State of Play: Indonesia

Indonesia is a country with enormous potential to decarbonise its transport sector, including shipping – but can its government drive through an ambitious domestic ‘green’ strategy?

Leading Candidate for a Green Revolution

Indonesia is the world’s fourth most populous nation. 260 million people live on over 17,500 islands with over 108,000 kilometres of coastline. It is the world’s largest archipelagic state with 260 port administrations overseeing over 1,200 ports including 97 international bunkering ports and over 140 oil terminals. Around one million Indonesians are directly employed in domestic and international shipping.

The Indonesian government under Joko Widodo has focused on developing and modernising the nation’s infrastructure along with a programme of industrialisation, taking advantage of a large pool of labour to become a manufacturing, assembly, and export location for domestic and overseas corporations. The nation has become the fastest growing consumer of energy in the world.

Shortly after being elected in 2014, President Joko Widodo launched a five-year $50 billion plan to build up the maritime sector, including the expansion and development of 24 so-called strategic ports. According to a 2015 study by transport consultancy Frost and Sullivan, Indonesia was spending the equivalent of 24% of GDP on logistics compared to 14% in China and 8% in Japan, while sea transport accounted for just 6% of domestic freight traffic compared to 45% by land and 30% by air.

This is a country with enormous potential to decarbonise its transport sector including its maritime industry while building on both to modernise its economy and meet UN sustainable development goals.

A GHG Giant

Indonesia is the world’s fourth largest GHG emitter, with deforestation and peatland fires contributing most to that status, while transport is responsible for a small but increasing share of overall GHG emissions. As a tropical archipelago it is acutely vulnerable to climate change. The capital Jakarta is the fastest-sinking city in the world according to a 2018 study by the Bandung Institute of Technology which published data showing North Jakarta had sunk 2.5 metres in 10 years.

In 2015, the government pledged to cut GHG emissions by 29-41% by 2030 compared to ‘business as usual’. The wide range reflects the government’s estimate of possible progress if Indonesia acts alone to being able to act with international cooperation and financial support. The challenge for Indonesia is to achieve even the lower target while simultaneously achieving its development and economic growth targets.

Indonesia is a significant coal consumer and with Australia a top-two world coal exporter. It is the world’s biggest palm oil producer, deforesting millions of hectares of rainforest to clear land for palm oil plantations and using the felled timber in its paper, timber, woodchip and pulp export industries. From 2000 to 2015, Indonesia lost an average of 498,000 hectares of forest each year making it the world’s second biggest deforester after Brazil. In September 2018, President Widodo issued a presidential decree to place a three-year moratorium on new permits for palm plantations. But weak enforcement has failed to prevent further palm oil development.

Plans for Renewables

Indonesia relies on coal for over 50% of its electricity generation, with about a quarter coming from natural gas and around 10% from hydro-electric projects. The country has plans to be the world’s leading producer of geothermal energy for electricity generation – currently it is second after the US – but renewables make up less than 10% of total electricity production. The first wind farms opened in 2018 and plans are afoot across the archipelago for more wind turbines. The government aims for 6.4 GW of solar power by 2025, compared to 16 MW in 2017.

In some arenas, Indonesia can act in concert with its neighbours. Along with other ASEAN members, in 2018 Indonesia introduced road fuel standards equivalent to Euro IV effective from 2021 with ambitions to move to Euro VI which eliminates soot from vehicle exhausts.

Meanwhile over 19 million hectares of Indonesian national waters were declared a Marine Protected Area in 2017, although though this fell short of creating a maritime emissions control area.

Plans for Marine Fuels

Maritime decarbonisation comes lower down the list of the nation’s climate priorities for the moment.

The main focus recently has been on reducing Indonesia’s dependence on imported mineral oil products and replacing them with domestically produced biodiesel. This looks like a renewable fuel but it does involve the continuing deforestation of the nation’s rainforests despite the moratorium on new palm plantations.

Biofuels are expected to represent 30% of all transport fuel in Indonesia by 2025, helping to replace diesel which is 40% of transport fuel demand and is 40% imported.

