Indonesia has a viable path to reaching its target of net zero emissions by 2060, bringing major benefits to its citizens in the process such as more secure and affordable energy supplies, according to a new IEA report released today. But key policy reforms and international support will be crucial to the success of the clean energy transition in the world’s fourth most populous country as it enters a new phase of its economic development.
The IEA’s Energy Sector Roadmap to Net Zero Emissions in Indonesia – a collaborative project undertaken with the Indonesian Ministry of Energy and Mineral Resources (MEMR) at the request of the Government of Indonesia – was launched today at the G20 Energy Transitions Ministerial Meeting in Bali under Indonesia’s first G20 Presidency. IEA Executive Director Fatih Birol and Indonesia’s Minister of Energy and Mineral Resources Arifin Tasrif also signed a Joint High-Level Statement that sets out a shared vision of Indonesia’s path to net zero, drawing on the Roadmap’s findings.
Indonesia’s economic development over the past half century has been a remarkable success story, lifting millions of people out of poverty and bringing electricity to almost all citizens across the country’s 17 000 islands. Access to affordable supplies of energy from the country’s abundant resources as well as revenues from fossil fuel exports have been important drivers of this success.
Today, the clean energy transition offers huge opportunities for the next chapter of Indonesia’s development as it seeks to become an advanced economy by 2045. According to the IEA Roadmap, many of the ingredients for reaching net zero emissions and advanced economy status are the same: innovation, knowledge, technology, and economic diversification.
For instance, Indonesia’s export revenues from critical minerals, which are needed for many clean energy technologies, are set to be greater in 2030 than its largest ever export revenues from coal. And even bigger opportunities exist if Indonesia can capture more of the clean energy value chain. At the same time, the clean energy transition and economic diversification will have significant impacts on Indonesia’s coal-producing regions, demanding attention from policy makers to ensure a fair and people-centred transition.
The IEA Roadmap shows that by reaching net zero by 2060, Indonesia would reduce total household energy bills as a share of income from today’s level. For the country’s economy as a whole, the pathway to net zero by 2060 would lower oil import bills by one-third in 2030 compared with a business-as-usual scenario. This saving on oil imports would by itself cover the extra cost the transition would require in terms of new investments – meaning that the transition would effectively pay for itself. An even more ambitious transition by Indonesia and other countries around the world, as envisaged in the IEA’s global Net Zero Emissions by 2050 Scenario, would yield even greater savings, the analysis shows.
“Indonesia has the opportunity to show the world that even for a country that relies heavily on fossil fuel exports, a pathway to net zero emissions is not only feasible but also beneficial,” said IEA Executive Director Fatih Birol. “We must be clear-eyed about the challenges, especially in areas that depend on the coal industry, but the economic opportunities more than compensate for the costs.”
“This Roadmap – which reflects the IEA’s status as the global authority and was conducted hand-in-hand with my Ministry – sets out a clear and achievable path forward, based on energy efficiency, renewables and electrification,” said Indonesia’s Minister of Energy and Mineral Resources Arifin Tasrif. “This demonstrates that a transition to net zero in Indonesia can be just, affordable and rich with opportunities.”
The IEA report stresses that the technologies Indonesia needs for the initial steps in its journey to net zero – such as energy efficiency solutions, solar, wind and electric vehicles – are already commercially available today and cost-effective, provided that the right policies are put in place.
Enforcing energy performance standards, especially for air conditioners, and supporting electrification of transport and cooking are essential to lower energy costs and emissions at the same time. Indonesian homes are set to add another 20 million air conditioners by 2030, shifting to the best available technologies could avoid annual electricity demand equivalent to the output of around 10 coal power plants.
Driving rapid expansion of renewables, especially solar, demands an immediate and sustained policy push. Solar projects in Indonesia are currently more than twice as costly as those in similar emerging market countries. But costs can be brought down by introducing transparent and competitive tariffs and a predictable project pipeline. At the same time, by allowing coal plants to operate more flexibly and remunerating them for it, Indonesia can reduce power system costs by more than 5% and help free up the space in the power system that needs to go to renewables.
To achieve net zero by 2060, Indonesia will need to almost triple energy investment by 2030 from today’s level. That means an extra USD 8 billion in investment a year by the end of this decade compared with the level in a business-as-usual pathway. Mobilising that additional financing will hinge on policy reforms and international financial support for which Just Energy Transition Partnerships (JET-P), as endorsed by G7 Leaders at their Summit in June, can provide a framework. International cooperation will also be critical to bring technologies such as nuclear power, hydrogen and carbon capture to market in Indonesia and to reduce costs.
