Indonesia, key to energy transition in the region – Opinion
Harsh Vijay Singh and Pedro Gomez
Monday, April 26, 2021
The global energy transition has taken many steps over the past decade, exceeding most expectations. Thanks to technological innovation, entrepreneurship and the risk-taking of political decision-makers and companies, the installed capacity has been multiplied by seven for solar photovoltaic and three-fold for onshore wind since 2010.
Formerly considered a pipeline, the share of renewable energies in the electricity mix is higher than fossil fuels in some countries. The last decade has also seen the number of people without access to modern forms of energy decline dramatically.
But there is still a long way to go. In 2019, 81% of the world’s primary energy supply still relied on fossil fuels. And while the share of coal in the electricity mix is steadily declining, the volume of electricity produced from coal has increased in absolute terms – mainly in regions where energy demand is on the rise.
Analysis of a decade of comparative data from World Economic Forum Energy Transition Index 2021 indicates that only 10% of the 115 countries analyzed have maintained a steady upward trajectory towards energy transition. While most countries have made some progress, steady progress has been a challenge.
As we enter the decade of deliver and act, when promises and commitments are meant to translate into action, maintaining consistency of progress is of paramount importance for a rapid and efficient energy transition. Along with speed and direction, emphasis should also be placed on the resilience of the energy transition, which makes progress irreversible and allows the process to bounce back from disruptions.
As the global energy transition progresses, the risk landscape for the transition is rapidly changing. Accelerating gradual progress will depend not only on continued technological progress, but also on taking into account the socio-economic and geopolitical ramifications of the energy transition.
In this regard, the ongoing recovery efforts from the COVID-19 pandemic offer five crucial takeaways also revealing some blind spots that can potentially undermine hard-earned progress.
First, energy remains strongly associated with economic growth.
Addressing this compromise is at the heart of the energy transition. Recovery efforts to mitigate the economic damage caused by COVID-19 are expected to be an important ecological catalyst. Yet despite historic emission reductions caused by lockdowns, emissions in many countries quickly rebounded to pre-pandemic levels.
Moreover, while billions of dollars are pledged and effectively channeled into sectors related to energy transition, a majority of these have been allocated to carbon-intensive sectors in most countries, potentially blocking emissions. for years. Investing in green and future-ready infrastructure can be a powerful way to boost economic growth and create jobs.
Second, not all economic recoveries will support the energy transition in the same way.
As the global economy returns to normal, forecasts suggest emerging and developing economies are on track for a slower recovery, many are not expected to return to pre-pandemic gross domestic product levels until 2023 , according to the International Monetary Fund. The prospect of a divergent economic recovery and the resulting budgetary challenges will limit their ability to support investments in the energy transition. In the short term, it is important to speed up vaccine production and distribution and ensure equitable distribution so that emerging and developing economies can rebound quickly.
Third, we must ensure the protection of the most vulnerable.
The pandemic has highlighted the devastating effects of income inequality, both in terms of the increased risk of contagion and the economic costs associated with the loss of income and jobs. The impact of the energy transition will be equally disproportionate for vulnerable segments of society – for example, due to labor market dislocations along the value chain from conventional energy sources and accessibility issues. resulting from reforms of carbon subsidies or taxes.
Addressing distribution considerations by prioritizing ‘just transition’ pathways, with an inclusive approach to assess energy policy and investment decisions, is essential for the inclusiveness of the energy transition.
Fourth, the challenges of international collaboration remain.
The COVID-19 pandemic has exposed the limits of international cooperation to mitigate and respond quickly to the global health emergency. Climate change, the main driver of the energy transition, is already creating food and water shortages in many parts of the world and is expected to trigger an unprecedented wave of migration in the near future, in addition to the trade and competitive implications of taxes. on carbon.
This will likely further test the strength and effectiveness of international collaboration, which will require the development of strong cooperative mechanisms among all stakeholder groups to meet this globally shared challenge.
Fifth, we must convince all citizens.
Uneven public compliance with mitigation measures and reluctance to immunize have highlighted challenges in mobilizing public support to deal with a rapidly worsening emergency. Research suggests that people underestimate the effects of hazards that have exponentially growing, long-term horizons, or that could take place in faraway places. At the same time, inconsistent communication and administrative errors can lead to loss of trust and lead to misinformation.
Given the ubiquitous presence of energy in the fabric of the modern economy and society, the energy transition has systemic implications and requires the active participation of individuals. With delays spanning decades into the future, the perceived inadequacy of individual action for a collective problem, or extreme weather events occurring in remote parts of the world might not convey the scale and need. speed of energy transition to individuals. This underlines the urgency of strengthening literacy on the energy transition to ensure the active participation of all layers of society.
As Southeast Asia’s largest energy consumer and source of growing demand, Indonesia is the key to an efficient energy transition in the region. The country ranks 71st out of 115 countries according to the 2021 Energy Transition Index and has improved its ETI score by 6% since 2012, with the most significant improvement in transition readiness (10%).
The energy system is essential for economic growth in Indonesia, both as a source of export income, an important source of employment and a source of competitiveness. The complexity of the energy transition imposes compromises on emerging economies, as shown by the growing share of coal in power generation in the Asia-Pacific region.
Indonesia has made great strides in energy access and security over the past decade, both in terms of access and reliability.
The country can aim for accelerated progress on the energy transition by taking bold steps for the environmental sustainability of the energy system, in particular by reducing the carbon intensity of the energy supply which has increased significantly over the past decade.
A robust environment conducive to energy transition, characterized by increased political commitment to energy transition, mechanisms to attract capital and investment, and fair transition pathways to ensure a fair distribution of the costs and benefits of energy transition are essential to accelerate progress in Indonesia.
Harsh Vijay Singh is Project Manager, Platform for Shaping the Future of Energy, Materials, and Infrastructure, and Pedro Gomez is Head of Oil and Gas Industry at the World Economic Forum.