What Are The Plans of Indonesia to Reduce The Carbon Footprint in The Energy Mix?

DO WELL DO GOOD
What are the plans of Indonesia
to reduce the carbon footprint in
the energy mix?
Presentation
December 2020
Dimas Naufal Al Ghifari
Junior member
LU Energy

2
Copyright ©2019 ShARE. All Rights Reserved
Executive Summary
• Indonesia’s carbon emission is expected to reach 3000 million tons of CO2 until the end of
2030, with about 49% of emissions are contributed from the energy sector
• Key actions are taken by the government in effort to reduce carbon emission from its
energy mix, primarily by renewable energy developments and provision of biofuels
• Up to $36.95 million are allocated to finance renewable energy projects, with about 87%
of the total fund are invested in hydropower and geothermal power plants
• The government encourages biofuel consumption through gradual increase of biofuel
mixing in fuel consumption of 30% by 2025
• Financial incentives and market price support are introduced to attract more investments,
including government guarantee, tax exemptions and feed-in tariff

3
Energy sector contributes 49% to Indonesia’s national GHG
emission which is projected to reach 300 million tons of CO2
Source: World Resources Institute & BPS
0
500
1000
1500
2000
2500
3000
3500
2000 2005 2010 2015 2020 2025 2030 2035
Historical Emission
BaU Projection
Indonesia’s GHG Emission
Projection 2030, BaU Scenario
(MtCO2e)
49% Energy
25% FOLU*
11% Agriculture
10% Waste
5% IPPU*
1% Forest Fire
Percentages of GHG Emission by
Sector 2017
1150
MtCO2-eq
*FOLU: Food and Other Land Use; IPPU: Industrial
Processes and Product Use
Extensive forest fires
in 2015 caused sharp
increase in emission
3.7%
CAGR
“Indonesia needs to reduce its emission below 551 MtCO2e by 2030 and to
below -128 MtCO2e by 2050 to be within its fair-share range compatible with
the global 1.5°C scenarios” – Climate Transparency 2019
Comments:
• Energy sector’s emission shows the highest
annual increase rate of 4.5%, followed by FOLU
and forest fire combined at 2.7%
Comments:
• BaU (Business-as-Usual) scenario refers to the
case where no mitigation policy are taken into
action

4
About 86% of national energy mix is dominated from fossil
fuels with the demand remains as high as 80% of total energy
demand
Source: Statista & Indonesia Energy Outlook 2018
0
50
100
150
200
250
300
350
2020 2030 2040 2050
Indonesia’s Energy Demand
per Energy Source, BaU Scenario
(MTOe*)
Renewable
Energy
Oil
Gas
Coal
Fossil fuel will still dominate the national energy
demand by more than 80% in Business-as-Usual
(BaU) scenario
Fossil fuels dominate the contribution of the
national energy production by 82.9% as per
2018
Comment
• Share of fossil fuel in energy demand will remain
as high as 88% averagely in the next 30 years
50%
29%
7%
14%
Installed Capacity per Energy Source 2018
Coal
Gas
Oil
Renewable energy
64.5 GW
Comment
• Coal plants are still the prevalent due to the
cheaper cost of production compared to the
other energy sources
*Million tons of Oil Equivalent

5
Indonesia’s government had pledged for carbon emission
reduction through its National Action for Greenhouse Gas
Emissions Reductions (RAN-GRK)
Source: World Resources Institute
Goal
• The National Action Plan for Reducing Greenhouse Gas Emissions (2010-2020) sets target
for 26% emission reduction below BAU by 2020, followed by further reduction of 41% with
adequate international support
Key Objectives
(Energy Sector)
• Promoting development and usage of renewable and clean energy
- At least 23% share of renewable energy in national energy mix by 2025 and 31% in 2050
- Reducing contribution of oil, coal, and natural gas in the energy mix by 25%, 30%, and
22% respectively, by 2025
- Accelerating implementation of biofuels in energy consumption, 20% biodiesel use in
diesel fuel consumption and 15% bio-ethanol use in in gasoline consumption by 2025
• Increasing energy security and efficiency
- Final energy consumption efficiency by 17% from BaU scenario
Progress and
Developments
• Renewable energy holds 14.7% of the total installed capacity
- A total of 10.17 GW capacity installed, with hydropower and geothermal as the main
contributors to the mix
• Renewables investments potential reached $1.17 billion
- About 44% of total investment came from geothermal plant projects
• Biodiesel production reached 6.96 million kL
- 4.6 million kL had been consumed domestically and 1.3 million kL biodiesel had been exported

6
In terms of renewables investments, Indonesia’s government
favoured more towards geothermal and hydropower plant
Source: katadata.co.id
“The estimated cost could reach about IDR1400 trillion, which
could be fulfilled through investment flow, and the rest from
energy subsidies allocation of about IDR200 trillion”
William P Sabandar – Chief of P2EBT task force
17.45
14.58
1.69 1.6 1.37
0.26
Geothermal Hydropower Solar & Wind Waste-to-energy Bioenergy Hybrid
Renewable Energy Project
Investments in Indonesia 2019*
($mil.)
*assuming 5.5% YoY economic growth
• Total investments amount to
$36.95 million
• Since geothermal and
hydropower holds the most
potential of 29 GW and 75
GW respectively, government
is investing more into these
sources
• Low investments in solar &
wind due to the long payback
period of 11-12 years
Geothermal & hydropower
account for 87% of
renewables investments
Most of these
renewable sources
are utilized for off-grid
rural electrification

