JETP: A reflection of Indonesia’s commitment to transform its power sector

Indonesia’s JETP requires the country to cap its power sector emissions at 290 million tonnes in 2030, but more specific requirements are needed to speed up coal retirement and make space for renewables.

Detailed road map is needed for coal-fired power plants retirement

JETP emphasises on freezing the existing pipeline of planned on-grid coal-fired power plants included in the national Electricity Supply Business Plan 2021-2030 (RUPTL). However, it has no requirements to stop coal plants under construction in both the power sector and the captive plants.

JETP emissions cap for the power sector is not aligned with 1.5C

The JETP emissions cap of 290 million tonnes CO2 is broadly consistent with the Announced Pledge Scenario analysed in a recent IEA report which aligned with the government’s target to achieve Net Zero Emissions for all sectors by 2060, not 1.5C pathway.

Coal generation needs to decrease substantially by 2030

To put the country on track for 1.5C, coal generation needs to decrease substantially by 2030, through closing some operating coal plants and significantly reducing coal power generation and rapidly deploying renewable energy.

Indonesia needs to align with the global 1.5C climate target

Indonesia should leverage the momentum and financial support from JETP to help the country reconfigure its transition pathway to align with the global 1.5C climate target.

At the G20 meeting in November, Indonesia secured the Just Energy Transition Partnership (JETP) deal of USD 20 billion to fund the country’s energy transition efforts. Led by the United States and Japan, developed countries agreed to help Indonesia achieve Net Zero Emissions by accelerating the development of renewable energy, fast-tracking the retirement of coal-fired power plants and helping the communities affected by the transition, especially in the coal sector.

As part of this agreement, Indonesia is required to cap its power sector emission at 290 million tonnes (Mt) in 2030. The agreement also emphasises to freeze the existing pipeline of planned on-grid coal-fired power plants included in the national Electricity Supply Business Plan 2021-2030 (also known as RUPTL), reaffirming a full moratorium on any new on-grid coal power generation capacity in accordance with Presidential Regulation on Renewable Energy Number 112/2022 and accelerating the deployment of renewable energy to reach at least 34% of total generation by 2030.

However, there are no specific requirements in the deal to address the under construction on-grid coal power generation. So, how did this agreement come with a 290 Mt emissions cap? What does this mean for coal power in Indonesia and what are the implications for climate targets?

The JETP should be detailed further to include any possible scenarios for the country. This deal should also include options of any possible early retirement and lower down the average capacity factor of operating coal-fired power plants, plus a target to accelerate renewable energy uptakes, to demonstrate that international support could significantly help the country to reroute its transition pathway towards the 1.5C target.

Dr. Achmed Shahram Edianto
‍Asia electricity analyst, Ember

Unpacking the emissions cap requirement

The JETP emissions cap of 290 Mt CO2 is broadly consistent with the Announced Pledge Scenario analysed in a recent IEA report – An Energy Sector Roadmap to Net Zero Emissions in Indonesia – which aligns with government’s target to achieve Net Zero Emissions for all sectors by 2060.

In this scenario, the coal fleet is expected to grow from 35 GW in 2021 to approximately 45 GW by 2030. This includes 14 GW of coal currently under construction that will come online between 2021 to 2030, resulting in a total of almost 50 GW coal-fired power plants in 2030. The discrepancy comes from the assumption to retire around 5 GW of coal capacity between 2021 to 2030.

Furthermore, although JETP also states that Indonesia needs to restrict the development of captive coal-fired power plants and to find and implement potential zero emissions and renewable solutions for power generation facilities outside Jawa-Bali, including captive power facilities, the restriction is in accordance with the Presidential Regulation mentioned above.

It means, the government still allows captive coal power plants to be built as long as it is integrated with industries that increase the added value of natural resources or are included in Indonesia’s National Strategic Projects with major contributions to job creation and national economic growth.

To date, Indonesia has a total of 5 GW of captive coal power operating in 2021, with 4 GW under construction, according to the Global Energy Monitor. These coal plants do not appear to be included in the 290 Mt emissions cap and have no specific restriction in the JETP agreement.

If this assumption is correct, this means JETP Indonesia has no special requirements for stopping coal plants in the electricity sector beyond what has been planned by the government, as well as any requirements for captive power plants. In other words, JETP still allows the highest emitting energy source – coal power – to grow in the next few years.

Can JETP bring Indonesia’s power sector closer to 1.5C?

Developing countries expect JETP to help them accelerate the just transition process. Alongside this expectation, they also need support to align their national targets with the global target to limit temperature rise to 1.5C.

However, in Indonesia, the objective is to help the country achieve its net zero emissions target for all sectors by 2060, where the power sector is expected to achieve this target by 2050.

