PLN needs to be relieved of the costs and problems of off-grid electrification, for which it is not the best suited, by operationalizing the existing ESDM regulations (38/2016), which allow private participation in off-grid supply. By changing the application of the single price policy, 88 RON fuel should be quickly abandoned and replaced by 92 RON.
Introduction
Purpose of This White Paper
Due to the importance and complexity of the sector, Bappenas has issued this Energy Infrastructure Assessment and Priorities as a "white paper" to document independent research conducted to inform the formulation of the policies included in the RPJMN. Accordingly, the recommendations in this white paper do not represent approved policy and are not necessarily consistent with the final RPJMN 2020-2024.
How This White Paper Was Prepared
Effective planning, management and operation of the energy sector is key to accelerating economic growth, ensuring the well-being of all citizens and preserving our environment. The paper does not address topics such as oil and gas exploration and development or the exploitation of biofuels.
Principal Policy Themes
- Energy Efficiency: The First Fuel
- Improved Sector Governance
- Optimizing Subsidy Delivery
- Ensuring Access for All to Modern Sources of Energy
- Assessing Impacts – the Energy Trilemma
This White Paper applies the framework of the "energy trilemma" to illustrate how the proposed policy leads to a better balance of these often conflicting objectives. Each policy presented in this White Paper is evaluated on how it changes the balance of the three dimensions of the trilemma relative to current conditions.
Overall Sector Management
Current Conditions
- Data unreliability and planning inconsistencies
- Unclear carbon targets
These indicate a much lower level of emissions by 2030 than those projected under the BAU pathway included in the NDC. The combined impacts are that, by 2025, energy sector emissions under the updated BAU pathway are about 457 MtCO2e or 38% below those under the BAU pathway in the NDC.
Improve Data Management and Policy Analysis
An Indonesian equivalent would be the Fiscal Policy Agency (Badan Kebijabi Fiskal, BKF), whose functions include analysis of fiscal and financial sector policies and monitoring and evaluation of their implementation. However, this does not prevent Pusdatin from conducting stakeholder consultations as part of the policy analysis process to share its findings and ask for feedback.
Establish a Meaningful Carbon Target
Such a role would be purely advisory in nature, in order to improve the information available to policy makers and in turn improve the overall quality of policy making. Since Pusdatin is an agency within ESDM, it would be inappropriate for it to publicly deviate from ESDM policy or be perceived as criticizing ESDM policy.
Primary Energy
- Current Conditions
- Replace the PLN Coal Price Cap
- Transition to a Single Weighted Average Price for Gas
- Compensate Affected Communities
This mixed impact on local communities is reflected in a survey of households living near coal-fired power plants. This mechanism would greatly contribute to the sustainability of the electricity sector by removing artificial incentives for PLN to use coal. This helps remove the disincentives that work against increased research and development and against increased domestic sales.
For example, communities located near coal-fired power plants suffer from the adverse impacts of coal exploitation, but are not compensated from resource revenues or electricity sales. As mentioned above, a survey of households in the vicinity of two coal-fired power plants (one in Banten province, the other in East Java province) revealed mixed feelings about the plants: just over 70% of the respondents said it created economic opportunities, but almost 60% said it had a bad impact on health and about 50%. Power plants can be charged according to the amount of non-carbon dioxide emissions (eg sulfur dioxide, nitrogen oxides, particulates and other hazardous air pollutants) each.
If each of these coal-fired power plants and coal mining concessions were eligible for funding at half the level provided in Thailand by the PDF for each eligible area (approximately Rp 1.8 billion per area, which can cover more desaer), the total cost would be Rp 2.7 trillion (US$191 million) per year.
Electricity
- Current Conditions
- Unrealistic planning and excessive reserve margins
- Inequitable and inadequate supply quality
- Lagging renewable uptake and increasing dependence on coal
- Electricity subsidies
- Achieving universal access
- Adequacy of PLN revenue
- Strengthen Regulation
- Separate the System Planner, Single Buyer & System Operator Functions
- Accelerate Use of Renewable Energy
- Implement Non-PLN Off-Grid Supply
- Optimize Delivery of Electricity Subsidies
- Targeting of subsidized 450 VA connections
- Automatic tariff adjustments and update of base tariffs
- Connection subsidies
The lack of transparency in the process makes it impossible to identify the source of unrealistic inputs, but the responsibility ultimately rests with the ESDM, which approves the RUPTL. However, only 19% of the public would be willing to pay more for electricity to encourage greater use of renewable energy sources. In addition, the PLN government had to pay additional compensation outside the established subsidy mechanism in order to continue operating, such as Rp. 23.2 trillion paid in 2018 as
The prevailing regulatory arrangements are weak and contribute to the root causes of the problems that threaten the energy sector. PLN designs its system based on the financial prices it faces, neglecting differences with market prices and externalities. This approach creates a plan that may be the cheapest for PLN, but is not necessarily in the best interest of the country.
Interviews conducted as part of the opinion survey also revealed a willingness to pay more for higher quality electricity supplies.
