Transitioning the energy sector to achieve the 2030 Agenda for Sustainable Development and the objectives of the Paris Agreement presents a complex and difficult task for policymakers. It needs to ensure sustained economic growth as well as respond to increasing energy demand, reduce emissions and, more importantly, consider and capitalize on the interlinkages between Sustainable Development Goal 7 (SDG 7) and other SDGs. In this connection, the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) has developed the National Expert SDG Tool for Energy Planning (NEXSTEP). This tool enables policymakers to make informed policy decisions to support the achievement of the SDG 7 targets as well as emission reduction targets (NDCs). The initiative has been undertaken in response to the Ministerial Declaration of the Second Asian and Pacific Energy Forum (April 2018, Bangkok) and Commission Resolution 74/9, which endorsed its outcomes. NEXSTEP also garnered the support of the Committee on Energy in its Second Session, with recommendations to expand the number of countries being supported by this tool.
The key objective of this SDG 7 roadmap is to assist the Government of Indonesia develop enabling policy measures to achieve the targets of SDG 7. This roadmap contains a matrix of technological options and enabling policy measures for the Government to consider. It presents several scenarios that have been developed using national data, considering existing energy policies and strategies, and reflecting on other development plans. These scenarios are expected to enable the Government to make an informed decision to develop and implement a set of policies to achieve SDG 7 by 2030, together with NDC.
Roadmap Document Chapter Outline
The “Energy Transition Pathways for the 2030 Agenda: SDG 7 Roadmap for Indonesia” provides a comprehensive overview of the Indonesia’s energy sector and descriptions of various possible energy system trajectories. Most importantly, the policy recommendations in achieving the SDG 7 and Nationally Determined Contributions (NDCs) targets. In addition, the document highlights several key areas and measures that may enable the country’s energy sector to shield itself from the likely impacts of the COVID-19 pandemic, and helps in the recovery to build better. The following provides the chapter outline of the roadmap document:
| Executive Summary | |
| Chapter 1: Introduction | This chapter provides the background to NEXSTEP, SDG 7 targets and indicators, as well as the Nationally Determined Contributions (NDCs). |
| Chapter 2: NEXSTEP methodology | This chapter provides the descriptions of the key methodological steps and scenario definitions. |
| Chapter 3: Overview of the Indonesia’s energy sector | This chapter provides a current overview to the Indonesia’s energy sector. It also covers the energy demand outlook in alignment with the business as usual (BAU) and the current policy scenarios. |
| Chapter 4: SDG scenario – achieving SDG 7 by 2030 | This chapter comprehensively describes the SDG scenario, as well as the policy actions required to achieve the SDG 7 and NDC targets. |
| Chapter 5: Energy transition pathways with increased ambitions | This chapter looks at various possible cost-effective measures in raising Indonesia’s ambition beyond just achieving the SDG 7 targets through several enhanced SDG scenarios. |
| Chapter 6: Rebuilding better in the recovery from COVID-19 with the SDG 7 roadmap | This chapter highlights several key areas that will assist policymakers in strengthening policy measures to help recover from the COVID-19 impacts while maintaining the momentum to achieving the 2030 Agenda for Sustainable Development and the Paris Agreement. |
| Chapter 7: Revisiting existing policies | This chapter provides an evaluation of Indonesia’s current policies, highlighting revisions required to achieve the SDG 7 and NDC targets. |
| Conclusion | |
| References | |
| Annexes |
Indonesia’s progress towards achieving the SDG 7 targets is promising, but the current pace will not be enough. Without a concerted effort and an enabling policy framework, Indonesia is unlikely to achieve all SDG 7 targets by 2030. Indonesia plans to extend the city gas network to supply the remaining 52 million people with clean cooking technology. However, this would incur a significant investment in infrastructure development. Another option for Indonesia is to explore the use of surplus electricity with highly energy efficient induction-type electric cookstoves, particularly in areas where there is sufficient electricity supply. The current plan for a 1 per cent annual improvement in final energy intensity will need to be boosted to 1.53 per cent in order to the achieve primary energy intensity target of 2.39 MJ/US$ by 2030.
The existing trend indicates that the country may not achieve its 2025 renewable energy target as well as the emission reduction target pledged under the Paris Agreement. The share of renewable energy will need to increase to 22 per cent of total final energy consumption, which is a 6 per cent increase from the current rate, to enable Indonesia to achieve its NDC target for the energy sector together with the SDG 7 targets.
A deeper analysis indicates that commissioning new coal-fired power plants beyond 2020 is not feasible, from both the economic and environmental perspectives. A faster transition towards cleaner energy sources, especially renewables, will help Indonesia to meet its national energy security of supply and its NDC target. The lifecycle cost of renewables-based power generation is already cheaper than coal-fired energy; however, removal of fossil fuel subsidies from power generation and putting a price on carbon would further attract private investments in renewables.
Universal access to electricity
Indonesia is on track to achieve universal access to electricity by 2020. Achieving universal access to electricity is a priority for Government of Indonesia, The National Energy Policy (KEN) states that Indonesia should approach “near 100 per cent” access by 2020. Access to electricity is modelled based on the rural electrification plan of the Perusahaan Listrik Negara (PLN); NEXSTEP identifies off-grid renewables as the cost-effective approach to supplying electricity to the remaining population without access.
