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Reducing Greenhouse Gas Emissions through Energy Efficiency – and Learning from One’s Peers

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China, India, Indonesia, the Philippines, Pakistan, and Vietnam are critical for global climate action. Why? Among other reasons, because three-fourths of all new coal-fired power plants to begin operations before 2020 globally will be in these six Asian countries. Fostering more energy efficiency will be imperative in the countries’ efforts to adopt a low carbon energy path.

One initiative that supports efforts to scale up energy efficiency and clean energy – and lower greenhouse gas emissions – in these six countries is the Energy Transition in Asia program managed by the Energy and Extractives Global Practice.

Comprising of knowledge exchange and capacity building on key issues, the program recently held a workshop in Singapore to share lessons learned on energy efficiency, following last year’s learning forum on solar auctions, also held in the city-state. Participants agree that peer-to-peer learning works. After sharing best practice efforts in China, India, Japan, Korea, Mexico, the United Kingdom, and host country Singapore, team spirit and friendships strengthened, along with confidence, productivity and learning outcomes.

By the end of the three-day workshop, participants from governments not only requested follow-up assistance but also to learn more from their newfound friends about conserving more energy. “We were able to advance country engagement with the clients on energy efficiency,” explained Xiaodong Wang, team leader for the Energy Transition in Asia initiative. “Conducive policies that combine mandatory regulations with financial incentives are essential drivers to create market demand for catalyzing investments in energy efficiency.”

Results are already encouraging. China is a leading example. From 1990 to 2010, more than half of global energy savings took place in China, thanks to the government’s ambitious targets, stringent regulatory policies, generous financial incentives, and effective institutions – all of which reiterate strong commitment to energy efficiency. Reducing energy intensity was made a mandatory target, allocated to each province and 17,000 energy intensive enterprises. Efficiency standards for appliances, buildings, and vehicles were upgraded and complemented with billions of dollars of financial incentives in output-based subsidies, rebates for energy efficient consumer products, and compensation for the phase-out of inefficient stocks. All these efforts were monitored across the country.

India also led by example. Energy savings targets – at least for energy intensive industries – were made mandatory with the Perform, Achieve, and Trade scheme (PAT), which also allows the trade of Energy Savings Certificates to achieve targets in a least-cost way. Non-compliance at the end of the three-year cycle incurs a financial penalty. The results of the first phase surpassed targets. The second phase began in April 2017.

Workshop participants from India reminded, however, that these are early years. Following a visit to the district cooling system under Marina Bay Sands – the world’s largest underground facility and its most efficient – S.P. Garnaik, Chief General Manager of India’s Energy Efficiency Services Ltd. (EESL), a joint venture under the Ministry of Power, envisioned replicating such a system in India. But while a policy framework is being prepared to support the use of district cooling systems in rapidly urbanizing India, Garnaik admits that substantial results may take time, as “these are very new concepts.”

In addition to the mandatory output-based target approach in China and India, participants also noted Singapore’s green mark program, which combines mandatory building codes with financial incentives from the government for auditing and investment costs, as a model to emulate.

Indeed, the knowledge gap between participating countries is large. Yet even countries in the ‘nascent’ phase are eager to make progress.

Energy intensity in Asia is highest in Vietnam, with energy consumption by industry accounting for almost half of the country’s total energy use. Current efforts towards energy efficiency are encouraging. Labeling schemes have been established and energy management systems now require energy managers and auditors in large energy users. Indonesia is implementing a similar  system.

Learning from one’s peers can be galvanizing. As Trinh Quoc Vu of Vietnam’s Energy Efficiency and Sustainable Development Department at the Ministry of Industry and Trade explains, Vietnam is eager to learn from China’s and India’s shift to a mandatory target approach. Indonesia’s delegates were inspired by their peers’ experience in expanding pilot programs. The Bank is providing advisory services to both Indonesia and Vietnam in their efforts to scale up energy efficiency.

The workshop also highlighted the critical role of strong government support in developing the ESCO business. ESCOS are energy service companies which design and implement energy savings projects.  Energized by his peers, Trinh is now intent on exploring mechanisms for promoting and incentivizing the ESCO business in Vietnam.

The World Bank Group supports many energy efficiency financing mechanisms worldwide, including through credit lines, risk sharing facilities, dedicated funds, program-for-results (PforR), and development policy loans. Critical to success is a strong pipeline for deal flows, as well as technical assistance.

