De-carbonization of the Electricity Sector Can Be Achieved at an Additional 5-26% of Business-As-Usual Costs
Jakarta, 3 October 2023 – De-carbonization scenario of the electricity sector towards Net-Zero Emissions (NZE) can be achieved with an additional cost of around 5-26 percent compared to the cost of scenario where no greenhouse gas (GHG) reduction target is set. This estimate is the result of an analysis of various levels of GHG reduction ambition and the readiness of Indonesia’s resources.
“The additional cost for NZE scenario options are only slightly above the cost of the business-as-usual scenario. However, the need for initial investment requires 68-98 percent increase,” Ping Yowargana, Coordinator of the Energy Future Initiative (MDE) explained during a launch and discussion session with MDE initiators in Jakarta, Tuesday (3/10).
MDE is a collaboration initiated by the International Institute for Applied Systems Analysis (IIASA), Katadata Insight Center (KIC), World Resources Institute (WRI) Indonesia, and the Indonesian Business Council (IBC). The project aims popularize an in-depth analysis of various energy transition scenario for Indonesia, including the NZE scenario, in order to mitigate fair and equitable climate challenge.
Ping explained that electricity as part of the energy sector is the main target of de-carbonization. The energy sector has contributed up to 75 percent of greenhouse gases (GHG) emission globally and 44 percent on a national scale as of 2020. “In addition to that, there are at least three supporting factors, which although not easy to implement, must be met in order to have effective mitigation and adaptation efforts,” he said.
First is related to optimal planning and implementation where the construction of power plants and additional network of infrastructure must be aligned with the potential, location, and timeframe of the demand for renewable energy resources.
Second, de-carbonization will shift the cost structure of the electricity sector. The overall cost of the electricity sector will increase by 26 percent, while the cost of using fossil fuels in the electricity sector will decrease by 80 percent by the end of the 21st century (USD3.6 – 5.9 trillion). This decline in consumption costs certainly reflects the sluggishness of the mining sector.
However, this is not all bad news for the national economy. At the same time, increasing cost of generator could provide a momentum to develop the manufacturing sector, hence supporting the transition to secondary industry.
Third, by 2050 the cost of solar panels is projected to drop drastically from the price today. Even though the cost of solar panels has decreased by 85 percent in the last 10 years, the continuity of declining trend in solar panel cost remain an uncertain assumption and will require joint efforts from all stakeholders to be realized.
MDE analysis concludes that NZE transition can be formulated to narrow the development gap within the country. In addition to carrying out the development mandate, this approach will also help fulfill the requirements for effective adaptation efforts.
Ping also explained that the importance of combining climate change mitigation and adaptation efforts will be reflected in cost efficiency. NZE transition costs will become cheaper when combined with equal distribution of electricity supply between regions. This means that effort for equal electricity supply is in line with climate change mitigation since utilization of renewable energy is spread across all regions.
MDE is looking into various scenarios of de-carbonization of national electricity sector. These scenarios follow different levels of ambition of GHG emissions reduction. The more drastic the reduction target in GHG emissions, the higher the responsibility and challenge for Indonesia.
“The national vision to achieve Net-Zero target is a form of Indonesia’s contribution to tackle global warming. However, it needs to consider the principles of justice. De-carbonization should not hurt people’s rights to utilize energy to improve welfare,” said Tri Mumpuni, the advisor to the MDE initiative.
“Data-based analysis needs to be presented in communicative way so it is easier for the public to digest. We hope that this can encourage openness and the formulation of Net-Zero transition efforts to better respond to development needs,” said Bambang Harymurti, advisor to the MDE initiative.
MDE initiative expects to encourage discussion on complex issues in a scientific, data-driven and open manner. In this way, MDE will bridge complex knowledge and public understanding in addressing the energy transition discourse. Details of the MDE analysis can be studied further through map visualization and infographics available on the Masa Depan Energi website.
Read the full report from Katadata.co.id in Bahasa Indonesia: Dekarbonisasi Sektor Kelistrikan Nasional Menuju Net-Zero Emission