Indonesia Establishes an Emission Target for G7 Funding

Indonesia wants to raise its percentage of renewable energy generation to 44% and reduce carbon emissions to 250 million metric tons for its on-grid power sector by 2030 as part of the Just Energy Transition Partnership (JETP).

The partnership aims to assist developing nations in making the transition to cleaner energy in the power sector through a financing scheme that includes equity investments, grants, and concessionary loans from Group of Seven (G7) members, multilateral banks, and private lenders.

The partnership’s comprehensive investment and policy plan (CIPP), which outlines Indonesia’s route to obtaining $20 billion in funding under the program, was made available to the public.

At first, Indonesia and a group of investors led by the United States and Japan had agreed to raise the share of renewable energy in power generation to 34% and to peak emissions from the power sector at 290 million tonnes by 2030. However, at that time, the off-grid power system’s scope was not fully defined.

The off-grid systems designed and operated by industries specifically for their use, known as “captive power plants,” are not included in the CIPP that was made public on Wednesday.

In the Southeast Asian archipelago, captive coal power plants with a capacity of 13.74 gigawatt (GW) are currently in operation, and 20.48 GW are planned. A July report commissioned by the Asian Development Bank states that the recent upsurge is the result of the sector’s expansion in metal processing.

According to a program official, the reason industry-run coal-fired power plants are not included in the plan is that authorities need more time to figure out how to safeguard the nickel smelting industry.

“While the off-grid captive power systems are outside of the scope of the current CIPP, Indonesia and IPG share a strong commitment to identifying and implementing viable solutions going forward,” the JETP Secretariat of Indonesia stated in the plan.

The Secretariat stated in its plan that it had identified more than 400 priority projects that would require at least $67.4 billion of investment, even though the plan is intended to secure $20 billion in G7 funding, with $10 billion of public funding pledged and $10 billion due from private lenders.

Of the $20 billion pledged, the plan indicated that $153.8 million had been designated as grants. According to the Secretariat, concessional loans at below-market rates may make up the remaining portion of the public financing.

According to the statement, based on priorities, Indonesia’s JETP office would match projects with suitable financing terms and structures.

According to the plan, private financing could take the shape of equity investments, market-rate commercial loans, or other arrangements.

According to the plan, early retirement of coal power will be implemented for 1.7 GW of capacity by 2040.

According to experts, it’s critical to guarantee Indonesia’s JETP succeeds not only because it’s the largest but also because it serves as a gauge of the G7’s willingness to collaborate with developing countries.

China has been asked to assist Indonesia in the development of renewable energy.

Reference : 

Nangoy, F. (2023, November 1). Indonesia sets emission target for G7 funding, lays out investment map. Reuters.