7
Governmental budgets play a pivotal role in renewable energy
projects financing aided with loans from international banks
Source: WWF Report 2014
Public Sources Private Sources
National Budget
SMI
DAK1 Ministry
Budget
Gov.
Guarantee
Financing
Modalities
PIP2
Local
Budget
Project Budget
Bank Loans
CSR
(grant)
NGOs/
CSOs
Non-Commercial RE
Projects
Non-Commercial
Local RE
Projects
Commercial
Projects
Community-
based Projects
Most of the projects here are
demonstration or pilot-type
projects
Notes:
1 Dana Alokasi Khusus (Specific Allocation Fund)
2 Pusat Investasi Pemerintah (Indonesia Investment Agency)
Comments:
• Government program budget (central and local) are mostly directed
for small-scale and off-grid renewable energy pilot projects
• Government guarantee and modalities are employed for commercial
projects development but usually only to the extent of demonstration
phase

8
Indonesia is supported by the high number of engineers that
will support Indonesia’s renewables plans
Source: Forbes
454
238 233
168
148 140 130
114 105 100
Russia United
States
Iran Japan South
Korea
Indonesia Ukraine Mexico France Vietnam
Countries With The Most Engineering Graduates
(thousands)
About 2671 engineers
per one million of its
population
Comments
• In addition, Indonesia ranks among the top countries producing the most STEM graduates,
with about 206,000 graduates
• Despite the high number of engineer graduates, Indonesia still remains in shortage of 30,000
new engineers each year

9
By the end of 2019, a total of 1.5 GW geothermal power plants
has been installed in Indonesia,
Source: ESDM
Lahendong 120 MW
Mataloko 2.5 MW
Ulumbu 10 MW
Dieng 60 MW
Ulubelu 164 MW
Sibayak 12 MW
Rantau Dedap
90 MW
Sorik Merapi
45 MW
Sokoria 5MW
Darajat 270 MW
Kamojang 235 MW
Wayang Windu
227 MW
Patuha 55 MW
Gunung Salak
377 MW
Comments
• Until 2020, the development of geothermal plants still
only cover 5.4% of the existing reserves in Indonesia
• Additional 140 MW capacity is expected to operate in
2021
Installed capacity
Under construction

10
Indonesia’s hydropower generation reached about 4.8 GW of
installed capacity
Source: IESR
West Sumatra
253 MW
Riau 114 MW
Riau 226 MW
Lampung
118 MW
North Sumatra
1134 MW
Jambi 180 MW
West Java
1895 MW Central Java
181 MW
East Java
159 MW
North Sulawesi
36 MW
Central Sulawesi
260 MW
South Sulawesi
658 MW
South Kalimantan
30 MW
Comments
• Shown on the map are medium and large scale hydropower dams
• Mini/micro-hydros are also installed mainly in rural areas with a total of
465 MW capacity
Cirata Dam is the largest
hydropower dam located in
West Java with an installed
capacity of 1000 MW
A 9000 MW hydropower in North
Kalimantan dam is undergoing
construction which will be the
largest dam upon operation in 2025
However, Indonesia has only
effectively utilize 6.4% of its
potential, with untapped
resources concentrated in
Sumatra, Java and Sulawesi
About 13 provinces has already
utilize hydropower as the source
of electricity generation

11
Indonesia’s government strives to increase biofuel production
and mixing to B30* level in its energy consumption by 2025
Source: ESDM & US Commercial Service
2008 2010 2014 2015 2016 2018 2019 2025
B2.5-B7.5 B10 B15 B20
B30
B20 mixing mandatory
implemented for PSO
and non-PSO sectors
B20 mixing incentives
policy for PSO & non-
PSO sectors
• B30 road test for trains,
heavy equipments, etc.
• Biodiesel SNI issued
Biofuel Mixing Scheme
0
2
4
6
8
10
12
14
16
18
20
2005-2010 2011-2015 2016-2025
Roadmap for Biofuel Production
Development
(million KL)
Bio-oil
Bioethanol
Biodiesel
62%
Comments
• As per 2019, only bio-ethanol that
has seen no implementation
due to lack of financial supports
and feedstock constraints
CAGR
*B30: 30% of biofuel mixing
in final fuel consumption

12
Financial incentives and market price support are introduced
attract more renewables investments while providing guarantees
to offset risks
Source: WWF Report 2014
Financial
Incentives
Provision of
Goods &
Services below
market value
Market Price
Support
Policy Scheme
• Indonesia Infrastructure
Guarantee Fund (IIGF)
Details
• IIGF provides guarantee to attract private
capital investment
• Provide finance for geothermal exploration
sites proven to be productive
• Import duty exemption on machinery and
capital for development of power plants
• Including accelerated depreciation,
compensation, and reduced dividends
• Geothermal Fund Facility
• Import duty exemption
• Income tax reduction
• Mandatory biofuel use for
industry
• Mandatory use of biofuel for industry and
transportation
• Feed-in-Tariff (FiT)
• Biofuel Purchasing Price
• Feed in Tariff (FiT) for mini/small hydro,
biomass, PV, geothermal, & waste plants
• Market price index for biofuel (FAME) to be
blended with other fuels
Regulations
• MOF Regulation No.
26/2010
• MOF Regulation No.
3/2012
• MoF Regulation No.
21/2010
• MoF Regulation No.
21/2010
• MEMR Regulation No.
25/2013
32/2008
17/2014
• MEMR Decree No.
2185/2014

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