The dark cloud over Indonesia's commitment to reach net zero emissions by 2060

Unlike the rest of the world, Indonesia plans to reduce its renewable energy ambitions by 2030.

Just over two months ago, the 28th United Nations Climate Change Conference (COP28) concluded with a historic agreement in which 123 countries participated. engaged to triple the installed global capacity for renewable energy (RE) production to reach at least 11,000 gigawatts (GW) by 2030, by abandoning fossil fuels, doubling energy efficiency improvements and accelerating reductions in methane emissions.

In Indonesia, outgoing President Joko Widodo has consistently reaffirmed the country's commitment to achieving net zero emissions (NZE) by 2060 or sooner. Despite this, the Indonesian government chose not to sign the global renewable energy and energy efficiency pledge at COP28, raising questions about whether Indonesia's NZE target will be reached.

Currently, the Indonesian National Energy Council (DEN) is working on updating Government Regulation No. 79 of 2014 concerning the National Energy Policy (KEN), which should be completed next June.

The project, currently under discussion in the House of Representatives, would reduce the national renewable energy target for 2025 from 23% of total energy to 17%-19%, based on the new assumption that Indonesia can only increase the share of renewable energy by around 2%. at 3% per year. Similarly, for 2030, KEN's draft reduced the renewable energy target from 26% to 19%-21%. Such measures could demonstrate weak government commitment to the energy transition and prolong Indonesia's heavy reliance on fossil fuels.

The new draft political objective is not aligned with the commitments of the Indian government within the framework of Nationally determined contributions(NDC) submitted to the United Nations Framework Convention on Climate Change. Such a rollback could jeopardize the $20 billion Just Energy Transition Partnership (JETP). investment proposal currently being negotiated by the government with several donor governments, philanthropies and the private sector, in which Indonesia has proposed reaching a 44% renewable energy target by 2030, up from the previous one JETP of 2022. Joint declarationtarget of 34%.

Indonesia's continued failure to meet its renewable energy target

Over the past five years, Indonesia's incremental contribution to renewable energy in the primary energy and electricity generation mix has only increased by 1-2% per year. The current share of renewables in the electricity mix is ​​13.1%, well below the 2023 target of 17.9%, with a capacity of 13.2 GW comprising 94.5% hydropower, biomass and geothermal energy.

By reducing its targets, the Indian government recognizes that its current process of delivering renewable energy is failing. As Indonesia prepares for a change of administration, with outgoing President Joko Widodos' term ending in October, the country finds itself at a pivotal point. The new president and administration will inherit the important task of advancing Indonesia's commitment to achieving the NZE by 2060 or earlier.

The new government must make further additional efforts to ensure that even the reduced target is met. They must identify the root of the problem and make the necessary adjustments to its policies, regulations and processes to support the energy transition. The new government will have to overcome several challenges and problems.

First, the lack of a clear and coherent regulatory framework for renewable energy development in Indonesia demonstrates a lack of government commitment while raising concerns among investors and financial institutions. Although Indonesia has issued several regulations that support the RE environment in concept, the details of their practical implementation remain uncertain, giving the impression that the sector is very risky and the country is less attractive for investors.

Second, the Indian government would benefit from reassessing its fossil fuel strategy by understanding that the energy transition can create broad investment opportunities and expand job creation across the archipelago. Low-cost solar and wind renewables can provide an economically sustainable solution for rapid deployment while enabling concrete progress toward NDCs, as has been demonstrated in many other countries. Additionally, the ever-decreasing life cycle cost of solar, wind and battery storage technologies may create tax benefits for the government, particularly for the financially troubled national utility, Perusahaan Listrik Negara (PLN).

Third, it is important to create a clear and transparent process for project acquisition to unlock the potential for investment in renewable energy. As demonstrated in other Southeast Asian marketsRenewable energy can catalyze various domestic and foreign investments, local loans and technological innovations.

Indonesia's tariffs on renewable energy have been set considerably lower than those of other countries in the region that are more advanced in realizing renewable energy. Additionally, in the renewable energy procurement process, the winner is determined by the lowest tariff offered by the bidder, which makes the tariff even lower.

Aggressive PLN co-ownership in shares The requirements of recent tenders for renewable energy projects are discouraging international bidders. These factors make it difficult for potential investors to understand how they will achieve appropriate returns on their investments, thereby adding obstacles to an already risky business.

The new government must address these structural challenges and create policies and regulations that make the renewable energy sector more accessible, safer and more profitable for potential investors.

Collaboration between government, the private sector and civil society, as well as strong policy frameworks, will be instrumental in overcoming these challenges and guiding Indonesia towards an economically and environmentally sustainable net-zero future.

Read this commentary in Bahasa Indonesia.