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Indonesia aims to go green with new energy deal at G20 summit.

Energy analysts said Indonesia is on track to secure a clean energy partnership with rich countries when it hosts a G20 summit in November, obtaining international funding to cut its reliance on coal power and to implement a green and fair transition. 

The multibillion-dollar agreement is expected to help Indonesia retire coal-fired plants early and ramp up investment in renewables, backed by wealthy nations, development and private banks, and philanthropists. 

Fabby Tumiwa, head of the Indonesia-based Institute for Essential Services Reform, an energy and environmental think tank, said the deal would be unveiled at the Bali gathering of leaders of the world’s top 20 economies from Nov. 15 to 16. 

He added that it has the potential to be “a big win for the presidency” of Indonesia’s Joko Widodo, while serving as an example to other G20 and coal-producing nations that are planning a shift to cleaner energy, such as India and China. 

At last year’s COP26 climate summit, the United States, Britain, France, Germany, and the European Union proposed an $8.5 billion package to help South Africa achieve a “just energy transition” away from coal, but progress has been slowed by disagreements on the type and use of financing.

In addition to Indonesia, other countries—Vietnam, India, and Senegal—are negotiating similar partnerships. 

Under the Paris Agreement to combat global warming, Indonesia, the eighth largest polluter of carbon dioxide in the world, has committed to reducing its emissions by about 32% due to business as usual by 2030 and hopes to reach zero by 2060. 

But almost 85% of the electricity in the Southeast Asian archipelago is produced by fossil fuels; coal-fired power plants generate about 60% of Indonesia’s electricity needs. 

Replacing coal power with renewable energy will be costly for Indonesia, a resource-constrained developing country still recovering from an economic downturn caused by the COVID-19 pandemic.

The principles of the Clean Energy Transition Agreement will be unveiled next month, but it is likely to follow in 2023 in its scope and investment plan, outlining financing for the green transition, Tumiwa said. 
He added that Indonesia’s best renewable energy sources are solar, hydro and geothermal. 

But transitioning to them will require about $135 billion in funding by 2030, and the success of any transition agreement will depend on pledges from wealthy Western nations, he said. 

A newly-built electric vehicle (EV) charging station in Nusa Dua, the venue for the G20 Summit, in Bali, Indonesia, on Wednesday, Oct. 5, 2022. Indonesia plans to begin subsidizing purchases of electric vehicles next year as the country aspires to have 2.5 million EV users by 2025 to boost demand and reduce air pollution. Photographer: Putu Sayoga/Bloomberg

“The (Indonesian) government wants to increase renewable energy to reach 40 percent of the electricity sector by 2030, and that will require big investments,” Tumiwa said. 

Pending Law: Renewable Energy As the world’s largest exporter of thermal coal, Indonesia wants to increase the share of renewable energy sources in its energy mix to 23% by 2025, but so far only about 12% has been achieved.

World Resources Institute energy expert, Clorinda Wibowo, said Jakarta is likely to reveal a list of coal plants to be closed at the G20 summit and plans to promote greener energy use in all industries. 
The Renewable Energy Law is still being finalized, meaning the energy transition agreement with donors may lack implementation details as they are still being discussed at the ministerial level, Wibowo said. 

Alloysius Joko Purwanto, an energy economist at the Jakarta-based ASEAN and East Asia Institute for Economic Research, said the first version of the agreement is likely to specify the total amount and outline key pillars such as decommissioning of coal plants, investment in renewables and modernization . to the power grid. 

“If the funds are given as a loan or debt, there is little public acceptance,” he added, requiring negotiations on the implementation of the agreement with the public and civil society groups. 

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From forests to energy 

Indonesia’s forest sector accounts for 55 percent of the planet’s total greenhouse gas emissions, while electricity accounts for about 35 percent, said Alessandro Gazzini, a partner at management consulting firm Kearney in Jakarta. 

After making progress in reducing deforestation in recent years, the government “realized that the next step on Indonesia’s road to net zero is to figure out the energy sector,” he said.

Indonesia is home to the world’s third largest rainforest, but it is also the largest producer of palm oil and a major source of wood, which many environmentalists blame for deforestation. 

Since 2015, it has intensified efforts to combat forest fires, banned new permits for the conversion of old forests and carbon-rich swamps, temporarily suspended new permits for oil palm plantations, and established an agency to repair damaged peat and turf mangrove forests. 
Cleaning up the energy sector is also a big challenge, Gazzini said, with a pipeline of new coal-fired power plants and more than 20 powerful coal mining companies generating significant revenue for the government. 

Premature phase-out of coal plants and renewables by 2060 will require more than $2 trillion in funding, he estimated, adding that pledges at the G20 summit under the transition agreement will likely be less than $7 billion. .

Unlike Vietnam, India, and China, Indonesia has done little to boost investment in renewable energy, which means Jakarta may need to make reforms to enable the transition to green energy, Gazzini noted. 
He said this could include creating an independent regulator and separating network management from the national operator. 
“Within the limitations of the current system, this is difficult to achieve,” he added.

Source: Reuters

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