Biofuels can make sense in nations like Indonesia with a large agricultural sector, rising energy demand and a growing domestic maritime industry. The government says that the relatively small output of biofuel processers means that the marine market is in smaller coastal and inter-island services located near to refineries or for use as ultra-low sulphur fuel in ports.

To supply feedstock for biofuel refineries, Indonesian palm plantations have expanded from around eight million hectares in 2009 to around 12.5 million hectares in 2020.  There may be more biodiesel available for domestic use in coming years without further plantations. This is because Indonesia’s biggest palm oil export customer, the EU, concluded in 2019 that palm oil cultivation leads to excessive deforestation and passed a law to phase out its use as transportation fuel between 2023 and 2030.

What of Hydrogen?

In October 2019, state-owned electric company, Perusahaan Listrik Negara (PLN), signed a Memorandum of Understanding with Toshiba Energy Systems & Solutions Corporation to adopt Toshiba’s hydrogen-based electricity generating system H2One with a target of ‘an advanced adoption of the commercial H2One in the archipelago of Indonesia by 2023.’ H2One uses renewable electricity to electrolyse hydrogen from water and store it in fuel cells for off-grid power, which can be used in remote locations such as many of Indonesia’s islands.  There has been no mention of using this fuel cell system for transport systems.

There are individuals and organisations in Indonesia who do make plans for fuel cells for transport. Eniya Listiani Dewi, Professor of Electrochemical Process at the Agency for the Assessment and Application of Technology, is one of the country’s leading experts in fuel cells. As manager of the Consortium of Fuel Cell and Hydrogen of Indonesia, she told reporters in September 2020 of her plans to create hydrogen-powered cars to cut pollution with the hydrogen made from bio-waste, methanol or water electrolysis. She has created a one litre hydrogen fuel cell producing one kilowatt hour of energy. She admits that the hydrogen production cost is currently much higher than for fossil fuels. But she plans hydrogen fuelled transport systems across Indonesia.

Massive Domestic Opportunity

The Indonesian flag fleet comprises 11,300 vessels of all types, including over 1,300 general cargo ships of below 10k DWT; over 600 smaller oil products tankers and bunker tankers;  around 70 small LPG and several small LNG vessels; 250 bulk carriers;  thousands of passenger vessels from water taxis up to inter-island ferries; over 500 Ro-Ro ferries; around 800 fishing vessels; and hundreds of tugs and harbour vessels. 

The government aims to convert many of these to biodiesel but the potential to skip to electrification with the electricity generated from renewables is enormous. Solar and wind are now cheaper per kilowatt hour to develop than coal, even when unsubsidised, according to Bloomberg New Energy Finance. And Indonesia’s vast hydro and geothermal energy potential could add to a revolution in green shipping, even supporting the 200-plus boatyards producing passenger boats, ferries, workboats, fishing boats and the like.

Firefighting Versus Strategising

Near-term event management impinges constantly on long-term plans. The Indonesian government retains ownership of several shipbuilding facilities. Plans to increase their capability to build ships up to 80,000 DWT appear to have faded in recent years with newbuilding demand, as have plans to build more CNG and LNG ships for domestic trade. The coronavirus pandemic cut domestic shipping activity by 17.5% in Q2 this year according to the Central Statistics Agency, while imports were down 11.7% and exports were down 16%.

Covid-19 has, however, thrown Indonesia’s renewables planning into doubt. The government has capped the domestic price for coal to support consumption, using 14% of the funds set aside for National Economic Recover to subsidise coal. This year’s geothermal auctions have been abandoned. Solar installations are down 70% year on year. Even the deadline to switch from mineral oil to biodiesel products by 2023 has been pushed back to 2026.

Conclusion: Vast Untapped Potential

Indonesia’s government has made clear that international assistance will be vital to help it to meet its climate action goals under the Paris Accord. Simultaneously, within the maritime space, there is no equivalent domestic market anywhere in the world. This gives the country a unique opportunity to be a prototype or test-bed for combined policy, finance and engineering changes to bring about decarbonisation of an entire domestic maritime system. It remains to be seen whether Indonesia and its international friends can visualise and capture this opportunity. 

Mark Williams

Mark Williams