In India, the Partial Risk Sharing Facility for Energy Efficiency initiative, financed by the Clean Technology Fund (CTF) and Global Environment Facility (GEF) resources,  is supporting private sector ESCO-implemented energy efficiency projects through partial credit guarantees. The proposed new US$300 million India Energy Efficiency Scale Up Operation with EESL is expected to leverage over $1.5 billion of demand side energy efficiency investments across residential and public sectors. Similarly, the China Energy Efficiency Financing Project has leveraged the original World Bank financing eight times over, with a total investment of US$2.6 billion. The project has led to an annual reduction of 11 million tons of CO2 emissions.

Such figures may seem ambitious, but workshop participants were unfazed. Many are confident they will accomplish similar achievements. When learning from one’s peers, who all face challenges in their respective development journey, anything can seem possible.

World Bank

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Indonesian Coal Roadmap: Optimizing Utilization amid Global Tendency to Phasing Out

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Authors: Razin Abdullah and Luky Yusgiantoro*

Indonesia is potentially losing state revenue of around USD 1.64-2.5 billion per year from the coal tax and non-tax revenues. Although currently Indonesia has abundant coal resources, especially thermal coal, the coal market is gradually shrinking. This shrinking market will negatively impact Indonesia’s economy. The revenue can be used for developing the country, such as for the provision of public infrastructures, improving public education and health services and many more.

One of the main causes of the shrinking coal market is the global tendency to shift to renewable energy (RE). Therefore, a roadmap is urgently needed by Indonesia as a guideline for optimizing the coal management so that it can be continuously utilized and not become neglected natural resources. The Indonesian Coal Roadmap should also offer detailed guidance on utilizing coal for the short-term, medium-term and long-term.

Why is the roadmap needed?

Indonesia’s total coal reserves is around 37.6 billion tons. If there are no additional reserves and the assumed production rate is 600 million tons/year, then coal production can continue for another 62 years. Even though Indonesia’s coal production was enormous, most of it was for export. In 2019, the export reached 454.5 million tons or almost 74% of the total production. Therefore, it shows a strong dependency of the Indonesian coal market on exports, with China and India as the main destinations. The strong dependency and the global trend towards clean energy made the threat of Indonesian coal abandonment increasingly real.

China, one of Indonesia’s main coal export destinations, has massive coal reserves and was the world’s largest coal producer. In addition, China also has the ambition to become a carbon-free country by 2060, following the European Union countries, which are targeting to achieve it in 2050. It means China and European Union countries would not produce more carbon dioxide than they captured by 2060 and 2050, respectively. Furthermore, India and China have the biggest and second-biggest solar park in the world. India leads with the 2.245GW Bhadla solar park, while China’s Qinghai solar park has a capacity of 2.2GW. Those two solar parks are almost four times larger than the U.S.’ biggest solar farm with a capacity of 579 MW. The above factors raise concerns that China and India, as the main export destinations for Indonesian coal, will reduce their coal imports in the next few years.

The indications of a global trend towards RE can be seen from the energy consumption trend in the U.S. In 2019, U.S. RE consumption exceeded coal for the first time in over 130 years. During 2008-2019, there has been a significant decrease in U.S coal consumption, down by around 49%. Therefore, without proper coal management planning and demand from abroad continues to decline, Indonesia will lose a large amount of state revenue. The value of the remaining coal resources will also drop drastically.

Besides the global market, the domestic use of coal is mostly intended for electricity generation. With the aggressive development of RE power plant technology, the generation prices are getting cheaper.  Sooner or later, the RE power plant will replace the conventional coal power plant. Therefore, it is necessary to emphasize efforts to diversify coal products by promoting the downstream coal industries in the future Indonesian Coal Roadmap.

What should be included: the short-term plan

In designing the Indonesian Coal Roadmap, a special attention should be paid to planning the diversification of export destinations and the diversification of coal derivative products. In the short term, it is necessary to study the potential of other countries for the Indonesian coal market so that Indonesia is not only dependent on China and India. As for the medium and long term, it is necessary to plan the downstream coal industry development and map the future market potential.

For the short-term plan, the Asian market is still attractive for Indonesian coal. China and India are expected to continue to use a massive amount of coal. Vietnam is also another promising prospective destination. Vietnam is projected to increase its use of coal amidst the growing industrial sector. In this plan, the Indonesian government plays an essential role in building political relations with these countries so that Indonesian coal can be prioritized.

