Indonesia needs to crystallise its energy transition plan and introduce a financing programme to steadily trim its reliance on coal power and reduce carbon emissions, according to Indonesian think tank IESR.
The world's biggest coal producer has set a target to achieve net zero by 2060, but Jakarta has not published a comprehensive action plan to transition away from the fossil fuel. The private sector needs clarity on government plans and financial support to switch to the renewable energy in a big way, IESR said. The IESR works closely with the Indonesian energy ministry on policy matters.
Indonesia also needed to incentivise investment in greenfield renewable energy projects by giving tax holidays, preferential interest rates on loans, as well as other financial or regulatory benefits and grants to encourage the private and public sectors to adapt to cleaner sources of energy. International programmes, including the $20bn Just Energy Transition Partnership and the Asian Development Bank's Energy Transition Mechanism, can be used as financing models and refined further with inputs from local stakeholders to come up with an indigenous energy transition financing programme, it added.
More than 65pc of Indonesia's installed generation capacity of 82GW is coal-fired. Its renewable energy capacity is at 12.5GW, accounting for 14.5pc of the current generation mix. Indonesia aims to increase the share of renewable energy in the overall generation to 34pc by 2030 and 100pc by 2060. The country will need up to $1 trillion to completely retire all Indonesian coal plants by 2058, according to the country's energy ministry.
The southeast Asian nation needs to have a social and economic development-linked plan towards achieving the energy transition goal, IESR said. The targets across the different ministries and sectors need to be clearly spelt out, it added.
Jakarta should also consider reviewing existing policies and regulations with respect to energy transition, and merge rules where necessary with an aim to simplify its broader energy transition agenda and bolster the business climate towards energy transition, the think tank said. The policies should be aimed at setting up more ambitious renewable energy targets and mitigating various risks involved with the development of the renewable energy sector, it added. This would involve access to transparent renewable energy data that can benefit all stakeholders.
