- Indonesia’s newly revised plan for a $20 billion clean energy transition has come under criticism for offering “false solutions” that would effectively cancel out any gains it promises.
- One of its most controversial proposals is to not count emissions from off-grid coal-fired power plants that supply industrial users without feeding into the grid.
- Emissions from these so-called captive plants alone would exceed any emissions reductions projected under the rest of the Just Energy Transition Partnership.
- The plan also puts a heavy emphasis on “false” renewables solutions such as biomass cofiring and replacing diesel generators with natural gas ones.
MALINAU, Indonesia — Indonesia’s newly revised energy transition plan includes a more stringent limit on carbon emissions, an increase in the share of renewable energy generation, and a diversified range of funding types to cover the $20 billion tab.
But energy analysts say the plan is heavy on “false solutions” that will negate any emissions cuts it promises. The emissions cap, they note, comes with a massive loophole for off-grid coal plants; the renewable aspect relies on building centralized hydropower and geothermal plants rather than small-scale solar and wind; and the funding will come overwhelmingly in the form of high-interest loans from the rich countries most responsible for the climate crisis.
Known as the Comprehensive Investment and Policy Plan (CIPP), it sets out the road map for Indonesia’s Just Energy Transition Partnership (JETP), under which the country will receive $20 billion in funding from the G7 group of rich nations plus Denmark and Norway to decarbonize its grid.
In the latest draft of the CIPP, the government plans to cap emissions at 250 million metric tons of CO2 (MtCO2) by 2030, down from a previous target of 290 MtCO2. Yet its ultimate goal of achieving net-zero emissions in the electricity sector has a deadline of 2050.
This is a decade later than what the Paris Agreement, which Indonesia has signed up to, calls for, according to Jakarta-based think tank the Institute for Essential Services Reform (IESR), which is part of the technical working group helping draft the CIPP.
There’s also a power plant-sized loophole in that emissions goal. Notably exempt from any emissions cap or net-zero target are so-called captive power plants, which are built specifically to provide electricity to industrial and commercial consumers without feeding into the country’s central grid.
Indonesia has seen rapid development of captive coal power in the past decade due to the expansion of the metals-processing sector. In 2013, Indonesia had 1.3 gigawatts of captive coal power capacity. By 2023, that number has grown tenfold to 13.74 GW, according to data from the Ministry of Energy and Mineral Resources. An additional 20.48 GW of captive coal plants are in the planning stages.
These captive power plants are estimated to emit between 153 and 187 MtCO2 by 2030, according to energy think tank Ember. If these emissions were actually counted, then emissions from the electricity sector would far exceed the government’s emissions cap target of 250 MtCO2.
Harryadin Mahardika, director of the Clean Transition Program, said captive coal plants pose a major stumbling block to Indonesia’s energy transition agenda and net-zero target.
“Even if the CIPP target is achieved, Indonesia’s zero emission target will never be achieved because captive coal-fired power plants will still produce large amount of emissions,” he said.
Compensating for the huge capacity of operational and planned captive power plants will require mass and rapid development of solar and wind power and transmission lines within the next six years, according to the CIPP’s technical working group. This, the group says, is unrealistic.
Yet even when it comes to the grid, the CIPP only calls for cancelling some of the coal power plants in the pipeline, according to an analysis by a coalition of Indonesian NGOs. The government initially aimed to retire 5.2 GW of coal from the grid by 2030 when it announced the JETP deal. But the new draft plan slashes that target to 1.7 GW because of lack of committed funding, according to IESR executive director Fabby Tumiwa.
That figure is far from what needs to be retired for Indonesia to meet its Paris Agreement goal, which is 9.2 GW. It’s also much lower than the target in a similar JETP deal for South Africa, which plans 6 GW of early coal plant retirement.
“From our perspective, building new power plants and early retirement are two activities that cancel each other out. This mutual cancelling-out action is expensive with zero results,” the analysis says.
Bhima Yudhistira, executive director of nonprofit Center of Economic and Law Studies (CELIOS), said, “There seems to be no intention to really retire coal-fired power plants.”
False solutions from renewables
Then there’s the question of renewables. Indonesia previously planned to boost the share of renewables in the energy mix to 34% by 2030, but in the latest draft of the CIPP has boosted that figure to 44%.
While this might seem like good news, observers say it puts too much emphasis on the development of so-called dispatchable renewables like hydropower and geothermal, which are more expensive and will take longer to go online than variable renewables like solar and wind.
In the draft, development of dispatchable renewables accounts for the bulk of the 44% figure, with an estimated cost of up to $49.2 billion compared to $25.7 billion for variable renewables development.
“We have seen the combo of solar and battery energy storage systems (BESS) outperforming other sources of energy in terms of costs and practicality for deployment,” said Pamela Simamora, Ember Southeast Asia senior electricity policy analyst. “The CIPP’s focus on dispatchable renewables, which will only begin operations by the end of the decade, risks steering Indonesia off course from an accelerated energy transition.”
The CIPP also focuses too much on the development of large-scale renewable energy, rather than small-scale ones managed by local communities, such as microhydro plants and solar assemblies, even as their costs continue to go down, according to Sisilia Nurmala Dewi, head of the Indonesian chapter of the climate campaign group 350.org.
