One Year Passes the Promise of IDR 300 Trillion JETP Program

In the JETP investment plan document (CIPP), projects are stated that can be funded by JETP public funding. Later, there will be a discussion. However, the government and donor countries must agree and be compatible.

The following article was translated using both Microsoft Azure Open AI and Google Translation AI. The original article can be found in Setahun Berlalu Janji Rp 300 Triliun Program JETP

KOMPAS/ADITYA PUTRA PERDANA

The JETP investment plan or comprehensive investment and policy plan (CIPP) was launched at the Ministry of Energy and Mineral Resources, Jakarta, Tuesday (21/11/2023). JETP is a funding commitment of 21.5 billion US dollars from developed countries and the private sector.

About a year ago, in the series of the G20 Summit in Bali, Indonesia "was showered" with funding commitments for the energy transition of 20 billion US dollars in the Just Energy program. Transition Partnership or JETP. We continue to try to fulfill this commitment. On the other hand, the portion of grants in JETP is very minimal and is dominated by soft loans.

JETP is a funding commitment worth $21.5 billion (currently increasing) or IDR 333.8 trillion (with an exchange rate of IDR 15,527 per US dollar). $11.5 billion comes from public funds of developed countries (International Partners Group/IPG), led by the United States and Japan. Meanwhile, $10 billion comes from several world-renowned banks that are part of the Glasgow Financial Alliance for Net Zero (GFANZ).

Indonesia certainly expects more from IPG's public funds, which take the form of grants (grants), loans with concessional terms (concessional), and guarantees, rather than from GFANZ which offers commercial loans. However, since mid-2023, it has been revealed that the portion of grants in JETP is very minimal. In fact, that form of funding is what is actually being pursued.

Until Tuesday (21/11/2023) or when JETP's Comprehensive Investment and Policy Plan (CIPP) was launched, the composition of funding forms had not changed much. The grant portion is only around 300 million US dollars or 1.4 percent of the total JETP funding commitment. Meanwhile, the concessional loan is around 6.9 billion US dollars.

Also read: Grants Only 1.4 Percent, Energy Transition Potentially Hampered

Undoubtedly, there is a concern that the debt will burden Indonesia. Akmaluddin Rachim, a researcher at the Center for Energy and Mining Law Studies (Pushep), stated on Thursday (30/11/2023) that Indonesia's bargaining power should be stronger, both in grant funding and in ensuring the availability of the funding commitment.

"Indonesia is rich in natural resources, particularly minerals and coal. However, it is also requested to follow global commitments related to emission reduction. In anticipating the energy transition, raw minerals are still highly needed and their processing will inevitably cause emissions. Our bargaining position should be stronger," said Akmaluddin.

The government, according to Akmaluddin, must be stronger in discussing and negotiating which projects are needed and accompanied by funding certainty. Even if in the form of soft loans, it must be ensured to be as soft as possible. Moreover, the Paris Agreement requires developed countries to provide funding for developing countries in taking action on climate change adaptation and mitigation.

Meanwhile, 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 the social impact economy. It can also strengthen governance and encourage funding to developing countries (Global South).

"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 impose a significant financial burden on organizations or SOEs involved in the energy transition," said Media.

Also read: Transmission Development and "Early Retirement" of PLTU Cirebon-1 Prioritas

This can affect the ability of the organization or state-owned enterprises related to invest in technology, infrastructure, and sustainable practices. The obligation to repay loans actually hamper the progress of energy transition by limiting the ability to adapt to changing situations.

Regarding concerns about the debt trap in JETP, Deputy for Infrastructure and Transportation Coordination of the Coordinating Ministry for Maritime Affairs and Investment, Rachmat Kaimuddin, stated that the government will ensure that Indonesia is not forced to do anything unnecessary.

"The generation of electricity is important and in accordance with our energy and industrial needs. If we need energy, we definitely need power plants. And if we need power plants, we definitely need investment. As long as the need is productive and generates added value, it's okay to borrow money. But if it's not productive, then we shouldn't." he said during the launch of CIPP JETP.

KOMPAS/IWAN SETIYAWAN

A chameleon perched in front of the pipe that delivers hot steam to the Kamojang Geothermal Power Plant (PLTP) in the regency of Bandung, West Java, on Thursday (30/9/2021). Three geothermal power plants managed by PT Indonesia Power are able to generate 140 MW of electricity that supplies the interconnection power grid of Java, Bali, and Madura. The first geothermal power plant in Indonesia, which has been operating since 1982, serves as an example of the utilization of new and renewable energy sources.

Coordinating Minister for Maritime Affairs and Investment ad interim Erick Thohir at that time also emphasized that productive debt was emphasized in the JETP. He then gave the example of motorbike credit which can be used only for traveling or used for motorbike taxis (productive).

"Well, there are debts that are unproductive and corruptive. Well, that's what we brushed. However, if productive debt is normal, entrepreneurs alone have 70 percent of their debt, their equity is 30 percent. "Productive debt is normal," said Erick.

