New Policy in Indonesian Renewables Bill

  • Indonesia’s parliament is drafting a bill on renewable energy that will be included in its docket of priority legislation for passage this year.
  • Energy industry observers and activists have welcomed the move and called for policies to transition the country away from its heavy reliance on coal.
  • Coal accounts for the majority of Indonesia’s energy mix, and looks to remain that way through to at least 2025, even though the country has vast untapped potential to generate power from geothermal, solar, wind and wave.
  • Observers are also wary of the government’s definition of what constitutes new and renewable energy, which includes nuclear, gasified and liquefied coal, hydrogen, and even palm oil biodiesel.

JAKARTA — Indonesia’s parliament has for the first time prioritized passing new legislation on renewable energy, and activists have seized the opportunity to call for a shift away from coal.

The country is one of the world’s biggest producers and exporters of the highly polluting fossil fuel, yet has the potential to be a renewable energy powerhouse. It boasts the world’s richest reserves of geothermal energy, receives year-round sunshine thanks to its location on the equator, and has one of the longest coastlines of any country, ideal for wind farms or tidal generators.

“The government must understand which energy resources will benefit our economy the most,” Fabby Tumiwa, the executive director of the Institute for Essential Services Reform (IESR), told Mongabay in a recent interview in Jakarta. “Many analyses, including ours, have shown that renewable energy offer more benefits in the long term than coal.”

He was speaking after parliament announced its docket of priority legislation for this year, which for the first time includes a bill on “new and renewable energy.” Environmentalists have welcomed this as a sign that the government is taking renewable energy more seriously.

Coal accounts for the majority of Indonesia’s power generation at present. The government plans to nearly double the installed capacity of coal plants over the next decade from the current 28 gigawatts, ensuring coal’s dominance of the country’s energy mix at nearly 55% by 2025.

But the country’s reliance on coal has become problematic both economically and ecologically. Lower-than-expected electricity demand, rising costs, and financial obligations are squeezing the state-owned utility, and ultimately the government’s finances. Coal mining has also destroyed some of the archipelago’s rainforests and claimed many lives, while the pollution from coal-fired plants continues to jeopardize the health of millions.

With legislators now working on a draft of the renewable energy bill, energy observers have expressed hope for policies that can help Indonesia transition from its reliance on coal to generating power from cleaner resources, and reduce its emissions amid a global push to tackle the climate crisis.

Indonesia has pledged to cut emissions by 29 percent independently to 2,037 million tons of carbon dioxide equivalent (MtCO2e) by 2030, or at least 41 percent with international help. It targets an 11% reduction in total CO2 reduction from the energy sector in its nationally determined contribution (NDC), its pledge under the Paris climate agreement.

“The bill appears to be part of Indonesia’s efforts to push for renewable energy in order to cut greenhouse gas emission that’s stipulated in the NDC,” said Grita Anindarini, a researcher for environmental pollution control at the Indonesian Center for Environmental Law (ICEL), and NGO, at a recent discussion in Jakarta.

Indonesia’s energy policy calls for 23% renewables in the national energy mix by 2025. The government has previously issued policies to help achieve that target, for instance a 2018 ministry-level decree regulating the installation of rooftop solar. But critics say the development of renewable energy at scale has failed to take off partly due to the lack of national regulatory support.

“Essentially, we need this bill to guarantee a more progressive development of renewable energy in the future,” Fabby said. “The bill must lay a clear path for energy transition in Indonesia, and this is important so that renewable energy can develop fast.”

The bill being drafted in parliament will eventually be made available for public input before it goes to the government. Some of the key elements that experts say they hope to see in it include the establishment of a renewable energy market, and schemes to incentivize power producers to integrate renewable energy into the grid.

Fabby called for the bill to lay out a mechanism for market pricing and incentives to support the development of the renewable energy industry to make it cost-competitive with coal, which enjoys a price cap and other preferential policies.

“The problem is the government currently still pushes for coal consumption domestically,” he said.

A major reason for that, critics point out, is that those in power have business interests in or links to the coal industry, which makes any effort to phase out the use of coal an uphill task.

For the new bill to be effective, experts say it must require energy producers, in particular state-owned utility PLN, which runs a quasi-monopoly, to diversify their power sources to include renewables. Elrika Hamdi, energy finance analyst at Institute for Energy Economics and Financial Analysis (IEEFA), said a key challenge in developing renewable energy in Indonesia was the low level of generated electricity.

“My hope is that the bill will see renewable energy as part of [the country’s] electricity system,” she said. “So instead of the installed capacity target [for renewable energy], it should have a penetrated capacity target.”

Experts have also warned of pitfalls to avoid in drafting the bill. One crucial point is to ensure the law only focuses on renewable energy with a low carbon footprint, rather than the “new” resources that parliament is also lumping into the bill. According to Grita from ICEL, the government’s definition of “new energy” includes nuclear, gasified and liquefied coal, and hydrogen. She added that the government also considered palm oil biodiesel a “renewable” fuel.

The government has touted other energy projects as contributing to Indonesia’s renewable targets, even as conservationists warn that they threaten environmental sustainability. One of the most controversial is a planned hydropower plant in Sumatra’s Batang Toru forest landscape, the only known habitat of the critically endangered Tapanuli orangutan.

Grita said that to avoid developing unsustainable forms of renewable energy, legislators should ensure the bill upholds principles of strict environmental protection.

“Our hope is for the government to not focus on the label ‘renewable,’ but to be able to describe it as ‘renewable that’s sustainable.’ And this is what we’ve yet to see,” she said.


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