What should be included: the medium and long-term plans

For the medium and long-term plans, it is necessary to integrate the coal supply chain, the mining site and potential demand location for coal. Therefore, the coal logistics chain becomes more optimal and efficient, according to the mining site location, type of coal, and transportation mode to the end-user. Mapping is needed both for conventional coal utilization and downstream activities.

Particularly for the downstream activities, the roadmap needs to include a map of the low-rank coal (LRC) potentials in Indonesia, which can be used for coal gasification and liquefaction. Coal gasification can produce methanol, dimethyl ether (a substitute for LPG) and, indirectly, produce synthetic oil. Meanwhile, the main product of coal liquefaction is synthetic oil, which can substitute conventional oil fuels. By promoting the downstream coal activities, the government can increase coal’s added value, get a multiplier effect, and reduce petroleum products imports.

The Indonesian Coal Roadmap also needs to consider related existing and planned regulations so that it does not cause conflicts in the future. In designing the roadmap, the government needs to involve relevant stakeholders, such as business entities, local governments and related associations.

The roadmap is expected not only to regulate coal business aspects but also to consider environmental aspects. The abandoned mine lands can be used for installing a solar farm, providing clean energy for the country. Meanwhile, the coal power plant is encouraged to use clean coal technology (CCT). CCT includes carbon capture storage (CCS), ultra-supercritical, and advanced ultra-supercritical technologies, reducing emissions from the coal power plant.

*Luky Yusgiantoro, Ph.D. A governing board member of The Purnomo Yusgiantoro Center (PYC).

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Engaging the ‘Climate’ Generation in Global Energy Transition

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photo: IRENA

Renewable energy is at the heart of global efforts to secure a sustainable future. Partnering with young people to amplify calls for the global energy transition is an essential part of this endeavour, as they represent a major driver of development, social change, economic growth, innovation and environmental protection. In recent years, young people have become increasingly involved in shaping the sustainable development discourse, and have a key role to play in propelling climate change mitigation efforts within their respective communities.

Therefore, how might we best engage this new generation of climate champions to accentuate their role in the ongoing energy transition? In short, engagement begins with information and awareness. Young people must be exposed to the growing body of knowledge and perspectives on renewable energy technologies and be encouraged to engage in peer-to-peer exchanges on the subject via new platforms.

To this end, IRENA convened the first IRENA Youth Forum in Abu Dhabi in January 2020, bringing together young people from more than 35 countries to discuss their role in accelerating the global energy transformation. The Forum allowed participants to take part in a truly global conversation, exchanging views with each other as well as with renewable energy experts and representatives from governments around the world, the private sector and the international community.

Similarly, the IRENA Youth Talk webinar, organised in collaboration with the SDG 7 Youth Constituency of the UN Major Group for Children and Youth, presented the views of youth leaders, to identify how young people can further the promotion of renewables through entrepreneurship that accelerates the energy transition.

For example, Joachim Tamaro’s experience in Kenya was shared in the Youth Talk, illustrating how effective young entrepreneurs can be as agents of change in their communities. He is currently working on the East Africa Geo-Aquacultural Development Project – a venture that envisages the use of solar energy to power refrigeration in rural areas that rely on fishing for their livelihoods. The project will also use geothermal-based steam for hatchery, production, processing, storage, preparation and cooking processes.

It is time for governments, international organisations and other relevant stakeholders to engage with young people like Joachim and integrate their contributions into the broader plan to accelerate the energy transition, address climate change and achieve the UN Sustainable Development Agenda.

Business incubators, entrepreneurship accelerators and innovation programmes can empower young people to take their initiatives further. They can give young innovators and entrepreneurs opportunities to showcase and implement their ideas and contribute to their communities’ economic and sustainable development. At the same time, they also allow them to benefit from technical training, mentorship and financing opportunities.

Governments must also engage young people by reflecting their views and perspectives when developing policies that aim to secure a sustainable energy future, not least because it is the youth of today who will be the leaders of tomorrow.

