On August 16, 2022, Indonesian President Joko Widodo spoke at the Indonesian House of Representatives Annual Session and the House of Representatives Joint Session. He conveyed the agenda of Indonesia Maju, the Indonesian Cabinet; a transition to green energy was one of the key agendas. Widodo expressed great optimism in realizing an inclusive and sustainable Indonesia.

Previously, at the 2021 National Development Planning Conference, Widodo said that if Indonesia could implement this agenda, the country could achieve its national development. 

Indonesia has made efforts to reduce gas emissions by switching from fossil fuels to green energy. At the 2022 G20 Bali Summit in Bali, Indonesia, the country launched the Just Energy Transition Partnership (JETP). This partnership relies on a financing scheme of $20 billion from the member countries International Partners Group (IPG) — European Union, United States, Japan, Canada, Denmark, France, Germany, Italy, Norway and the United Kingdom — and is coordinated by the Glasgow Financial Alliance for Net Zero (GFANZ). Each of them provided funds amounting to $10 billion.

Indonesian Minister of Foreign Affairs Retno Marsudi handled diplomacy with other countries. For example, Marsudi met with the Norwegian Minister of Foreign Affairs Anniken Huitfeldt by agreeing to a Memorandum of Understanding on the forestry sector; Norway is committed to assisting Indonesia with $250 million in the context of implementing JETP. According to a statement from the Ministry of Environment and Forestry, the current efforts make Indonesia optimistic about reducing its greenhouse effect from 29% to 41% by 2030.

Indonesia lacks commitment to green energy

Despite Indonesia’s optimism, the country must overcome great challenges in carrying out the energy transition. The country has repeatedly issued statements regarding clean energy, but talk isn’t enough; it must fulfill its commitments. Its primary energy remains driven by non-renewable fossil fuels. The Center of Economic and Law Studies (CELIOS) released a study in 2024 showing that Indonesia’s dependence on coal and oil is enormous. Two of the reasons are the economic price and the vast potential space for miners. This is why Indonesia still experiences an “addiction” to non-renewable energy.

The coal sector increased from 100.51 million barrels in 2018 to 167.41 million barrels just one year later. This figure shows a peak in 2022 of 299.19 million barrels. Although there is a decline in 2020 and 2021, it does not show a significant figure.

The weakness of Indonesia’s commitment is plainly obvious when looking at private and state banks, which support the non-renewable project. Take the coal mining company PT Adaro Energy Tbk as an example. In May 2023, Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia, Bank Central Asia and Bank Permata contributed $1.75 billion for the construction of the Steam Electricity Power Plant (PLTU, abbreviated based on the Indonesian spelling) with 1.1 gigawatts in North Kalimantan.

According to Bhima Yudhistira, Director of the Center of Economic and Law Studies (CELIOS), this disbursement of funds shows that the rate of return for loan funds is still high. In fact, there has been a great deal of encouragement in the construction of the Adaro project to move away from coal. Several banks, such as CIMB Niaga Bank, Standard Chartered, Mizuho Bank and HSBC Bank, withdrew from the coal business.

The green energy mix target for 2030 reaches 44%. Harryadi Mahardika, Director of the Clean Transition Program, says that Indonesia’s noncommitment toward the energy transition is also accompanied by an increase in the 35 Gigawatt Program electricity initiative. The majority of this remains dominated by coal-based PLTU.

In 2023, the publication Kompas revealed that out of Indonesia’s total energy consumption the previous year, renewable energy made up only 12.3%. This is an increase of 0.1% from 2021. The data shows that Indonesia still needs to reach the government’s target of 23% in 2025. The government even failed to meet the 15.7% target in 2022.

According to Amin Nasser, CEO of Saudi Arabia’s Aramco oil company, reducing gas emissions is just a ‘fantasy’ for the country. Naseer predicts demand for gas will increase in the next few years rather than decrease. Therefore, Indonesia and other countries clearly lack commitment to the green energy initiative.

The JETP scheme needs crucial clarification

Another issue is that the JETP scheme has yet to be clarified. The IPG’s financing will come in the form of debt. However, economists fear this could burden the fiscal sector, resulting in Indonesia entering a debt trap. In 2023, the data company Katadata found that 60% of Indonesia’s debt will be concessional loans, 17% will be in the form of guarantees from the US and UK through the International Bank of Reconstruction and Development, 14% will be non-concessional and the remaining percentage will be in the form of equity investment and grant funds. Additionally, the GFANZ group needs to share financing details. This can be dangerous if the Indonesian government is not careful.

The launch of the Comprehensive Investment and Policy Plan for the JETP (CIPP JETP) had little impact on the situation. Before its publication, Indonesia had launched its Energy Transition Mechanism (ETM) with the Asian Development Bank (ADB) on November 3, 2021. In the CIPP JETP document, Indonesia decided that the Cirebon-1 PLTU, with a capacity of 1×660 megawatts, would retire early in 2035. The Pelabuhan Ratu PLTU would then retire in 2037.

Even though they are already in the ETM, these two PLTUs remain a priority for early retirement in the CIPP JETP document. According to the government, this pension policy is a compliance action to reduce global emissions. However, this step is repetitive — Indonesia has never been serious about solving environmental problems by diversifying other PLTUs.

Similarly, PLTU Suralaya and PLTU Paiton will be targeted for early retirement. However, Wahyudi Iwang, the Executive Director of WALHI West Java, pointed out that the early retirement schemes for PLTU Cirebon-1 and Pelabuhan Ratu do not reflect the principles of justice. Iwang stated that in the ETM scheme, the ADB did not inform the public of the decision’s consequences. One way is to use technique co-firing. Based on reports and research results from the Center for Research on Energy and Clean Air and the Institute for Essential Services Reform, this technique can only reduce emissions by around 20%. Fortunately, that will still make a positive impact on air pollution, and especially on public health.

The energy transition must (but can’t) be equally distributed

The third problem to consider is that not all regions can make an energy transition. This is a negative trend in the context of the equal distribution of green energy. Researchers Media Wahyudi Askar and Achmad Hanif Imaduddin’s study, “Indonesia’s Energy Transition Readiness Index: Mapping Current Conditions and Navigating the Future of the Energy Sector,” shows that DKI Jakarta occupies the top position with a score of 84.24, followed by Special Region of Yogyakarta (66.4), Banten (58.5), Central Java (55.22), West Java (55.19) and East Java (52.89). Simultaneously, provinces outside Java cannot follow the energy transition trend, such as Papua, Central Sulawesi, Bangka Belitung and West Papua; the majority of them score below 40.

According to Askar and Imaduddin, provinces with high averages are supported by sufficient financial capabilities. For example, until 2020, as many as 90% of Solar Power Plants (PLTS) were still located on the island of Java. Provinces with low scores need help due to, among other things, the electrification ratio. When compared on a national scale, these provinces are below 99.2%.

Another challenge is human resources. Provinces with low scores tend to have low human resources for understanding foreign languages ​​and technology, such as computers and electronics.

We can conclude that the Indonesian government’s commitment to implementing a green energy transition needs improvement, especially when the government failed to implement mixed energy towards net zero emissions. Apart from the country’s minimal commitment, the energy transition in Indonesia still needs to be characterized by unclear JETP schemes and equal distribution in each region. Based on this, it is obvious Indonesia is not ready to carry out the green energy transition.

[Lee Thompson-Kolar edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.