Through this scheme, Indonesia is expected to be able to accelerate the achievement of an equitable energy transition while maintaining a global warming limit at 1.5 degree Celsius, in accordance with the Paris Agreement for climate change control and sustainable low-carbon development investments.
In addition, the partnership can reduce emissions in the electricity sector to less than 290 megatons by 2030, including those on-grid, off-grid and from private power utilities, to achieve net zero emissions by 2060.
JETP will focus not only on a substantial emission reduction, but also promote sustainable development and economic growth, while protecting the livelihoods of people and workers in affected sectors.
Thus, JETP constitutes a major stride forward in Indonesia’s transition toward clean and equitable energy in the future. This partnership also demonstrates Indonesia’s commitment and contribution to global efforts to combat global warming, discouraging it from exceeding 1.5 degrees Celsius. It is hoped that this partnership can be implemented smoothly and provide real benefits for Indonesia and the world.
Impact for Indonesia
In line with other countries, Indonesia has a commitment to meet its zero carbon emissions target by 2060. This partnership encourages this country to move more quickly in meeting the goal, enabling the country to reduce GHG emissions by more than 300 megatons by 2030 and 2 gigatons by 2060, according to an expert projection.
In the next five years, Indonesia is expected to receive strong financial support of up to US$20 billion (Rp310 trillion) to accelerate the development of EBT sources for power generation, to meet at least 34 percent of national electricity generation by 2030.
Source of funding from this partnership is a breath of fresh air for the development of EBT-based energy in Indonesia, as it will help overcome funding constraints. Domestic banks are reluctant to fund EBT projects, due to their long-term nature and risks involved.
According to a report titled Indonesia Energy Transition Outlook 2022, bank funding for the energy sector has been heavily focused on coal-based energy. In the 2016-20 period, domestic banks have funded coal projects worth a total of Rp216.6 trillion. Investment in EBT has been minimal.
It is understandable that banks still consider the development of EBT to be highly risky, considering existing technology. The development of geothermal energy is a prime example.
Even though Indonesia has up to 40 percent of the world’s geothermal potential, its development is mired by the high risks it faces, including the still low success rate of only around 50 percent.
In addition, social risks may arise with the local community as well as environmental impact due to exploration in conservation areas: this poses further technical problems that may lead to massive cost overruns and delays. This is also the case with other types of EBT.
The same report estimates that Indonesia’s total renewable energy potential reaches 3,692 gigawatts (GW). However, up until 2021 the installed capacity was only 10.5 GW, around 0.3 percent of existing potential. While solar and wind energy constitute the two most potential EBT sources, their installed capacity is still very small.
The development of existing EBT is skewed toward hydropower and geothermal. This despite the fact that they are considered to be relatively riskier and challenging, compared to solar and wind. (table)
The development of wind energy has even seen a significant technological evolution. Startup companies have successfully developed blade-less wind turbines, which significantly reduce noise pollution and are completely safe for migratory birds. The technology is even capable of harnessing wind from all directions, converting the vibrations of the towers caused by gusts of wind into electrical power.