Global Support for Indonesia’s Renewable Energy Push

G20 supports national energy transition . . . 

The G20 Summit, hosted by Indonesia in Bali from November 15-16, has moved the dial on Indonesia’s energy transition and net-zero commitments. G20 leaders announced two policies in support of Indonesia’s ambitious energy transition agenda, the Just Energy Transition Partnership (JETP) and the Energy Transition Mechanism (ETM). The JETP, announced during the event on Partnership for Global Infrastructure and Investment, is a monetary commitment of G7 countries (plus Denmark and Norway) to provide C$26.5 billion in funding commitments, including grants, concessional loans, market-rate loans, and private investments, in support of Indonesia’s energy transition and net-zero strategy. The ETM is an investment co-ordination and delivery vehicle to fund Indonesia’s net-zero plan.

Public and private support . . .

Japanese Prime Minister Kishida Fumio has committed around C$664 millionin support of Indonesia’s renewable energy and grid networks as part of Japan’s Asia Zero Emissions Community Initiative. Private actors have also expressed support for the initiative. Contemporary Amperex Technology (CATL), for example, announced plans to support Indonesia’s “green” battery industry, including developing the EV value chain in Indonesia. A consortium of South Korean companies is also working on an EV factory in Indonesia as part of their supply chain diversification strategy.

Will the transition be sustainable?

ETM is expected to speed up Indonesia’s retirement of coal-fired power plantsahead of their expected life spans. And JETP is expected to support Indonesia’s goal of reaching a carbon emissions peak by 2030 and accelerating its switch to renewable energy. While Indonesia is moving toward a net-zero transition, the new strategies must account for relatively lax environmental policies in Indonesia that result in environmental degradation. Using an example of lithium-ion battery supply chains, Indonesia ranks among the lowest in terms of Environmental, Sustainability, and Governance (ESG) indicators by BloombergNEF. To ensure the sustainability of the transition strategy, Indonesia and its partners will need to incorporate ESG commitments into their funding packages.