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Indonesia aims to use gas in foreign-funded energy transition; critics cry foul

Mongabay - March 9, 2023

Hans Nicholas Jong, Jakarta – Activists have lambasted the Indonesian government's proposal to include gas in its clean energy transition program funded by industrialized countries.

They said the inclusion of gas-fired power plants in Indonesia's transition from fossil fuels to renewable energy would derail the country's bid to lower its emissions to contribute to capping global warming at 1.5 degrees Celsius (2.7 degrees Fahrenheit) above pre-industrial levels.

Indonesia was the world's fifth-largest greenhouse gas emitter in 2019, behind only China, the U.S., India and the EU as a whole. Its emissions largely come from deforestation and burning of coal, with the latter generating 61% of the country's electricity.

Emissions from Indonesia's power sector are projected to keep increasing as the country grows its economy, the largest in Southeast Asia and 16th largest in the world by nominal GDP.

As a part of its energy transition program to lower emissions from the power sector, the government plans to convert existing diesel fuel-fired power plants into gas-fired ones.

Energy and Mineral Resources Minister Arifin Tasrif argued that it's the fastest way to curb emissions, as gas-fired power plants emit fewer emissions compared with diesel.

"This is the fastest way to reduce emissions and costs, from diesel fuel-fired to gas-fired," he said on Feb. 17.

There are currently 5,200 diesel power plants in 2,130 locations throughout Indonesia. The plan is to convert at least 52 diesel plants into gas plants. At the initial stage of the plan, 33 diesel plants will be converted first.

The oil and gas director-general at the energy ministry, Tutuka Ariadji, said the conversion project was still at the auction stage and was expected to commence this year.

Arifin said his ministry hoped the gas conversion project could be funded by an energy transition deal called the Just Energy Transition Partnership (JETP).

Under the JETP, the G7 group of industrialized countries plus Denmark and Norway will deliver US$20 billion in funding over the next three to five years to help Indonesia speed up its transition from fossil fuels to renewable energy.

"We'll see. Hopefully [the gas conversion project] could be included [in the JETP], especially the funding [of the project]," Arifin said as quoted by news outlet Tempo.

The government's proposal has met with criticism. One critique centers around the government's claim that converting diesel plants into gas ones would lower greenhouse gas emissions.

Raphael Slade, the head of science for the United Nations' Intergovernmental Panel on Climate Change (IPCC) Working Group III Technical Support Unit, said diesel fuel and oil fuel-fired power plants are in the minority nowadays as many have been phased out after the 1970s oil crisis.

"But gas power plants will have lower emissions than those using diesel or using coal," he said.

When burned in a power plant, gas produces half the carbon dioxide of coal. Therefore, there is a role for gas for quite a long time within many of the energy transition pathways presented by the IPCC, Slade said.

"Whereas coal, the expectation is that to be eliminated a lot more rapidly," he said.

Nevertheless, Slade pointed out that gas is still a fossil fuel, not renewable energy, and thus will eventually have to be phased out as well. "The caveat to this of course is the sooner you reduce all fossil fuels emissions, the better," he said.

While gas produces fewer emissions than oil and coal, at 442 grams CO2 per kWh, gas still emits far more carbon emissions than renewable energy like onshore wind and solar (9 grams and 33 grams of CO2 per kWh respectively).

Furthermore, gas-fired power stations could emit even higher greenhouse gas emissions in their life cycle due to the emission of methane.

Methane is one of the most potent greenhouse gases, trapping as much as 85 times more heat than carbon in the first 20 years after escaping into the atmosphere through leaks during the transportation of gas.

Therefore, Indonesia's gas conversion project is at odds with the country's goal to reduce emissions in the electricity sector, according to Grita Anindarini, the deputy director of the Indonesian Center for Environmental Law (ICEL) NGO.

She also pointed out that a drastic reduction in methane is crucial in mitigating climate change.

IPCC's sixth assessment report stated that a third of methane emissions have to be eliminated from current levels by 2030 and about 45% by 2040 to limit global warming at 1.5 degrees C.

"This conversion plan is surely against IPCC's call for massive reduction in methane," Grita said.

Indonesia also signed the Global Methane Pledge during the 2021 U.N. climate talks in Glasgow, Scotland. Countries that sign the pledge commit to taking voluntary actions toward cutting global methane by at least 30% by 2030 from 2020 levels.

If this goal is achieved, more than 0.2 degrees C of warming could be eliminated by 2050.

More costly

Activists also pointed out that gas is highly volatile and more expensive than renewable energy.

A 2021 report by the Institute for Energy Economics and Financial Analysis (IEEFA) estimated that the project might be too costly for the state-owned gas distribution company, PGN.

PGN is tasked to deliver gas to gas-fired power plants that will replace diesel power plants.

The cost of this is estimated to reach US$2.5 billion, which will be used to construct small-scale liquefied natural gas (LNG) receiving terminals and gas distribution facilities. These units will deliver gas to smaller markets in eastern Indonesia.

Small-scale LNG is a niche segment of the gas industry, which involves a scaled-down version of LNG operations, transporting less than 0.5 million metric tons of LNG per year.

IEEFA energy analyst Putra Adhiguna said the economics of this gas conversion plan, which is based on small-scale LNG, are problematic. "Supply chain cost of LNG is known to be costly, and even more so at a smaller scale," Adhiguna said.

According to the report, the cost for small-scale LNG supply chains could reach 30-50% of the total gas price, whereas conventional LNG supply chains typically account for 10-20% of the gas price.

Furthermore, the build cost – per unit of capacity – of smaller LNG carriers (LNGC) is typically more than three times the cost of their larger counterparts, the report noted.

"There is a reason why small-scale LNG has been on the drawing board for such a long time; justifying its economics is a big challenge," Adhiguna said.


Developing gas-fired power plants also means more competition for renewable energy.

"The policy to convert diesel power plants to gas will close the room for renewable energy power plants, which progress is still very slow, just 12% [of the country's energy mix]," Greenpeace Indonesia climate and energy campaigner Bondan Andriyanu said.

The government has a target to increase the share of renewables to 23% of the national energy mix by 2025. And under the JETP program, the government targets to increase the renewables share in the energy mix to 34% by 2030.

Since 2011, the growth of the renewable energy share in the primary energy mix has been increasing, albeit slowly, with the annual growth of only 1-2%.

However, by the third quarter of 2022, the share of renewable energy declined to 10.4%, while the coal share increased to an all-time high of 43%, according to a report by the Institute for Essential Services Reform (IESR), a Jakarta-based think tank on energy issues.

Therefore, the government should've focused on developing renewable energy so it can meet its own target, Bondan said. "With the inclusion of gas to replace diesel power plants, it shows that the government is still being half-hearted in doing energy transition," he said.

Bondan called on the developed countries who made a deal with Indonesia under the JETP to not consider funding the gas conversion project.

"The G7+ countries shouldn't be hands off and they have to make sure that the JETP funds are used for renewable energy projects that speed up Indonesia's efforts to achieve net zero emisssions," he said.


Adhiguna, P. (2021). Indonesia's Small-Scale LNG Power Plant Conversion – A Triple Hit for PGN? Retrieved from Institute for Energy Economics and Financial Analysis website: https://ieefa.org/wp-content/uploads/2021/08/Indonesias-Small-Scale-LNG-Power-Plant-Conversion_August-2021.pdf

Source: https://news.mongabay.com/2023/03/indonesia-aims-to-use-gas-in-foreign-funded-energy-transition-critics-cry-foul