Five times

Regardless of its type, Indonesia does indeed require a substantial amount of funding for its energy transition. As stated during the launch of JETP, the national requirement for achieving the energy transition roadmap by 2030 is $97.3 billion USD. This amount is nearly five times the total funding commitments of JETP.

Also read: The JETP Program Must Be Able to Prevent Unemployment

A number of targets in JETP have also been agreed upon by the Indonesian Government and IPG. Among these is the peak greenhouse gas (GHG) emissions in the electricity sector, specifically in the PT Perusahaan Perusahaan Perusahaan Perusahaan Perusahaan Perusahaan Gas Negara (Persero) or on-grid system, amounting to 250 million tonnes of CO₂ in 2030. Second, 44 percent renewable energy in the electricity mix in 2030. Third, net zero emissions (net zero emissions/NZE) in the electricity sector in 2050 .

Then, there are five focus areas for JETP funding. First, transmission construction. Second, early termination of coal-fired power plant (PLTU) operations. Third, acceleration of renewable energy that can be controlled and constant (dispatchable). Fourth, acceleration of variable renewable energy(weather dependent). Fifth, improving the renewable energy supply chain.

What will be a priority or is targeted to be implemented in the near future is the early termination of operations of PLTU Cirebon-1, West Java. "(What PLTU) Cirebon is pursuing first is to be a benchmark template (benchmark)," said Head of JETP Indonesia Secretariat Edo Mahendra, on the sidelines of the launch of CIPP JETP.

Apart from that, the need to build an electricity transmission network also emerged which JETP is also expected to support. Construction of the Java-Sumatra transmission, for example, to evacuate electricity from oversupply Java to Sumatra. Also transmission networks in other regions.

Edo explained that from JETP's public funding commitment, there are around 4.5 billion US dollars for projects that have been determined and around 7 billion US dollars for projects that have not yet been determined. In the future, Indonesia will offer energy transition projects to developed countries within the IPG and there will be discussions. Both parties must agree.

Also read: Waiting for Inclusivity in the JETP Program

The Charge d'Affaires of the US Embassy in Indonesia, Michael Kleine stated that the US and IPG members remain ready to support Indonesia's energy transition plan. JETP Indonesia can assist the world in combating climate change, including maintaining the average increase in Earth's temperature below 1.5 degrees Celsius.

"(Document) This investment plan is balanced and realistic. It will harness Indonesia's potential in renewable energy while providing reliable and affordable electricity," said Kleine.

KOMPAS/HENDRA A SETYAWAN

Farmers begin planting season near the row of wind turbines of the Tolo I Wind Power Plant (PLTB) in Jeneponto, South Sulawesi, on Sunday (23/6/2019). There are 20 wind turbines at PLTB Tolo, each with a capacity of 3.6 MW. Each tower has a height of 138 meters with a blade length of 64 meters.

Just transition

On the other hand, the energy transition in JETP is also related to mitigating the impacts caused, including to the lowest groups of society. Because, no one should be left behind in the energy transition. In fact, ”just” is ahead in JETP. However, it is considered that a just transition has not really been reviewed in detail.

Green Economy Program Manager of the Institute for Essential Services Reform (IESR), Wira Agung Swadana, believes that the aspect of justice is not yet sharply and specifically seen in the CIPP JETP. One of the areas he highlighted is how economic diversification can be created during energy transition, rather than simply shifting from coal to palm oil, for example.

He actually agrees with the diversification and economic transformation contained in CIPP JETP. "However, we hope that we don't just shift from job A to job B, for example becoming independent of coal or PLTU. Green economy principles do not have to apply to the entire energy sector or just one sector. Must be more varied. "That's what hasn't been seen," he said.

Wira added that JETP should be one of the ways to improve equal access to energy. Currently, there are still many areas in Indonesia that have not yet been electrified. JETP must aim to ensure that the community is connected to electricity for 24 hours. One option is the development of community-level renewable energy.

Apart from that, the portion of grants in a just transition must also be increased. IESR notes, currently the JETP funding commitment specifically for a just transition is 353 million US dollars or 1.6 percent of the total funding commitment. However, of the 353 million US dollars, 92 percent was in the form of concessional loans.

”Why does it have to be a majority of concessional loans? There should be more grants in this social-economic-politic project. Also, there must be new commitments, not old commitments rephrased. "This is important so that there is added value," said Wira.

Reducing GHG emissions, however, is a necessity in order to save the Earth from increasing environmental damage. However, implementation efforts must be focused, well-planned and inclusive. Funding commitments are a piece of the puzzle amidst the various existing challenges. Commitment also needs to be realized, not just euphoria.

Also read:

• The Energy Transition Needs to be Balanced by the Growth of Supporting Industries
• The Energy Transition Faces Challenges in Funding and Technology Transfer
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