“As a long-term and steadfast partner to Indonesia, the IEA is committed to continuing to provide leading analysis and practical solutions to help Indonesia achieve its energy and climate goals,” said Dr Birol. “I call on Indonesia’s international partners to do their part by mobilising clean energy finance through a Just Energy Transition Partnership and ensuring much needed technology transfers. The results will bring major benefits for both Indonesia and the world.”
Guterres leads call to make Africa ‘renewable energy superpower’
The flame of injustice is “scorching hopes and possibilities” across Africa as the world grapples with the climate crisis, with the continent suffering some of the worst impacts of global warming said the UN chief on Tuesday.
Secretary-General António Guterres was addressing the African Climate Summit in Nairobi, Kenya, noting that despite “extreme heat, ferocious floods, and tens of thousands dead from devastating droughts”, the continent was responsible for less than four per cent of emissions.
“The blow inflicted on development is all around with growing hunger and displacement”, he said.
But amid the “climate chaos” he said it was still possible to avoid the worst, “but only with a quantum leap in climate action.”
He said far greater climate ambition was needed from all countries led by the largest emitters, in line with his Climate Solidarity Pact and Acceleration Agenda.
He called on the G20 advanced economies meeting in Delhi this week, to take responsibility and commit to reaching net zero emissions as close as possible to 2040.
Secondly, he called for “climate justice” to reach goals on renewable and affordable energy, particularly in Africa. This means operationalizing the agreed loss and damage fund, universal early warning systems, and a “course correction in the global financial system.”
‘World leader in renewable energy’
Third, Africa is rich in untapped renewable energy with the potential to become a world leader in renewables and “green growth.”
It has nearly a third of the world’s mineral reserves for solar power, electric vehicles and battery storage.
“To truly benefit all Africans, the production and trade of these critical minerals must be sustainable, transparent and just across every link of the supply chain”.
The UN chief pointed to the Greater Horn region where over 85 per cent of electricity comes from renewables. Mozambique gets nearly all its energy from green and sustainable resources.
And wind and solar projects are already helping power Egypt, Algeria, Tunisia, Morocco and South Sudan.
He called for a collective effort to create “a true” African Renewable Energy Alliance.
“Renewable energy could be the African miracle but we must make it happen. We must all work together for Africa to become a renewable energy superpower.”
Mr. Guterres told the conference of African leaders and stakeholders hosted by Kenya and the African Union Commission that he was convinced the continent “can be at the heart of a renewable future.”
He said now was the time for all nations “to stand as one in defence of our only home. Let’s deliver the climate justice that Africans, the world, and the planet we share, demand and deserve.”
Speaking at a press conference in Nairobi after his speech, the Secretary-General said it was time to end the injustices that are holding the continent back. He pledged to work closely with African leaders and organizations such as the AU, to accelerate progress.
WP: Drop in energy needs points to a further deterioration in industrial activity in Europe
Europe has an even stronger ally to keep gas prices under check heading into the colder months: extremely weak demand. The manufacturing crisis that’s plaguing the continent — industrial activity in Germany has contracted for 14 consecutive months — is the best antidote against a gas supply squeeze. With friends like that, who needs enemies? – asks ‘The Washington Post’.
Europe is defeating its energy crisis thanks to the impact that said crisis has had on its industrial heartland. Across the continent, many energy-intensive companies have either closed or reduced production after not being able to cope with higher energy prices. The fertilizer, chemical, metallurgic, glass, paper and ceramic industries are particularly affected. All those shuttered factories don’t need gas or electricity now.
In Germany, activity among energy-intensive companies plunged in June by nearly 18% versus late 2020, according to official data. During the same month, industrial gas demand also declined 18% compared with a year ago. In July, gas demand posted an even deeper plunge, falling 22.9% from a year earlier, the largest decline so far in 2023. When official industrial production data is released for July in a few weeks, that drop in energy needs points to a further deterioration in industrial activity.
Due to anemic manufacturing activity and lower-than-expected gas-burn in the electricity sector, Morgan Stanley reckons that total gas demand in Europe is running about 15% below the five-year average, even when adjusted by the impact of the weather. With consumption low and LNG supply so far plentiful, Europe has been able to inject a record amount of gas into underground storage over the spring and summer — despite most countries in the region no longer having access to Russian pipeline gas supply.
European gas stocks are nearly 92% full — a record high for this time of the year. If the current injection pace continues, inventories would reach 100% by mid-September.
And yet, it would be of little solace for the continent’s industrialists. Currently, European gas prices are running at about €35 ($38) per megawatt hour, compared with the 2010-2020 average of just over €20. Wholesale electricity prices are running above €140 per megawatt hour, more than triple the 2010-2020 average of €38.5.
