of embracing a new paradigm of decentralised and flexible power systems.

Given growing emissions from energy and transport, strategies to couple the sectors are needed now.

Since 2017, Indonesia has had a nationwide target for electric vehicles, set under the National Energy Plan. The targets are for 2.1 million e-bikes, 2,200 e-cars, and 10 per cent of public e-bus fleets on the road by 2025. More recently, there is also an inclusive roadmap that compiles electric vehicle adoption commitments and targets, including from state-owned enterprises  and businesses. According to the roadmap, Indonesia is aiming to have a total of 27,408 e-cars, 715,694 e-bikes, and 8,264 e-buses on the road by 2025.

This aligns well with Indonesia’s ambitions to build its manufacturing strength in battery production, building on its natural resources of nickel and bauxite reserves. The government has ordered the establishment of a battery holding company and is in discussion with China’s CATL and South Korea’s LG Chem to invest  US$12-20 billion to develop the planned supply chain. At the end of March, an EV battery holding company was launched, consisting of state-owned entities Pertamina (an oil and natural gas corporation) PLN (energy supplier), PT Aneka Tambang (‘Antam’, nickel and gold mining organisation) a privately-held mining holding company (MIND ID) More importantly, the Ministry of Research and Technology has listed the electric battery as one of the five national research priorities for clean energy.

Electricity supply, particularly from renewables, has to match with the increase in demand from an increasing number of EVs. A study from a Jakarta-based energy think tank, the Institute for Essential Services Reform (IESR), shows that an increase of 6 GW in the peak demand is estimated from the on-peak charging scenario by 2028, based on the current target and power projection.

With more EVs, there will be less demand for biofuels, making it easier to produce them sustainably. Decarbonising the transport sector is linked to the number of transport modes that can be electrified – coupling decarbonisation of transport with the energy sector. 

Betting on biofuels to reduce emissions is risky – and distracting.

Indonesia has a plan to increase its biofuel production, as a means to meet its renewable target. Currently, Indonesia has a B30 biodiesel policy – which means 30 per cent palm oil, mixed with diesel fuel. As of the first semester of 2020, the B30 biodiesel contributed to one-third of renewable energy in the energy mix. 

There is an ongoing debate on whether B30 biodiesel can be attributed to renewable energy. But more cautioning is the government’s plan to increase the mix to 50 per cent by 2025 – risking massive deforestation to supply the required palm oil. According to the Energy Minister, this percentage would require additional 15 million hectares of new plantation. To meet a 50 per cent blend by 2025, the University of Indonesia’s Institute for Economic and Social Research estimated almost 23 million hectares of plantation is needed – eight million hectares more than the current size. Alin Halimatussadiah, lead researcher, has stated, ‘That’s only to meet the need [for palm oil-derived biofuel] until 2025. That’s why there needs to be serious mitigation to hold back land expansion.’

Aside from deforestation, relying on biofuel to meet renewable targets opens Indonesia up to be dependent on carbon-based technology, risking stranded assets – infrastructure or objects from the built environment that become superseded by new technology. Instead of relying on biofuels to reach renewable and emissions reduction targets, Indonesia could focus on using biofuel for hard-to-abate transport such as long hauls and trucks, while optimising electric passenger vehicles to decarbonise the transport system. 

Indonesia is on the right track, but needs to build on its work so far

The years 2021 to 2025 are important for Indonesia in setting the robust foundation it needs to  achieve a net zero target. The energy sector can be transformed from a dependency on fossil fuels to a net zero emissions system by: continuing with planning in privatising the transmission system, reducing the PLN’s financial burden; decentralising the power system, allowing for renewable energy deployment and circular energy systems; and continuing to couple decarbonisation in energy supply and the transport sector with substantial electrification of the passenger vehicle fleets. The biggest homework for Indonesia is maintaining a pace of regulatory reform that can facilitate these changes.