Seizing Opportunities for Energy Transition and Transportation Electrification
So, what are we waiting for? The sooner the preparatory phase, feasibility study and land preparation are executed, the better. We must be optimistic!
The implementation of the green economic paradigm necessitates strong commitment, appropriate and consistent policies/regulations and funding.
In the New Institutional Economics perspective, these policies and regulations fall into the domain of formal institutions. The recent Group of 20 Summit in Bali brought fresh air for Indonesia’s green economy development. On that occasion, President Joko “Jokowi” Widodo signed an agreement with funding partners from the Group of Seven (G7) plus Denmark and Norway to provide financial support worth US$20 billion for the energy transition in Indonesia.
To be channeled in the form of either loans, investment or grants, the funding scheme is called the Just for Indonesia Transition Energy Program (JITEP), under the Just Energy Transition Partnership (JETP) program. The funding implementation will last for the next two to five years.
The implementation of the green economic paradigm necessitates strong commitment, appropriate and consistent policies/regulations and funding.
In the coming months, there will be a special task force to look into detail which projects will be funded under the JITEP scheme. In the JITEP/JETP program, Indonesia uses the Energy Transition Mechanism (ETM) platform for project mapping.
PT Sarana Multi Infrastruktur (SMI) will take up a central role in collaboration with several international and domestic institutions, including the International Monetary Fund (IMF), the Asian Development Bank (ADB) and the Indonesia Investment Authority (INA).
It will map out steam power plant (PLTU) projects as to which among them deserve prioritized termination to be replaced with new renewable energy (EBT)-based power plants, especially solar power plants (PLTS), in accordance with the latest criteria set by the Energy and Mineral Resources Ministry. The mapping also includes projects related to the development of the electric vehicle ecosystem in Indonesia.
Transportation electrification
Of the US$20 billion funds for the energy transition in Indonesia, half the sum comes from the public sector and the other half from the private sector among the G7 countries. Apart from financing the phasing out/termination of PLTU operations, the funds can also be used to accelerate the growth of the electric vehicle ecosystem in Indonesia.
The electric vehicle ecosystem may involve battery plus cooling system industry, electric bus manufacturing/fabrication/assembly industry, generating motor (plus cooling system), powertrain and electric bus chassis, steel and/or aluminum suppliers, as well as sensor and control systems.
This funding support gives us an opportunity to accelerate the transportation electrification program, especially bus-based public transportation. It is time for us to become the producer, not just the consumer, of electric buses.
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Regarding the minibus/SUV/MPV-class passenger electric car industry, we may delay our push for their industrial ecosystem development at home, thus leaving ourselves part of the regional or global ecosystem, because many foreign players are already well-established for mass production of electric vehicles and poised to seize opportunities ahead of 2030.
Manufacturers from South Korea (Hyundai) and China (Wuling), for example, have begun the development of their own electric vehicle ecosystem in Indonesia, by securing supplies of electric batteries and raw materials, building factories and even having started the production.
Significance of ASEAN market
With the pledged funds, we can move as early as possible to build a national electric bus ecosystem to make Indonesia the dominant electric bus manufacturer in ASEAN.
Regarding the design and construction of bus coaches, the industrial ecosystem has quite a lot of domestic manufacturing companies with expertise in coach-building. Higher education institutions, such as the Surabaya Institute of Technology (ITS), Gadjah Mada University (UGM), the University of Indonesia (UI), Surakarta State University (UNS), and the Bandung Institute of Technology (ITB), under the coordination of the Education, Culture, Research and Technology Ministry are also ready to support the ecosystem with research and development resources. Their involvement has even been running for decades.
Light but weight-resistant materials are needed to construct the bus coach to offset weighty batteries. It requires research and development support, especially from universities. State-owned train manufacturer PT Inka has produced electric buses with local content requirement (TKDN) reaching 65 percent, even though the production facility is still in the form of a workshop and the production capacity is still very limited.
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In the procurement of the fleet of the Merah Putih electric buses for delegates’ transportation during the G20 Summit, PT Inka collaborated with several universities and start-ups.