To be compliant with 1.5C, the power sector should in fact achieve net zero emissions by 2040. Furthermore, coal emissions need to be significantly reduced by 2030.

But the questions remain, is it possible to align with the 1.5C? Most importantly, what are the additional actions required to put the power sector on track for 1.5C?

Achieving the 1.5C target

It is technically possible to align Indonesia’s energy transition target with 1.5C, particularly in the power sector. To do this, the IEA scenario recommends that all new unabated coal-fired power plant projects must be completed by 2024, and several plants that are part of the active pipeline should be cancelled. Coal fleet needs to be reduced by 10% and the generation of operating coal-fired power plants in 2030 should decline by 70%, compared to the JETP scenario.

It means, in terms of capacity, Indonesia should retire around 9 GW of its coal fleet by 2030, since there are still new projects coming online between now and 2030. In the long term, unabated coal generation will only fall 8% from 2021 to 2040 (from around 190 TWh to 175 TWh) in the JETP scenario, whereas it needs to fall nearly 100% for 1.5C.

Meanwhile, analysis by the University of Maryland and the Institute for Essential Services Reform (IESR) shows that Indonesia should retire around 9.2 GW of its coal fleet by 2030, close to the 1.5C pathway from IEA.

To put the country on track for 1.5, coal generation needs to decrease substantially by 2030, through closing some operating coal plants and significantly reducing coal power generation.

In addition, the share of renewables should increase significantly to replace coal power generation. The IEA suggested that this share should reach about 60% of the total generation in 2030, around 25 percentage points higher than required by JETP and the IEA Announced Pledge Scenario.

The benefits of 1.5C-aligned pathways

The above studies also highlighted the benefits of Indonesia moving towards the 1.5C target. The IEA’s net zero emissions scenario shows that although the costs of the energy system are higher in 2030 compared to costs in the announced pledge scenario, investment requirements will fall in the longer term while consumer cost savings will also increase.

By 2050, the costs of the entire energy system will be cheaper under the net zero emissions scenario than other scenarios. Additionally, Indonesia’s power sector will be 100% clean by 2040, which in turn will accelerate net zero targets of all other sectors by 2050, 10 years ahead of the government’s deadline.

The University of Maryland and IESR also cites that accelerating the transition from coal to clean energy, in line with 1.5C, will be economically and socially beneficial. The benefits obtained from shifting coal subsidies and avoiding negative health impacts from coal are two to four times greater than the costs of stranded assets, decommissioning of coal-fired power plants, employment transition costs and loss of government revenue from the coal sector.

Expecting more advanced pathways for Indonesia

The IEA’s Announced Pledge Scenario provides sufficient information to understand the JETP emissions cap requirement for Indonesia’s power sector. However, this scenario is in line with net zero emissions in the power sector by 2050, which is not 1.5C compliant.

The government should consider three recommendations for ongoing JETP discussions to mitigate worsening impacts of the climate crisis by stringent emissions measures and offer more advanced pathways for Indonesia’s energy transition.

First, JETP emissions cap means no new coal other than those under construction. If any plants currently in development – but not under construction – also enter operation by 2030, this will add 7 GW of coal fleet, which equals to around 38 Mt CO2. To meet the emissions cap, this will need to be compensated by retiring more existing plants (beyond the 5 GW) or lowering average running hours of the operational coal fleet, or both. Furthermore, rapid deployment of renewable energy is needed to substitute coal power generation in the system.

Second, JETP should clearly define the power sector emissions cap. As part of coal phasedown, addressing coal power in the energy transition is not limited to the power sector. Gaps in dealing with captive coal power should also be considered an additional threat to Indonesia. The total emissions from existing and under construction captive coal could reach almost 50 Mt CO2 in 2030, 17% of the power sector emissions cap.

JETP does limit the power sector emissions and stated the restriction of captive coal power plants. However, this deal did not impose any captive coal emissions requirements. Therefore, an additional requirement to reduce captive coal emissions should be in place, as part of the deal.

Lastly, leveraging financial support is the key to accelerating energy transition. As mentioned by the Minister of Finance at COP 26, Indonesia could put forward the target to fully phase out coal-fired power plants by 2040, aligned with 1.5C, if sufficient financial support from international communities were available. With JETP now on the table, the country should put its climate-aligned commitment into measurable actions, showing that Indonesia’s energy transition could move faster and align with the global climate target of 1.5C.

Acknowledgements

Header Image
Sidrap Wind Farm in Sidenreng Rappang, South Sulawesi, Indonesia

Credit: Yermia Riezky Santiago / Alamy Stock Photo

JETP: a reflection of Indonesia’s commitment to transform its power sector

More specifics are needed for Indonesia to speed up coal retirement, make space for renewables and align with 1.5C.