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Part 2: Barriers of Indonesia’s slow clean energy transition

Hello, this is Cynthia from Think-team.

To remind you from my previous blog about why Indonesia has a rather slow clean energy transition here, I mentioned several economic barriers as the causes. In this blog, I would like to highlight some barriers to the policy and governance domain. Please note, this will become a little bit complicated.

During the interviews with some stakeholders, three perceived obstacles mentioned by the interviewees from policymaking and governance: 1) turbulent in policymaking, 2) complicated permits for renewable deployment, and 3) unattractive and unfair price regulation.

In general, some business actors are eager to contribute to the government's decarbonisation initiatives in the energy sector (i.e., 23% renewables in Indonesia’s energy mix by 2025). However, turbulent policymaking basically slows down the renewable uptake. This barrier is often mentioned by the stakeholders from society and the business environment. The frequent changes in policymaking affect decision making at the project level by investors might lead to unnecessary repetitive process (e.g., feasibility studies) that obviously requires additional resources and monetary capital. For instance, a ministerial regulation by the Ministry of Energy and Mineral Resources (MEMR), namely PERMEN ESDM No. 50/2017, has undergone many revisions every year until now, the latest revision goes by PERMEN ESDM No. 4/2020, which is also planned to be revised soon. Under this regulation, some issues are mentioned: the unappealing selling price (related to the economic barriers) and procurement mechanism set by the government from the business perspective. The renewable procurement is based on the BOOT approach (Build, Own, Operate, and Transfer) according to PERMEN ESDM No. 50/2017. This approach enforces the renewable project owners must transfer the asset to the Government to operate after the project's life cycle. Given that technology and land are the business actors' assets, this approach is not favourable for the private sector.

Another obstacle, the permit process is perceived as more complicated which is felt time-consuming and costly. It was highlighted by one of the interviewees that in executing a renewable project (probably encountered in other sectors too), the coordination and communication among government agencies at the local level are unclear. Ultimately, such mismatching and unfavourable policies must be revised and hinder the clean energy uptake.

Why such unalignment occurs? One of the arguments could be that policymaking often is not evidence-based or scientific-based policymaking. It is observed that the policymakers have a tendency to base judgments on their beliefs, and shortcuts based on their emotions and familiarity with information. Therefore, TIPPING+ aims to address multi-faceted problems of coal and carbon-intensive regions, including the Indonesia case, in which understanding of the problems, capturing societal shared-visions, and gathering discourse narratives and evidence (i.e., scientific-based) from different stakeholders are expected to enlighten the future towards decarbonisation. Later, policy dialogue with policymakers is planned to improve the policymaking process.

So, do you think Indonesia could suddenly shift toward a clean energy transition to catch up? TIPPING+ project will try to answer this question. Please look forward to more updates about the project. 😊

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