Grants Only 1.4 Percent, Energy Transition Potentially Hampered

Of the total energy transition cooperation funding commitment of 21.5 billion US dollars, the grant portion is only 300 million US dollars or 1.4 percent. South Africa, which has a grant share of only 4 percent, has also received criticism.

The following article was translated using both Microsoft Azure Open AI and Google Translation AI. The original article can be found in Hibah Hanya 1,4 Persen, Transisi Energi Berpotensi Terhambat

KOMPAS/RONY ARIYANTO NUGROHO

Solar Power Plant

The grant portion in the Just Energy Transition Partnership or Just Energy Transition Partnership/JETP is currently only 300 million US dollars or 1 .4 percent of the total committed funding which reached 21.5 billion US dollars. The portion of grants which is much smaller than loans is considered to have the potential to become a burden in implementing JETP.

In public communication regarding the investment plan draft for JETP, which was held by the JETP Secretariat online on Friday (3/11/2023), it was stated that JETP's current funding commitment totals $21.5 billion. This funding is divided into private funds of $10 billion and public funds of $11.5 billion.

Of the 10 billion US dollars in public funds, the grant portion is only 300 million US dollars. The remainder is loans with soft terms (conssessional) worth 6.9 billion US dollars, guarantees (guarantee) 2.1 billion US dollars, nonconsessional loans 1.6 billion US dollars, equity/investment of 400 million US dollars, and undefined amount of 300 million US dollars.

Director of Public Policy at the Center of Economic and Law Studies (Celios) Media Wahyudi Askar believes that JETP can actually accelerate energy transition efforts while addressing socio-economic impacts. It can also strengthen governance and encourage funding to developing countries (global south).

Also read: Cirebon-1 PLTU "Early Retirement" Agreement Sought This Year

"However, it is necessary to carry out a cost and benefit analysis and micro-simulation to see the impact. "If the percentage of grants is minimal compared to loans, it could create a significant financial burden on organizations or BUMN involved in the energy transition," said Media, Wednesday (8/11/2023).

This could affect the ability of organizations or state-owned enterprises to invest in technology, infrastructure, and sustainable practices. Loan repayment obligations may actually hinder progress in energy transition by limiting the ability to adapt to changing situations.

He added that the small portion of grants compared to loans would also face challenges in gaining support and approval from stakeholders, environmental advocates and the general public. Because, this condition is considered to support the interests of the global banking or financial sector (free riders) rather than environmental or social goals.

"If that's the case, the agreement and principle of collaboration will be difficult to achieve," he said.

He compared it to the South African JETP which has a grant portion of 4 percent, which actually also received various criticisms. "Therefore, the stages of absorbing public aspirations and initial negotiations are very important," he said.

The JETP funding commitment is directed at five investment focus areas(investment focus areas/IFA). The first, called IFA 1, is transmission development. IFA 2 is the early termination of operations of coal-fired steam power plants (PLTU). IFA 3 is a controllable and constant acceleration of renewable energy. IFA 4 is the acceleration of renewable energy which is variable (depending on the weather). IFA 5 is improving the renewable energy supply chain.

The small portion of grants compared to loans will also face challenges in gaining support and approval from stakeholders, environmental advocates, and the general public. (Media Wahyudi Askar)

Head of Secretariat JETP Indonesia Edo Mahendra said, what we will try to optimize first are IFA 1 and IFA 2. "In our opinion, IFA 1 and IFA 2 are what are needed, whether it is grants or loans< i> high concessional or mixed financing structures (blended finance). "This (priority) approach is what we chose," he said.

Edo emphasized that the JETP Secretariat does not manage funds, but only coordinates and analyzes studies. Indonesia has an energy transition task force and a country platform that will determine which project to analyze. "So, the hammer (on the project) is on the government through the country platform and task force," he said.

KOMPAS/IWAN SETIYAWAN

The Coal-Fired Steam Power Plant (PLTU) in Pelabuhan Ratu village, Pelabuhan Ratu District, Sukabumi Regency, West Java, generated electricity on Friday (18/4/2014). The PLTU, which has a capacity of 2x350 MW, is part of the government's 10,000 MW power plant project to assist with the electricity supply to the Java-Bali grid.

Energy transition project

Meanwhile, senior analyst of the Institute for Essential Services Reform (IESR), Raditya Wiranegara, stated that the procurement process for renewable energy plants often encounters various obstacles. Among these are frequent collisions with project preparations, including network connectivity studies, land acquisition, and permit-related affairs before the bidding process.

Also read: Waiting for Inclusivity in the JETP Program

"In Indonesia, this is still a responsibility of the developers, which makes the prospect of renewable investment only accessible to certain 'players'. Policy reform that emphasizes efficiency and ease in the procurement of renewable energy generators is absolutely necessary if the target expansion in capacity is to be achieved," he said.

In addition, the aspect of justice by involving community participation is also crucial in the Comprehensive Investment and Policy Plan (CIPP) of JETP. Based on IESR's study, mitigating the impact of energy transition in coal-producing areas is important. This includes, among other things, strengthening the capacity of central and regional government institutions as well as diversifying the economy towards sustainable economic development.

Previously, in early November, the JETP Secretariat released the CIPP JETP draft to the public, which can be accessed through the website www.jetp-id.org. Feedback from the public will be collected before Tuesday (14/11/2023) and will be processed to become the foundation for finalizing the CIPP document. According to the plan, CIPP will be launched before the 28th United Nations Climate Change Conference (COP) in Dubai, United Arab Emirates, on November 30, 2023.