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Five Key Takeaways from COP24 for Energy

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Authors: Caroline Lee and Andrew Prag*

In the late evening of December 15 2018, the gavel came down on the 24th Conference of Parties (COP) in Katowice, Poland, with the President of the conference leaping over the dais in celebration. The outcome of COP24 was heralded by many as a success in multilateralism and diplomacy, and the adoption of the Paris Agreement “rulebook,” a set of rules and guidelines designed to bring the Agreement to life, was no small achievement.

But how does this achievement translate to energy systems in the real world? What signals does it transmit to domestic policymakers and energy sector investors? We outline five key takeaways of COP24 for the energy system and energy transitions.

  1. A positive step forward for multilateralism on a common path forward

Consensus agreement on the 133-page Paris Agreement rulebook by almost 197 Parties (196 countries and the EU) represents no small feat in multilateralism. One particular success was the emergence of a single set of transparency guidelines for all countries to report and review information, such as their latest greenhouse gas emissions and progress towards meeting their Nationally Determined Contributions (NDCs, representing national pledges to address climate change under the Paris Agreement).

This approach represents a notable shift away from the existing “bifurcated” approach whereby industrialized and developing countries have different reporting and review obligations, though it still provides flexibility for developing countries who lack capacity.

The collection, reporting, and review of energy and emissions data are fundamental to tracking and driving progress of energy transitions and are also at the core of IEA’s work. The new, enhanced transparency framework negotiated in Katowice reflects a positive step in bringing all countries under a single, robust system, while allowing flexibility to those who need it.

One element of the Rulebook that has yet to be agreed upon regards market mechanisms, covered by Article 6 of the Paris Agreement. Negotiations on this topic will continue through 2019.

  1. A call for ambition: energy transitions are underway but must be urgently accelerated

Inspiring stories of energy transitions from all corners of the globe were heard around COP24: Iceland now generates 100% of its electricity from renewable sources, China forges ahead with the world’s largest emissions trading scheme, and Costa Rica is advancing on its plan to become the first carbon-neutral country in the world.

But despite such signs of progress, the pace of global energy transitions is woefully off-track from what is needed to meet global climate targets, and the Paris Agreement has yet to prove itself up to the task of bending the curve. The IEA estimates that energy-related emissions rose in 2018, including in advanced economies for the first time in five years, signalling emissions are moving in the exact opposite direction in which they should. This stark reality was underscored even further by the release of the IPCC’s Special Report on 1.5 Degrees last October, shifting the goal post on the challenge of meeting Paris targets.

With the rulebook in place, the next big challenge for the Paris Agreement is to show that it can result in greater ambition.  Countries are expected to submit revised, more ambitious NDCs by next year, returning the spotlight firmly to policymakers in national capitals and subnational jurisdictions, in particular those responsible for energy policy development. But a delicate process of diplomacy, both inside and outside of the negotiations, is important so that no country feels as if it is acting alone.

  1. Rising fossil fuel consumption remains at odds with meeting climate and energy objectives

It was no coincidence that COP24 was held in the heart of Poland’s Silesia coal region. A priority of the COP Presidency was to highlight and spark discussion on the challenges of fossil fuel transition, including the just transition of workers in these sectors. Coal contributes to 80% of Poland’s electricity generation mix, one of the highest shares in the world and 5 million homes in Poland are heated with coal, a fact that could not escape COP24 participants as the smell of coal smoke lingered over the city centre each evening.

These challenges experienced in Poland, but also in many other countries, highlight opportunities for integrating the need to reduce greenhouse gas emissions with other priorities such as air pollution reduction, sustainable employment, and clean economic development.

Globally, fossil fuels continue to form the backbone of the economy, accounting for 81% of global energy supply, a figure that has remained stubbornly unchanged in the last three decades. IEA’s Coal 2018 report showed that despite the advance of renewables, coal remains the largest source of electricity globally and global coal demand is in fact forecast to rise. Yet the IEA’s Sustainable Development Scenario, describing an energy sector aligned with the Paris Agreement, points to a need for global coal use to peak and enter a rapid decline. The tension between objectives and reality is troublingly, still rising.

  1. Tracking the progress of energy transitions is fundamental to raising ambition, and IEA has a key role to play

COP24 also saw the culmination of the Talanoa Dialogue, an important process to assess global progress towards Paris goals. Tracking progress is a critical driver of raising ambition and enhancing energy transitions efforts. Not only does it highlight progress made, but it reveals areas of action moving forward as “that which is measured, improves.”

The Talanoa Dialogue drew political attention to the value of tracking progress to meet Paris goals. Looking ahead, collective progress will be assessed every five years starting in 2023 through a more comprehensive assessment process called the Global Stocktake, considering not only emissions reductions, but also adaptation to climate impacts and finance.

The IEA is at the heart of global efforts for tracking energy transitions through a range of analytical tools, including Tracking Clean Energy Progress, the Global Energy and CO2 Status Report, and tracking progress on Sustainable Development Goal 7.

  1. Beyond solar and wind: all low-carbon options are vital

Another welcome development from COP24 was growing acknowledgment for the need to explore the full range of options in accelerating energy transitions. While much attention in recent years has been justifiably paid to the impressive growth of variable renewable energy sources, low carbon energy as a whole still only comprises 19% of total energy supplied.  To make real progress in decarbonising the energy system, energy transitions must rely on more than just variable renewables but on all available options.

COP24 saw increasing recognition of the need for a range of technologies to be deployed at scale, including carbon capture, utilisation and storage, nuclear energy, sustainable bioenergy, hydrogen, and of course energy efficiency. All of these have a role to play in addition to, not in lieu of, the rapid scale-up of renewables.

Despite the lack of a final agreement on market mechanisms, the adoption of the Paris Agreement rulebook should be recognized as the multilateral success as it was. However, the pace of energy transitions is far from what is required to meet Paris Agreement goals, and translating intention to practice will require strong, well-coordinated policies that rely on the full array of low-carbon options.

*Andrew Prag, Head, Environment and Climate Change Unit.

IEA

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Energy

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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