Walking the Line: Can Indonesia Keep a Closer Watch on its Net Zero Targets with the Help of Data & AI?

Indonesia's National Energy Council recently announced that they will be revising the 23% renewable energy target by 2025 to a new target of between 17 per cent and 19 per cent.

Renewables only made up 13 percent of Indonesia’s energy mix last year, according to the ministry’s data. It fell short of the 17.9 percent target that the government has aimed for the year to realise its 2025 target.

The new goals are described as "realistic" by Energy and Mineral Resources Minister Arifin Tasrif, but it underscores the monumental challenge that Indonesia faces - how to balance its reliance on coal-fired power with its ambitious net-zero emissions targets.

A Lay of the Land

Indonesia is the world's third-largest coal producer and exporter, and coal remains the backbone of its electricity generation, providing about 52 per cent of Indonesia’s electricity, according to the Just Energy Transition Partnership (JETP).

Cheap and abundant, coal has powered the nation's rapid economic growth in recent decades. However, this dependence comes at an environmental cost.

The Indonesian government has pledged to achieve net-zero emissions by 2060, a target that necessitates a drastic shift away from coal. The government has outlined plans to retire coal-fired power plants and invest heavily in renewable energy sources like solar and wind power.

In September last year, Indonesia announced the Cirebon 1 plant was one of two that it would retire in 2037. The other is a 700 megawatt plant 225km away in the town of Pelabuhan Ratu. These are documented in the Comprehensive Investment and Policy Plan (CIPP), and outlines Indonesia’s ambition to become net-zero by 2060.

However, another bigger coal-fired power plant, the 1,000 megawatt Cirebon 2, began commercial operations in May last year.

The Indonesia government initially aimed to retire 5.2 GW of coal from the grid by 2030 when it announced the JETP deal. But the new draft plan slashes that target to 1.7 GW because of lack of committed funding, according to Fabby Tumiwa, Exeecutive Director of Jakarta-based think tank, the Institute for Essential Services Reform (IESR), which is part of the technical working group helping draft the CIPP.

What is the JETP?

Under Indonesia's Just Energy Transition Partnership (JETP) the country seeks to cut carbon dioxide emissions to 250 million metric tonnes for its on-grid power sector by 2030, versus estimated business-as-usual emissions of over 350 million.

An International Partners Group (IPG), made up of the G-7, Norway, and Denmark and led by the United States and Japan, promised to mobilise $10 billion in financing, while a private sector alliance committed an equal amount.

Dark Clouds

However, funding plans for the JETP have come under scrutiny. The CIPP draft says the $20 billion will come in the form of grants, concessional loans, market-rate loans, guarantees, and private investments. The government is pushing for a greater proportion of grants in the JETP funding, which currently make up?only $153.8 million of the total funding, or less than 1%. As a proportion, this is less than the share of grants in South Africa’s JETP deal, which stands at 4%. (Grants, unlike loans, do not have to be paid back.)

The U.S. is the largest financier in Indonesia’s JETP deal, with more than $2 billion committed. But only $66.7 million of that comes in the form of grants, or just 3.3% of the total fund committed. At the same time, $1 billion of its commitment is in the form of market-rate loans.

Those $1 billion in loans will on their own require Indonesia to pay annual interest of at least $68.3 million — more than the one-time grant it’s getting from the U.S.

The Many Roadblocks

One major challenge is the high cost of transitioning to renewable energy. The Indonesian government had previously said that to transition from fossil fuels to renewable energy and ensure affordable electricity prices, it would need at least $1 trillion until 2060.

Another hurdle identified is Indonesia’s favourable pricing policies for coal. These undercut the business case for renewable energy and have held back investments in wind and solar.

There is also the social impact of the transition. Millions of Indonesians rely on the coal industry for their livelihoods. Shifting away from coal could lead to job losses and social unrest.

And there is question of captive coal power plants. The government has pledged to stop building new coal-fired power plants beyond those still in the construction pipeline, but it has carved out an exception for these coal power plants built at industrial parks with no access to the local power grid. According to Global Energy Monitor (GEM)’s Global Coal Plant Tracker, 8.2 gigawatts (GW) of the 10.8 GW capacity from captive power plants in Indonesia today are for the metal processing industry, to expand production of necessary products for the renewable energy transition.

Potential Bright Spots

Despite these challenges, Indonesia is taking steps to address them.

Indonesia's state utility, PT PLN (Persero) , plans to construct an additional 31.6 GW of renewable power capacity between 2024 and 2033, said Chief Executive Darmawan Prasodjo .

The extra renewable capacity would account 75% of the additional generation during that period, while the remaining capacity is expected to come from gas power plants.

In the 2021-2030 plan, PLN proposed building 20.9 GW renewable capacity and almost 20 GW of gas and coal power capacity. As of September, out of the total additional capacity planned for 2021-2030, 8.6 GW has been completed.

The new plan aims to accelerate the adoption of greener energy as the country targets achieving net-zero emissions by 2060.

The Use of Data and AI

“To incorporate more variable renewable energy (VRE), Indonesia’s electricity system requires a flexible and responsive infrastructure," said Pintoko Aji, Renewable Energy Analyst of IESR.

In our recent podcast release with Pak Suroso Isnandar , Director of Risk Management at PT PLN (Persero) , he shared how they are using GenAI to look at patterns of fluctuation to better predict future demands, including the way PLN will improve efficiency on renewable energy sources. According to IESR, use of AI-powered forecasting models can predict electricity demand and supply fluctuations, enabling a more efficient and flexible energy system that accommodates both renewables and existing coal plants.

Data can also help to identify areas with the highest potential for renewable energy deployment and optimise grid integration. GHG emissions can also be tracked with AI-powered monitoring systems to drive increased transparency and accountability.

In the 2023/24 AIBP ASEAN Enterprise Innovation Market Overview, 20% of ASEAN enterprises surveyed anticipate their organisation's innovation strategy in the next couple of years to be heavily inclined towards sustainable, ESG-aligned innovations. (See Valerie Tan's post here.)

For me personally, I'm also hoping that these technologies are able to enable the communities that are impacted by the energy transition. Can villages utilise blockchain platforms to manage a community-owned solar farm, transparently distributing energy and profits amongst themselves? PT Pertamina (Persero) has a successful Village Energy Independence Program, supporting the energy needs of the local micro, small and medium enterprise (MSME) empowerment program. Can it be scaled further?

Can the communities be involved in data collection and analysis to build data integrity and trust? And can AI support displaced workers from coal mines to find new jobs and the relevant training for the renewable energy sectors? Or even to better predict social risks and provide safety nets to ensure a just and equitable transition?

Final thoughts

The complexities cannot be overstated, whether Indonesia can successfully walk the tightrope between coal and net zero remains to be seen. The challenges are immense, but the potential rewards are significant. A successful transition could not only safeguard Indonesia's environment but also create new economic opportunities and improve the lives of millions of Indonesians.

The world is watching Indonesia closely as it navigates this complex and critical juncture. The choices it makes will have far-reaching implications not only for Indonesia but for the global fight against climate change.

Look out for our Tech for ESG discussions happening throughout the year across Southeast Asia. For more information, access https://aibp.iotbusiness-platform.com/techforesg