Indonesian Solar Market Poised For Unprecedented Growth, Holds Key To Decarbonizing Energy Sector: Report

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BloombergNEF, Bloomberg Philanthropies, and the Institute for Essential Services Reform (IESR) released a new report, Scaling Up Solar in Indonesia: Reform and Opportunity. Offering tailored policy recommendations to unlock Indonesia’s abundant and untapped potential for solar power, the report reveals that a national solar program with a target of 18GW of solar energy deployment can help Indonesia attract up to $14.4 billion in investment and help the nation meet its goal of reaching 23% renewable energy by 2025.

Endorsed by Arifin Tasrif, Indonesian Minister of Energy and Mineral Resources, Scaling Up Solar outlines a roadmap for Indonesia to significantly expand its solar capacity—which currently sits at just 1% of its potential. This industry outlook also shows how Indonesia, as the largest economy in Southeast Asia, offers tremendous economic and environmental opportunities for global investors as it transitions away from coal, gas, and fossil-fuel power toward a renewable energy future.

“Indonesia is positioned to be a world leader in solar power, with all the economic and public health benefits that investment in clean power brings,” said Michael R. Bloomberg, founder of Bloomberg L.P. and Bloomberg Philanthropies and the UN Secretary-General’s Special Envoy for Climate Ambition and Solutions. “Bloomberg Philanthropies has been working closely with partners in Indonesia to seize that opportunity and break down barriers to progress, and this report will help us build on that work. It outlines how smart policies and public-private partnerships can help Indonesia speed up solar investment and set an example for other countries.”

Leaders in Jakarta have outlined a goal of reaching 23% renewable energy by 2025—an ambitious step-up from the 13% renewable energy penetration in Indonesia’s 2019 primary energy mix. Scaling Up Solar finds that the power sector could achieve this level of renewable energy generation by installing 18GW of photovoltaic (PV) systems alone by 2025, with this rapid rise in solar deployment made possible by short lead times and plummeting costs. The report also shows that solar costs currently range between $65-$137/MWh (real 2020 dollars), but are estimated to fall to $27-48/MWh (real 2020 dollars) by 2030 driven by lower equipment and development costs, along with more attractive financing terms.

“The acceleration of energy transformation has become the Government’s commitment to support green economy, green technology, and green product, in line with the implementation of the Paris Agreement,” said Arifin Tasrif, Indonesia Minister of Energy and Mineral Resources. “Solar energy will become a mainstay in the strategy to develop renewable energy in an effort to promote the realization of net zero emission in 2060 or sooner, because of its enormous potential and more competitive prices.”

However, tapping into the abundant potential for solar energy will require bold policy actions to overcome existing regulations that stack the odds against clean generation technologies. These include establishing a new emissions target, instituting a coal moratorium, and implementing carbon pricing, which will send stable market signals that build investor confidence while also accelerating the pace of decarbonization.

“Solar power can be an affordable source of electricity for Indonesia if the country undertakes necessary power market reforms,” said Antoine Vagneur-Jones, energy transitions analyst at BloombergNEF. “Indonesia can learn from the experience of its peers such as India and Vietnam on how to attract investment into solar,” added BNEF’s Southeast Asia senior analyst, Caroline Chua.

“The impact of climate change has emphasized the urgency to take a role in combating climate change and solar energy development is one of the most concrete steps to support the ambition of energy transition in Indonesia,” said Edwin Syahruzad, President Director of PT SMI, one of the Special Mission Vehicles (SMV) under the Ministry of Finance. “PT SMI and its donors under the platform of SDG Indonesia One, have shown great support for this sector development. For example, we provide grant support to make a bankable feasibility study in an airport so that energy transition could be showcased starting from the airport. Collaboration and synergy are the key to enable this effort.”

Accelerating Indonesia’s transition from coal to renewable energy will also require leadership from the state-owned utility PLN, which recently committed to stop building new coal-fired power plants after 2023. This move reflects both an alignment with carbon reduction goals, as well as the new reality of economic conditions surrounding coal. Long considered the least-costly option for bulk generation, coal will no longer be able to compete as solar costs continue to drop.

“This decade is critical in determining Indonesia’s energy transformation pathway that is aligned with net-zero ambition. Pledges have been made over the course of this year, but these commitments must be followed with large scale renewable energy deployment,” said Fabby Tumiwa, Executive Director, IESR. “Solar power in particular can make a significant contribution to Indonesia’s energy transformation and emission reduction, if necessary reforms are made. Through this report, we hope it can offer policymakers and related stakeholders the necessary reforms to unlock and scale up solar development in Indonesia.”

“Two of the most important energy transition trends are decarbonization and electrification. Solar PV will be one of the right solutions for the advancement of clean energy development in order to achieve greenhouse gas emissions reduction target, and net-zero in 2060,” said Eka Satria, CEO, Medco Power Indonesia. “Currently, we are developing a 26 MWp captive solar project for mining operations in Sumbawa and 2×25 MWp utility-scale solar projects in Bali, which is our commitment to Indonesia’s clean energy development that is aligned with the Government of Indonesia’s target to achieve 23% of its primary energy from new and renewable energy by 2025.”

The release of Scaling Up Solar marks the latest report in a series to advance decisive and immediate climate actions and accelerate renewable energy in emerging markets. Michael R. Bloomberg, in his role as the United Nations Secretary-General’s Special Envoy for Climate Ambition and Solutions, and as founder of Bloomberg L.P. and Bloomberg Philanthropies, is committed to increasing transparency by making data and analysis available in service of building a clean energy future. BloombergNEF and Bloomberg Philanthropies also recently released the Climate Policy Factbook, which analyzes G-20 nations, including Indonesia, across three key policy areas for climate action.

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