IRENA

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The Urgency of Strategic Petroleum Reserve (SPR) for Indonesia’s Energy Security

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Authors:Akhmad Hanan and Dr. Luky Yusgiantoro*

Indonesia is located in the Pacific Ring of Fire, which has great potential for natural disasters. These disasters have caused damage to energy infrastructure and casualties. Natural disasters usually cut the energy supply chain in an area, causing a shortage of fuel supply and power outages.

Besides natural disasters, energy crisis events occur mainly due to the disruption of energy supplies. This is because of the disconnection of energy facilities and infrastructure by natural disasters, criminal and terrorist acts, escalation in regional politics, rising oil prices, and others. With strategic national energy reserves, particularly strategic petroleum reserves (SPR), Indonesia can survive the energy crisis if it has.

Until now, Indonesia does not have an SPR. Meanwhile, fuel stocks owned by business entities such as PT Pertamina (Persero) are only categorized as operational reserves. The existing fuel stock can only guarantee 20 days of continuity. Whereas in theory, a country has secured energy security if it has a guaranteed energy supply with affordable energy prices, easy access for the people, and environmentally friendly. With current conditions, Indonesia still does not have guaranteed energy security.

Indonesian Law mandates that to ensure national energy security, the government is obliged to provide national energy reserves. This reserve can be used at any time for conditions of crisis and national energy emergencies. It has been 13 years since the energy law was issued, Indonesia does not yet have an SPR.

Lessons from other countries

Many countries in the world have SPR, and its function is to store crude oil and or fuel oil. SPR is built by many developed countries, especially countries that are members of the International Energy Agency (IEA). The IEA was formed due to the disruption of oil supply in the 1970s. To avoid the same thing happening again, the IEA has made a strategic decision by obliging member countries to keep in the SPR for 90 days.

As one of the member countries, the US has the largest SPR in the world. Its storage capacity reaches a maximum of 714 million barrels (estimated to equal 115 days of imports) to mitigate the impact of disruption in the supply of petroleum products and implement US obligations under the international energy program. The US’ SPR is under the control of the US Department of Energy and is stored in large underground salt caves at four locations along the Gulf of Mexico coastline.

Besides the US, Japan also has the SPR. Japan’s SPR capacity is 527 million barrels (estimated to equal 141 days of imports). SPR Japan priority is used for disaster conditions. For example, in 2011, when the nuclear reactor leak occurred at the Fukushima nuclear power plant due to the Tsunami, Japan must find an energy alternative. Consequently, Japan must replace them with fossil fuel power plants, mainly gas and oil stored in SPR.

China, Thailand, and India also have their own SPR. China has an SPR capacity of 400-900 million barrels, Thailand 27.6 million barrels, and India 37.4 million barrels. Singapore does not have an SPR. However, Singapore has operational reserve in the form of fuel stock for up to 90 days which is longer than Indonesia.

Indonesia really needs SPR

The biggest obstacles of developing SPR in Indonesia are budget availability, location selection, and the absence of any derivative regulations from the law. Under the law, no agency has been appointed and responsible for building and managing SPR. Also, government technical regulations regarding the existence and management of SPR in Indonesia is important.

The required SPR capacity in Indonesia can be estimated by calculating the daily consumption from the previous year. For 2019, the national average daily consumption of fuel is 2.6 million kiloliters per day. With the estimation of 90 days of imports, Indonesia’s SPR capacity must at least be more than 100 million barrels to be used in emergencies situations.

For selecting SPR locations, priority can be given to areas that have safe geological structures. East Kalimantan is suitable to be studied as an SPR placement area. It is also geologically safe from disasters and is also located in the middle of Indonesia. East Kalimantan has the Balikpapan oil refinery with the capacity of 260,000 BPD for SPR stock. For SPR funding solution, can use the state budget with a long-term program and designation as a national strategic project.

Another short-term solution for SPR is to use or lease existing oil tankers around the world that are not being used. Should the development of SPR be approved by the government, then the international shipping companies may be able to contribute to its development.

China currently dominates oil tanker shipping in the world, Indonesia can work with China to lease and become Indonesia’s SPR. Actually, this is a good opportunity at the time of the COVID-19 pandemic because oil prices are falling. It would be great if Indonesia could charter some oil tankers and buy fuel to use as SPR. This solution was very interesting while the government prepared long-term planning for the SPR facility. In this way, Indonesia’s energy security will be more secure.

*Dr. Luky Yusgiantoro, governing board member of The Purnomo Yusgiantoro Center (PYC).

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