Universal access to clean cooking
Indonesia aims to provide 4.7 million city gas connections and 1.1 million biogas digesters for households by 2025 under the National Energy General Plan (RUEN). Expansion of access to clean cooking, at the current annual rate of improvement of 8.7 percent between 2010 and 2018, will achieve the SDG7 target by 2021 (figure ES 1). The increase is remarkable when compared to the global average improvement of less than 1 per cent over the same period (Tracking SDG7 Report, 2020). However, NEXSTEP analysis suggests that using energy efficient induction-type electric cookstove will be less investment intensive than alternative approaches e.g. city gas networks. Induction cookstoves are 20 per cent more efficient than conventional solid plate electric cookstove and thus the running cost is expected to be more affordable by households. If Indonesia continues to promote LPG cookstoves as the primary clean cooking technology, it may lead to some concerns, including increased reliance on LPG imports, increased vulnerability to global oil prices, increased fossil fuel subsidy burden and decreased share of renewable energy in TFEC.
Figure ES 1. Indonesian access to clean cooking
Renewable energy
The NEXSTEP analysis indicates that the current policies will fall short of Indonesia’s 2025 renewable energy target of 23 per cent and will only reach 17.7 per cent of the Total Primary Energy Supply (TPES) or 16.4 per cent of Total Final Energy Consumption (TFEC) by 2030. The SDG 7 goal and NDC unconditional target together would need a 22 per cent renewable energy share in TFEC by 2030. The increase will require a high penetration of renewable energy in the power sector as well as an increase in renewable energy in the transport sector. Looking further, new coal-fired power plants beyond 2020 are seen to be an uneconomic option, as the lifecycle cost of renewable-based power generation is cheaper than the fossil fuel counterpart. Moreover, investors will face high-risk premiums in investing in fossil fuel-based power plants. Stopping new investment in coal-fired power plants will require renewables to grow to 24 per cent by 2030.
Energy efficiency
The current trend of energy intensity reduction indicates that Indonesia will need to revise its targeted annual 1 per cent reduction of final energy intensity to 1.53 per cent of primary energy intensity (figure ES 2) to achieve the SDG 7 target of 2.39 MJ/US$ by 2030, a drop from 2.87 MJ/US$ in 2018.
There are ample opportunities for Indonesia to achieve this target as well as implement a higher rate of improvement. These include, for example, a minimum energy efficiency standard (MEPS), rapid deployment of electric vehicles and improvement of energy efficiency of industrial processes. These opportunities are discussed in later sections of this report.
Figure ES 2. Indonesia energy efficiency target
Nationally determined contributions
In the current policy scenario, Indonesia may not achieve the unconditional NDC target of 11 per cent emissions reduction from the energy sector. Emissions will reach 825 MtCO2-e by 2030, compared to 880 MtCO2-e in the business as usual (BAU) scenario, falling short of reducing emissions by 11 per cent target by 42 MtCO2-e. Increasing Indonesia’s contribution to the Paris Agreement and to align the NDC target to the global 1.5-degree pathway, requires emissions to drop to 722 MtCO2-e (figure ES 3). This calls for urgent action to reduce new investment in coal-fired power plants from 2020 onwards and invest more in renewable energy.
Figure ES 3. Comparison of emissions by scenarios, 2000-2030
The key policy recommendations to help Indonesia accelerate the energy transition to achieve SDG 7 and NDC targets include:
- Efforts to achieve universal access to clean cooking needs to increase by three-fold. The current plan for extension of city gas networks would see Indonesia achieving universal access by around 2025. This plan, however, would require building necessary infrastructure and therefore, would require both time and investment. If this plan is not realised, Indonesia can explore the electric cooking stove option, particularly for the areas where the electricity system has surplus electricity supply e.g., the JAMALI (Java-Madura-Bali) system. NEXSTEP analyses that the implementation of electric cookstove option will cost the Government of Indonesia a total of Indonesian rupiah (IDR) 9.77 trillion (US$ 688 million)2 to achieve universal access to clean fuels and technologies for cooking;
- Improving energy efficiency beyond the current target of 1 per cent energy intensity reduction offers a cost-effective way to reduce energy expenditure and achieve the SDG 7 target. Low- to no-cost measures, such as efficient lighting, Minimum Energy Performance Standards (MEPS), switching to electric transport, improving fuel economy standards and improvement of industrial processes have a solid business case with quick returns on investment;
- Indonesia has the potential to contribute more to achieving the Paris Agreement by enhancing its NDC targets to align it with the 1.5°C compatible pathways. A rapid decline in national greenhouse gas emissions by 45 per cent, compared to 2010 levels, can be achieved by 2030. This will require the energy sector to reduce its emissions by 18 per cent, compared with BAU;
- Investments in new coal-fired power generation are no longer cost-effective compared with renewables and should be stopped to avoid emissions lock-in. Least-cost optimization analysis suggests that lifecycle costs of renewables, such as hydropower, geothermal, solar and biomass, are cheaper than coal-fired technologies. The underlying financial risks of investment in coal-based power plants should not be ignored;
- Financing the low-carbon transition through carbon pricing, removing fossil fuel subsidies and the issuance of green bonds should be encouraged. Indonesia has already proved itself a leader in reducing fossil fuel subsidies. Further measures to eliminate remaining subsidies, particularly those for power generation, would save an annual fiscal cost of IDR 101.32 trillion (US$ 7.13 billion) and level the playing field for renewables. Placing a price on carbon will internalise the externality cost of fossil fuel-based power generation and establish a market mechanism to reduce GHG emissions. The introduction of green financing, such as through green bonds, would alleviate the burden of large capital investments needed for the 2030 energy transition.
