Concerns arise as Indonesia JETP progresses slowly in coal transition


PLTU Indramayu in Indonesia. (Photo: Wikimedia Commons)

After nearly 18 months, Indonesia's efforts to expedite its shift towards clean energy are stalling, with minimal progress made in phasing out coal plants.

Indonesia’s Joint Energy Transition Partnership, or JETP, was announced in November 2022. It promised $20 billion in financial support, with pledges led by the U.S. and Japan, along with other high-income economies and the private sector to transition the country away from coal. 

Slow progress

Melinda Martinus, a researcher at the ISEAS-Yusof Ishak Institute, said that “JETPs prioritize assisting developing countries in transitioning away from coal, given that coal fired electricity generation is the main contributor to carbon emissions in the power sector.”

Indonesia's JETP goals include shifting the country's projected emissions peak forward to 2030, reducing the power sector's emission cap, advancing the power sector's net-zero emissions target by 10 years, and accelerating renewable energy deployment to at least 34% of all power generation by 2030.

However, progress has been sluggish. The initial Comprehensive Investment and Policy Plan, outlining the country’s financing requirements and protocols for allocating JETP funds, was delayed by three months and was only released late last year.

There are also concerns that the government's emphasis on biomass, biodiesel, and co-firing coal with biomass might undermine the effectiveness of the JETP by merely transferring emissions from coal-fired power plants to other polluting energy sources.

Revenues from biodiesel

Tommy Pratama, executive director of Traction Energy Asia, noted, “When you see funding just for energy transition coming to any large developing country, you would hope it would be used for the right things.”

Indonesia’s Parliament is debating a new and renewable energy law that seeks to continue the use of coal, directly contradicting the goals of the JETP.

“The government needs the revenue from palm oil biodiesel, timber plantations for wood chips and coal to offset the huge subsidies that it provides those industries, and that’s an obstacle,” Pratama said. 

Newly built coal power plant

Indonesia, a major coal producer and one of the largest exporters globally, possesses a significant fleet of coal-fired power plants, with over 60% of them being 10 years old or younger. This trend reflects Indonesia's efforts to enhance domestic consumption.

With coal contributing to over half of Indonesia's fuel-based emissions, retiring coal plants is deemed crucial in curbing the country's greenhouse gas footprint. This shift is imperative as Indonesia is poised to become the world's sixth-highest emitter of fossil carbon dioxide, accounting for over 3% of global CO2 emissions.

A third JETP was announced in Vietnam weeks after Indonesia's, reflecting a similar trajectory in rapidly expanding coal-fired electricity generation fleets in both countries. Supported predominantly by Japanese, Chinese, and Korean financial institutions, the relatively young age of coal plants in both nations underscores the necessity of JETP financing for early coal-plant retirements.

Lagging behind in renewables

In 2019, only 0.2% of Indonesia’s electricity consumption came from solar and wind, despite abundant solar and wind resources available across the archipelago. Geothermal energy, for which Indonesia has more estimated potential resources than any other country in the world, also remains vastly underdeveloped.

Martinus said that building a clean energy industry could benefit economic development in Indonesia and Southeast Asia as a whole. She pointed out that there would be an increasing demand for components required for energy transition, such as solar cells, silicon, and battery storage.

Muara Laboh Geothermal Power Plant in Indonesia. (Photo: Inpex)

Huge funding gaps

According to Martinus, the $20 billion figure for Indonesia’s JETP is not nearly enough to meet the coal retirement and clean energy expansion goals.

“Indonesia needs $67 billion to finance projects for energy transitions. Even with JETP funding, Indonesia still faces a 70% financing gap,” she said. The lack of funding could mean less coal plants are retired.

Martinus also raised another concern that most of the funds for both Indonesia and Vietnam will be in the form of concessional loans rather than grants. This approach "could strain the fiscal capacity of recipient countries," she added.

Conflicts of interest

Another issue raised is that the main funding countries may have priorities that conflict with the JETP. For Traction Energy Asia’s Pratama, a big concern is biomass.

The Indonesian government has been promoting the idea of replacing some coal with wood pellets and co-firing it with coal in power plants. Wood pellets are sourced from wood plantations, but also tropical rainforests. However, science indicates that woody biomass is limited as a climate solution due to emissions from land-use change and deforestation.

“Japan is a big funding partner, they’re pushing biomass. European countries too, they’re also not calling out the dangers of funding unsustainable energy choices such as biomass because they are doing it too.” Pratama said.

Furthermore, according to Pratama, JETP only applies to grid-connected coal power plants, not so-called captive coal plants, which are constructed to power factories and industrial parks.

Taking all these factors into account, Indonesia's emissions continue to rise despite the 18 months that have passed since the JETP announcement. Coal consumption increased by 33% in 2022 compared to 2021, according to the Global Carbon Project, and is expected to have risen further.

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