The Economic Daily News reported on May 14 that in recent years, Indonesia has been actively promoting the use and development of green energy, becoming the center of energy transition in Southeast Asia and creating favorable conditions for achieving the 2060 net-zero emissions target. According to Indonesia's National Energy Commission 2023, Indonesia's current energy mix is still dominated by coal (40.46%), oil (30.18%), and natural gas (16.28%), with clean energy accounting for only 13.09%. The government aims to increase the share of clean energy to 19.49% by 2024 and to reach 23% by 2025 and 31% by 2050. Meanwhile, this year Indonesia's sovereign wealth fund will invest about $1 billion in all sectors, with green energy as one of the preferred focuses. Indonesia is also actively promoting potential investments in the electric vehicle ecosystem and geothermal energy sector, as well as seeking financing for the early decommissioning of coal-fired power plants, Invest Indonesia said.
Combined with Indonesia's own rich natural resources, the creation of an electric vehicle ecosystem, the development of clean energy, and the replacement of coal-fired power plants have become the trio of Indonesia's push for energy transition.
Indonesia is one of the countries with extremely rich reserves of raw materials for batteries, with nickel reserves accounting for more than 22% of the world's total, and nickel production accounting for more than 37% of the world's total. At the same time, Indonesia is also the second largest producer of cobalt, accounting for about 5% of global cobalt production. In addition, in Indonesia in bauxite and copper ore and other automotive components raw materials, there are also more than adequate reserves.
According to the Ministry of Energy and Mineral Resources, Indonesia has a clean energy potential of 3,686 gigawatts (GW), including solar, wind, hydro, bioenergy, geothermal and ocean energy. As a country of volcanoes, Indonesia's geothermal resources account for more than 40% of the world's geothermal power potential of 23.9 GW. In addition, Indonesia has many oceans whose currents, waves and tides can also be converted into electricity.
Promoted and incentivized by the government and many others, Indonesia is becoming one of the hotspots for electric vehicles. Electric vehicle manufacturers from all over the world are looking to set up factories or sell their products in Indonesia. Chinese companies such as Wuling, Chery, Nezha, and BYD have gained a lot of attention for their rapid development after entering Indonesia. Indonesia plans to build an electric vehicle ecosystem by 2027-2028, achieve a domestic electric motorcycle and electric car ownership of 13 million (including converted vehicles) and 2.2 million by 2030, and sell only electric cars and electric motorcycles by 2050. Indonesia's Minister of State Enterprises, Eric, said that at present, Indonesia's electric vehicle sales have reached 3% of total vehicle sales, showing significant growth momentum.
Indonesia has also made positive progress in clean energy development.2023 In November, the full-capacity Girata Floating Photovoltaic Project in Indonesia, constructed by CEC, was connected to the grid. The project is Indonesia's first and Southeast Asia's largest floating photovoltaic project, as well as the world's deepest floating photovoltaic project under construction, which plays an important role in demonstrating and leading the development of clean energy in Indonesia and even Southeast Asia. After the completion of the project, it is expected that the annual power generation will reach 300,000 MWh, which can save 117,000 tons of standard coal for Indonesia annually, and at the same time provide enough power for 50,000 households, greatly easing the tension of power supply around West Java, Indonesia.
Data show that by the end of 2022, Indonesia's installed geothermal power generation capacity reached 2,356 megawatts, surpassing the Philippines and becoming the world's second-largest geothermal power generation country after the United States. In order to meet the demand for electricity growth, the Ministry of State Enterprises wants Pertamina to purchase new and renewable energy up to more than 1 GW in 2024. According to Pertamina's plan, Indonesia's newly installed geothermal power capacity is expected to increase to 3,355 megawatts in 2030, with an increase of 141 megawatts in 2024 and 870 megawatts in 2025.
In 2023, Indonesia added 43 MW of geothermal power generation, lower than the target of 190 MW, mainly due to the development license is not easy to obtain, the localization of spare parts is too high requirements as well as the time-consuming negotiation of the sale and purchase agreement with Pertamina. Riza, the secretary-general of the Indonesian Geothermal Association, said that these problems have had a serious impact on obtaining financing from financial institutions.
In order to cope with the rapid development of renewable energy, and to solve the mismatch between the distribution of clean energy and the center of power demand and other outstanding problems, Pertamina is accelerating the construction of power interconnection, constructing a “super grid” to connect the scattered inter-island power system. At the same time, Indonesia is also studying the construction of smart grid projects.
The development and use of clean energy will not only help Indonesia save energy and reduce emissions, support the green and sustainable development of the economy, but also reduce the burden of imported oil and natural gas, and extend the life of coal reserves. Indonesia's Energy and Mineral Resources Minister Arifin recently said that Indonesia's oil production is 600,000 barrels per day, but it still needs to import 840,000 barrels to meet domestic demand, and the gap is still large. In addition, Indonesia also imports up to 5.5 million tons of liquefied natural gas per year.
According to the Indonesian Mining Association, with the increasing number of electric vehicles, Indonesia's coal reserves will have a useful life of 150 years. Indonesia's coal resources amount to 99.19 billion tons, with 35.02 billion tons of proven reserves. If coal production is 700 million tons per year, it is expected that the additional coal reserves will be exhausted in 47 to 50 years.
Nevertheless, Indonesia's energy transition still faces many challenges. For example, popular acceptance of electric vehicles remains low. On the one hand, although sales of electric vehicles in Indonesia have increased, they still account for a low percentage of total vehicle ownership; on the other hand, sales of electric motorcycles have not seen a major change despite the government's subsidy policy.In 2023, the government allocated Rp 1.4 trillion to subsidize 200,000 new electric motorcycles (including retrofitted vehicles), but only 11,532 quotas were used; in 2024 In 2024, the subsidy has been increased, but so far there are still 576,400 remaining quotas, with only 10,643 quotas applied for use.
Financing is also an issue: in 2022, Indonesia launched the world's largest financing program for the energy transition, mobilizing $20 billion over the next three to five years through the International Finance Facility Partnership for a Just Energy Transition (IFFPAT) to develop clean energy, including support for the early decommissioning of coal-fired power plants. The international partnership led by the United States and Japan has pledged to help Indonesia get rid of its reliance on coal for power generation and achieve carbon neutrality by 2050, but so far no substantial progress has been made, and private capital is even less interested in supporting the early decommissioning of Indonesia's coal-fired power plants. Ariffin said in February that the government's top priority would shift from decommissioning coal-fired power plants to optimizing transmission infrastructure.
Meanwhile, the legal basis for clean energy development in Indonesia remains weak. Indonesia has so far not passed the New and Renewable Energy Act, said Fahmi, a scholar at Gatchamada University. In addition to this, the Electricity Law also needs to be improved to accelerate the energy transition.