End-Use Energy Efficiency
- Current Conditions
- Enforce and Expand Industrial Energy Efficiency
- Implement a National Building Efficiency Program
- Expand Energy Performance Standards for Appliances
Assessing Indonesia's energy efficiency performance over time and relative to other countries is challenging. Another lies in the impossibility of separating changes in energy efficiency from changes in energy use, driven by rising incomes and changing the structure of the economy. While PT LSI has access to large funds, their use for energy efficiency investments is mainly aimed at improving the efficiency of infrastructure rather than industrial, commercial and residential facilities33.
Proposed policy measures to promote industrial energy efficiency are largely about building on existing incentives rather than creating new ones. These should be accompanied by the creation of a specific energy efficiency financing instrument, managed by PT SMI, but with a broader mandate to finance efficiency improvements in industry. The creation of such a large and credit-worthy market is expected to provide efficiency savings in itself, which should stimulate the rapid growth of ESCO companies and the accompanying financial mechanisms for energy efficiency.
The strengthening and expansion of MEPS provides a way to quickly improve energy efficiency at a relatively low cost.
Road Transportation
- Current Conditions
- Transport fuel subsidies
- Electric vehicle readiness
- Optimize Delivery of Transport Fuel Subsidies
- Phase Out RON 88
- Prepare for Electric Vehicles
- Establish Fuel Buffer Stocks
- Upgrade and Expand Refinery Capacity
Indirect subsidy for petrol 88 RON outside the Java-Madura-Bali region under the one price policy. However, this should be separated from the 88 RON sales and applied to the 92 RON and possibly diesel, making it an express public service obligation, with the additional costs imposed on Pertamina being reimbursed by a budget subsidy. The main reason for this appears to be the concern that the end of 88 RON sales will push up petrol prices.
The effective increase is likely to be lower, as higher octane fuels improve fuel efficiency by up to 4% if they move from RON 88 to RON 9244. The significant difference in retail prices across Indonesia between RON 92 and RON 88 does not come from the higher market price of the former, but from applying the policy of a price in RON 88 but not RON 92. Consumers currently dependent on RON 88 would see an increase in small price increase given the higher price of RON 92 in international markets, but this would be limited and, for those in remote areas, mitigated by the extension of the policy of one price to higher quality fuels.
This policy should remain unchanged, improving security of supply and facilitating the phase-out of RON 88.
Cooking
Current Conditions
- Uneven access to modern cooking fuels
- Large and poorly targeted LPG subsidies
This was mainly at the expense of kerosene, the original target of the LPG switching campaign. The percentage of households reporting fuelwood as their main cooking fuel has also fallen steadily, falling below 20% in 2017. The LPG switching program has been a success in many provinces, but it has yet to reach eastern Indonesia, where households are still are largely dependent on firewood or kerosene.
Household fuel stacking is still widespread: 30% of households still report using firewood for cooking (see Annex 21), while 12.7 million are still dependent on it. That the greater convenience of LPG is an important advantage for households can be seen in the results of the opinion survey, which over 90% identified as a reason to switch to. The LPG conversion was partially made possible by selling 3 kg LPG cylinders at a subsidized price of IDR 4,250 per cylinder. kg (larger 5.5 kg and 12 kg bottles are officially not subsidized).
In comparison, the full cost of LPG is IDR 8,529 per kg.54 This difference has inevitably fueled a significant LPG subsidy, which in recent years has been around IDR 30-40 billion, or 1.5-2.0% of the Indonesian government budget (see Exhibit 23).
Expand LPG Access
Despite this, most consumers pay significantly more than the subsidized price, due to their reliance on small retailers who impose large markups on the subsidized prices available from 'authorised dealers'.
Optimize Delivery of LPG Subsidies
Promote Clean Cookstoves as a Transitional Measure
The purchase costs for electric heaters include the costs of upgrading from a 450/900 VA connection to a 1,300 VA connection.
Focus City Gas Expansion for Households
This is compounded by the lack of a rigorous impact analysis process for proposed policies. Addressing these weaknesses is expected to lead to improvements in all dimensions of the trilemma, as better policymaking leads to better outcomes. Indonesia's current carbon targets, as expressed in its NDC, are essentially meaningless, as data and forecast errors mean they can easily be met with little or no action.
Replacing the cap with an export tax that is used to fund targeted subsidies to vulnerable customers will improve all aspects of the trilemma, with sustainability gaining more. Strengthening regulations through legal and institutional reforms will improve performance in all aspects of the trilemma, yielding this combined effect. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.
8 Direktorat Jenderal Mineral dan Batubara, Laporan Kinerja Tahun 2018, https://www.minerba.esdm.go.id/show/show _ pdf?link _ file=95. 9 Bank Indonesia, Statistik Ekonomi dan Keuangan Indonesia (SEKI), https://www.bi.go.id/id/statistik/seki/terkini/. 22 Massachusetts Institute of Technology dan Instituto Investigacion Tecnologica, "Perencanaan Elektrifikasi Berbiaya Rendah untuk Wilayah Maluku-Papua di Indonesia", presentasi di bawah ADB TA No.
