From coal to EBT
Indonesia’s dependence on PLTU is a challenge in the energy transition towards more sustainable energy sources. With relatively abundant and inexpensive coal resources, PLTUs account for 61 percent of the national electricity production capacity. This makes the energy transition away from coal by 2030 a gargantuan challenge.
Retiring PLTUs too soon could deal a severe blow to national economic growth, due to economic activity disruptions as the mains power supply becomes unreliable. It is also feared that electricity bills will become unaffordable even for the middle class, let alone low-income communities. As a result, welfare will suffer and unemployment will jump, pushing the poverty level higher.
As coal is one of Indonesia’s key export commodities, obviously export performance and state revenue will take a hit, and consequently foreign exchange reserves will dwindle.
On the other hand, Indonesia still possesses huge coal reserves, estimated at 38.84 billion tons, that can last 65 years with an average production of 600 million tons per year. Coal-based energy technology can also be improved to produce fewer emissions.
Therefore, the phasing out of PLTUs must be carried out in line with investment in EBT development, to maintain the continuity of an energy supply that propels Indonesia’s economic growth.
Implementation of JETP funding
The public is still waiting for the Government’s plan to implement JETP. The Energy and Mineral Resources (ESDM) Ministry has set a target for the implementation of a Comprehensive Investment Plan (CIP) for the fund to be completed by August 2023.
In line with this, the Government must also be consistent in halting the development of new PLTUs, including the development of private power utilities in industrial estates, by revising Presidential Regulation (Perpres) 112/2022 which still allows this practice.
This is important because the construction of PLTUs to support the construction of smelters to create value-added mining products actually drives up carbon emissions.
The public also needs to know that the JETP funding scheme is divided into public and private/commercial funding. This is because the US$10 billion that comes from public financing will be easier to obtain, including that in the form of grants.
However, the Indonesian government has not received any guarantees regarding the remaining US$10 billion in funding from private financing. Coordinating Investment and Maritime Affairs Minister Luhut Binsar Pandjaitan said as of May 2023 he has yet to receive any confirmation from the US government regarding commercial funding, including the interest rate offered.
The Government needs to ensure that the funding schemes offered, especially from commercial banks, can be delivered at low interest rates, because EBT investment funding is long-term in nature.
Less transparent funding without long-term soft financing risks pushing Indonesia into a debt trap. The Government also needs to encourage negotiations with donors regarding a debt cancellation scheme, to ensure that Indonesia will not be mired in crippling debt and that funds will have multiplier impact on the economy and job creation over the long run. (DR. Komaidi Notonegoro, SE.ME)