This means Indonesia’s energy transition agenda might leave local communities behind, she said.
“The CIPP document still sees the public as consumers, not as citizens who could contribute to the development of renewable energy,” Sisilia said. “As an archipelagic country with a spread-out population and abundant renewable energy potential, energy decentralization is an important strategy to achieve community energy sovereignty and to strengthen national energy security.”
The CIPP also calls for energy transition strategies that experts deem to be “false solutions,” such as biomass cofiring and natural gas.
Cofiring is the practice of substituting some of the coal in coal-fired power plants with woody biomass such as wood pellets, oil palm kernels and sawdust. The rationale is that this releases emissions that were previously captured in the biomass, thus making it carbon neutral — or at least the biomass part of it. The JETP envisions cofiring to account for 5–10% of annual generation from coal power plants over 2030-2050.
But ensuring a sufficient supply of biomass — 9 million metric tons annually, according to the government; 10.2 million metric tons, according to Trend Asia, a think tank — will all but guarantee widespread deforestation, critics say.
Trend Asia estimates it will take 2.33 million hectares (5.7 million acres) of land — an area roughly 35 times the size of Jakarta — to produce the needed wood. And nearly half of this would have to be newly established plantations, which in many cases means clearing standing forest for acacia and eucalyptus, given that Indonesia’s current annual production of wood pellets is less than 1 million metric tons.
That makes biomass cofiring a false solution that should have no place in Indonesia’s energy transition agenda, said Dian Sunardi, director of social change communication agency Arise! Indonesia.
“It will only exacerbate the climate crisis and destroy the future of Indonesia’s energy transition,” she said. “Indonesia has to take a firm stance and say no to false solutions and remove them from the CIPP.”
The CIPP also calls for a surge in the use of natural gas, which the government sees as cleaner alternative to existing diesel generators. And while it’s true that gas produces half the carbon per unit of energy produced as coal, it’s still a fossil fuel and much dirtier than wind and solar. Gas is also associated with methane, a far more potent greenhouse gas than CO2, which means that over its lifetime, a gas-fired power plant could emit even more greenhouse gases than a coal-fired one.
“All these [false solutions] could cripple Indonesia’s energy transition,” said Leonard Simanjuntak, the head of Greenpeace Indonesia. “I’m worried that the JETP will end up as a boutique project, with no significance or even becoming cosmetics in the complexity of Indonesia’s energy transition.”
Business as usual for a ‘boiling planet’
Funding plans for the JETP have also come under scrutiny.
The CIPP draft says the $20 billion will come in the form of grants, concessional loans, market-rate loans, guarantees, and private investments. The government is pushing for a greater proportion of grants in the JETP funding, which currently make up only $153.8 million of the total funding, or less than 1%. As a proportion, this is less than the share of grants in South Africa’s JETP deal, which stands at 4%.
Grants, unlike loans, don’t have to be paid back.
The U.S. is the largest financier in Indonesia’s JETP deal, with more than $2 billion committed. But only $66.7 million of that comes in the form of grants, or just 3.3% of the total fund committed. At the same time, $1 billion of its commitment is in the form of market-rate loans.
Those $1 billion in loans will on their own require Indonesia to pay annual interest of at least $68.3 million — more than the one-time grant it’s getting from the U.S.
This raises questions about industrialized countries’ commitment to the “just” part of the just energy transition, according to Bhima from CELIOS.
“What’s the use of waiting for the CIPP document to be released if the agreement with the developed countries is only business as usual?” he said.
Indonesian President Joko Widodo has also called out industrialized countries, which are most responsible for historical emissions, for not providing more favorable financing to the Global South countries they’re leaning on to provide climate solutions.
“We all know that until now climate financing is still business as usual, still like commercial banking,” he said in a speech at Stanford University in the U.S. on Nov. 15. “It should be more constructive, not in the form of loans that would only increase the burden on poor and developing countries [like Indonesia].”
Pius Ginting, coordinator of the NGO Action for Ecology and Emancipation of the People (AEER), cited Japan as an example of an industrialized nation that should step up its financing game as it continues to contribute to Indonesia’s emissions by financing coal-fired power plants.
Financial institutions from Japan and China were the largest funders of coal projects in Indonesia from 2014-2019. Three Japanese lenders are in the top five, of which the Japan Bank for International Cooperation (JPIC) is the single biggest financier, providing $4.7 billion for the construction of coal plants in Indonesia. That value represents a quarter of Indonesia’s JETP deal.
Pius said countries like Japan should follow the example of Germany, which has committed $167 million of grants or technical assistance to Indonesia’s JETP, or 10% of its total commitment.
“This grant proportion should be a reference for other industrialized countries as the implementation of the ‘common but differentiated’ responsibility principle in tackling the issue of [our] boiling planet,” he said.
Banner image: A shepherdess watches over her flock of sheep that graze near a coal power plant in Jepara, Central Java, Indonesia. Image courtesy of Kemal Jufri/Greenpeace.
See a related commentary:
Indonesia’s Just Energy Transition Partnership must increase transparency (commentary)
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