The real problem is that companies know that any supply issue, real or perceived, would trigger a price rally, because even with nearly full stockpiles, Europe needs all the gas it can grab to make it through the winter. The manufacturing sector remains the go-to segment of consumption to find extra demand destruction. Hence, why so many chief executive officers are reluctant to bring back production capacity, fearing reactivating a plant only to get caught again by higher prices.
As such, the price of avoiding the energy crisis is a deep recession in the manufacturing sector, and a long-term loss of economic growth.
German businesses are increasingly curbing investments and eyeing production abroad amid high energy prices at home, informs Bloomberg.
Over half of surveyed companies say the energy transition is having negative or very negative effects on their competitiveness, according to a report by the German Chamber of Commerce and Industry. Among manufacturers, almost a third are considering or already executing a production shift abroad — twice as much as during last year’s energy crisis.
“The German economy’s confidence in energy policy has fallen to a low point,” the group’s chairman Achim Dercks said. “Concerns about competitiveness have never been greater.”
Germany’s manufacturing-heavy economy has seen a protracted period of weakness that shows few signs of abating amid plunging business confidence, and it’s the only major European nation whose output is forecast to shrink this year. While manufacturers used to enjoy relatively cheap power costs when Germany was still receiving pipeline gas from Russia, last year’s crisis forced the country to revamp its plan for future supplies. Its energy prices are currently among the highest in Europe.
While the expansion of renewable energy sources is expected to eventually bring costs down, they are likely to remain elevated until at least 2027, according to the government. Among large industrial companies — who often already have links to production abroad — one in four have already started or completed further capacity movements.
EU imports record volumes of LNG from Russia
The EU is set to import record volumes of liquefied natural gas from Russia this year, despite aiming for the bloc to wean itself off Russian fossil fuels by 2027, Financial Times informs.
In the first seven months of this year, Belgium and Spain were the second and third-biggest buyers of Russian LNG behind China, according to analysis of industry data by Global Witness, a nongovernment organisation.
Overall, EU imports of the super-chilled gas were up 40 per cent between January and July this year compared with the same period in 2021.
The jump comes from a low base as the EU did not import significant amounts of LNG before the war in Ukraine due to its reliance on piped gas from Russia. But the rise is much sharper than the global average increase in imports of Russian LNG, which was 6 per cent over the same period, Global Witness said.
The NGO’s analysis is based on data from industry analytics company Kpler, which showed that the EU is importing about 1.7 per cent more Russian LNG than it did when imports hit a record high last year.
Global Witness said the cost of the LNG imported from January to July at spot market prices amounted to €5.29bn. “It’s shocking that countries in the EU have worked so hard to wean themselves off piped Russian fossil gas only to replace it with the shipped equivalent,” said Jonathan Noronha-Gant, senior fossil fuel campaigner at Global Witness.
Most of the Russian volumes come from the Yamal LNG joint venture, which is majority-owned by the Russian company Novatek.
As well as resulting in billions of euros in revenues going to Russia at a time when the EU continues to tighten its sanctions regime against Moscow, the import levels leave the EU exposed to any sudden decision by the Kremlin to cut supplies as it did for piped gas last year.
Alex Froley, senior LNG analyst at consultancy ICIS, said that “long-term buyers in Europe say they will keep taking contracted volumes unless it is banned by politicians”. He added that an EU ban on imports would cause some disruptions to shipping as global trade patterns would need to be rearranged, “but ultimately Europe could find other suppliers and Russia other buyers”.
Belgium imports large volumes of Russian LNG because its port of Zeebrugge is one of the few European points of transshipment for LNG from ice-class tankers used in the high north to regular cargo vessels.
Spain’s utility Naturgy and France’s Total also have continuing contracts for large quantities of Russian LNG, analysts said. EU policymakers have been urging European companies not to buy Russian LNG. Spanish energy minister Teresa Ribera, whose government is chairing the six-month rotating presidency of the EU, said in March that LNG should be hit with sanctions, adding that the situation was “absurd”.
Kadri Simson, the EU’s energy commissioner, has said that the bloc “can and should get rid of Russian gas completely as soon as possible, still keeping in mind our security of supply”.
EU officials have pointed to an overall effort to phase out Russian fossil fuels by 2027, but warned that an outright ban on LNG imports risked prompting an energy crisis akin to last year when EU gas prices hit record highs of more than €300 per megawatt hour.
One official said that despite European gas storage containers being more than 90 per cent full ahead of winter, there was still “a lot of nervousness” should there be any further cuts to supplies.
Russian LNG accounted for 21.6mn, or 16 per cent, of the EU’s total 133.5mn cubic metres of LNG imports (equivalent to 82bn cubic metres of natural gas) between January and July, Kpler data shows, making it the bloc’s second-biggest supplier of the liquid fuel after the US.
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