The start-ups were Braja Elektrik Motor (electric motor manufacturer) Ultima Design Otomotif (battery supplier), Solusi Produk Indonesia (SPIN/ electric vehicles marketing and Wiksa Daya Pratama (swap station maker). At the Inka workshop, the battery pack was assembled into an electric bus.
Other collaborations with the higher education consortium were conducted to develop the battery management system (BMS), engineering design, electric motor and controller. The set-up included system integration and data, design and management of air with HEPA filtering systems.
It was an encouraging team up in how the research and development entities (universities) synergized with electric bus industry players, even though the scale was still small. It can be expanded to the establishment of a large-scale national electric bus ecosystem in the future.
Manufacturing plants
In the next few years, we need plants with a large production capacity. Buses for inter-province public transportation (AKAP), intra-province public transportation (AKDP) and the tourism industry as well as those operated by the ministerial offices, which are almost entirely fuel-based, number around 30,000. Meanwhile, the number of public buses in Thailand, Myanmar and the Philippines is around 70,000, 30,000 and 20,000 respectively. The proportion of electric buses may be under 5 percent.
In the case of Vietnam and Cambodia, we may assume that the electric car market will be supplied largely by China due to their geographical proximity and the competitive price of Chinese products.
Assuming that all fossil fuel-based buses have to switch to EBT by 2030, we are faced with a seven-year transition, which means it will need more than 20,000 new electric buses per year to replace fuel based-buses in the four ASEAN countries (Thailand, Myanmar, Philippines and Indonesia), while Singapore, Malaysia, Brunei and Timor Leste need a relatively small fleet.
Not to mention other markets, such as Pakistan and Mexico. Pakistan has reportedly explored the possibility of ordering 14,000 units. For Indonesia alone, the need for new electric buses to replace fuel-based buses is around 4,000 units per year, whose procurement can be reinforced through various bus electrification programs.
The Transportation Ministry, for example, requires a large number of electric buses for the buy the service (BTS) program in a number of cities across Indonesia and in super-priority tourism destinations. Likewise, state-owned public transportation operator Damri and Transjakarta need a huge number of new electric buses to replace their fleets, some of which still operate with fossil fuel.
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In the early stages, at least we can identify a captive market for electric bus manufacturers such as PT Inka to align its mass production of electric buses, either independently or in collaboration within the electric bus ecosystem.
Thus, it is reasonable for manufacturing plants to be urgently established with an initial production capacity of 10,000 units per year. Next, the annual capacity can be developed up to 50,000 electric buses. A large production will be able to suppress the production costs for per unit, say between $100,000 and $200,000, for the manufacturing of a certain type like Chinese electric bus with a seating capacity of approximately 50 passengers and a cruising range of 250 kilometers.
The production of a small fleet of electric buses, such as in the procurement for the G20 Summit, with the coach measuring 12 meters in length, air-conditioned and installed with standard interior, could cost above S$300,000 per unit.
So, what are we waiting for? The sooner the preparatory phase, feasibility study and land preparation are executed, the better.
How much investment is needed? India can be a reference. It invested 600 crore rupees (equivalent to Rp 1.14 trillion) to build an electric bus plant with an annual production capacity of 10,000 units. In this case, India received technical assistance from Build Your Dreams (BYD), one of the Chinese electric vehicle manufacturers. For Indonesia, it is likely that the investment cost could be above India’s for the same capacity.
Regarding the use of the energy transition fund, if it comes from the public sector of the G7 countries, the mechanism is through state capital injections (PMN). If it comes from the G7 private sector, it can be through the foreign direct investment (FDI) mechanism.
From the policy perspective, it is necessary to prepare the regulations immediately that cover the aspects of electric bus safety and incentive system (fiscal/non-fiscal) to stimulate bus transportation companies (AKAP/AKDP), including those engaging in tourism, to start replacing their fleet with electric buses. An incentive system also needs to be put in place to invigorate national electric bus makers, including those which still have to import certain components, such as the electric control system, in the manufacturing process.
So, what are we waiting for? The sooner the preparatory phase, feasibility study and land preparation are executed, the better. We must be optimistic!
Wihana Kirana Jaya.
Wihana Kirana Jaya, Special Staff to the Transportation Minister
This article was translated by Musthofid.
