Indonesia Submits Plan on How it Will Spend $20 Billion on Clean Energy Transition

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Indonesia Submits Plan on How it Will Spend $20 Billion on Clean Energy Transition

The Just Energy Transition Partnership aims to accelerate the country’s transition to renewable energy over the coming decade.

Indonesia Submits Plan on How it Will Spend $20 Billion on Clean Energy Transition
Credit: Depositphotos

A plan for how Indonesia will spend $20 billion to transition to cleaner energy was submitted Wednesday to the government and its financing partners, the planners said.

Indonesia’s Just Energy Transition Partnership (JETP) deal was announced last year and aims to use the funds over the next three to five years to accelerate the retirement of the nation’s coal plants and the development of renewable energy.

Details were not made public. The investment plan will be reviewed and revised further by Indonesia and its JETP partners before being made available for public review and comment, according to a statement from Indonesia’s JETP Secretariat.

“The Indonesian public will have the opportunity to review the full draft text of the (plan) and submit comments and feedback,” Dadan Kusdiana, Indonesia’s Secretary General of the Ministry of Energy and Mineral Resources, said in a statement.

A person with direct knowledge of the talks who was not authorized to comment on the deal told The Associated Press that new information regarding the country’s captive coal and mineral processing infrastructure and difficulties matching the financing with potential transition projects were some of the crucial reasons why the details were still being negotiated.

“We welcome the submission of the (plan) to the Indonesian government. We understand that this is a global effort to address a very complex problem in Indonesia. We will review and ensure that it is aligned with Indonesia’s priorities in energy transition,” Rachmat Kaimuddin, Indonesia’s deputy coordinating minister for maritime affairs and investment, wrote in a statement.

The investment and policy plan comes after Indonesia’s JETP was announced at the Group of 20 summit in November 2022. The deal also shifted Indonesia’s renewable energy policy, which will need to account for some one-third of the country’s power production by 2030.

Experts have warned that Indonesia’s JETP deal and energy transition face significant challenges including retiring a relatively new network of coal plants, securing enough financing for the transition and ensuring it is equitable for those who are likely to be impacted by the transition, such as the 250,000 people employed by the country’s coal industry.

The Indonesian government also plans to build new coal-fired power plants to power strategic infrastructure projects such as smelters, raising concern amongst stakeholders and environmental activists alike.

“The International Partner’s Group failure to discourage the development of captive coal power plants would stifle any progress made from the JETP’s early retirement of coal power plants, and compromise the gains from rolling out renewable energy,” said Binbin Mariana, an Asia energy finance campaigner at Market Forces, a nongovernmental organization that monitors investments.

Local stakeholders have also expressed concern over how the JETP funds will be provided via a mix of grants, concessional loans, market-rate loans, guarantees, and private investments. Indonesia’s JETP deal is anticipated to be comprised of some $10 billion in public sector pledges and another $10 billion from private lenders, coordinated by the Glasgow Financial Alliance for Net Zero, which includes Bank of America, Citi, Standard Chartered and other major banks.

“We definitely would like to see more grants or concessional loans as the bigger part of the funding,” said Anissa Suharsono, an associate with International Institute for Sustainable Development.

While some $20 billion is pledged through the JETP, the International Renewable Energy Agency estimates Indonesia would need $163.5 billion for its renewable energy technology, grid expansion and storage needs through 2030.

The emissions targets could also still be part of the plan’s negotiations, said Deon Arinaldo, a program manager at the Institute for Essential Services Reform.

According to research published last year by IESR and the University of Maryland, a more ambitious target than specified in the JETP and Indonesia’s current regulation must be implemented in order to be compatible with the 1.5 °C target goal of the Paris Agreement, which calls for countries to take concerted climate action to reduce greenhouse gas emissions in order to limit global warming.