Transition to clean energy must be affordable and fair: Indonesia's coordinating economic minister

Indonesia is looking to phase down 5.5 gigawatts of power generation currently supported by coal-fired plants. PHOTO: REUTERS

SINGAPORE - Indonesia's Coordinating Minister for Economic Affairs Airlangga Hartarto called for a just and affordable transition to clean energy even as countries around the world scramble to secure energy resources in the short term amid a global oil and gas crunch.

"The most important thing for the energy transition is to obtain a just and affordable transition, and during the discussion in Davos, one of the most important issues that every country was looking at was their own energy security," said Mr Airlangga, who was speaking virtually in a panel discussion at the Indonesia-Singapore Business Forum held at the Hilton Singapore Orchard hotel on Tuesday (June 14).

Davos, Switzerland, is the venue for the World Economic Forum, an annual gathering of business, government and civil society leaders to discuss global issues. The event resumed last month following a two-year hiatus due to the Covid-19 pandemic.

Mr Airlangga noted that the component of financing would determine not only the affordability of projects that support the energy transition, but also the prices which consumers would eventually pay. He said this in response to a question by Mr Warren Fernandez, editor of The Straits Times and Editor-in-Chief of the English/Malay/Tamil Media Group, who was moderating the panel.

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Indonesia's Coordinating Minister for Economic Affairs Airlangga Hartarto calls for a just and affordable transition to clean energy at the Indonesia-Singapore Business Forum held today Jun 14, 2022.

The minister added that the country is looking to phase down 5.5 gigawatts of power generation capacity currently supported by coal-fired plants and turn to renewable energy instead.

Mr Airlangga also noted that Indonesia is currently looking at developing renewable energy projects with Singapore in geothermal, hydro, wind and solar power.

According to a Bloomberg report in early June, Indonesia is looking to subsidise renewable energy projects, as well as open its first nuclear power plant by 2045, in a draft legislation to help it reach its net-zero emissions goal.

The Bill, which requires approval from President Joko Widodo and Parliament before becoming law, positions the country on a path that would ensure all 270 million residents have access to power while also making the country entirely reliant on clean energy by 2060.

Panellist Jeffrey Jaensubhakij, group chief investment officer of Singapore's sovereign wealth fund GIC, said governments have a big part to play in attracting investment for energy transition projects.

“Obviously, the project risks are potentially enormous, and (it is important that) governments come in with standardised PPAs (Power Purchase Agreements), where people can know that if we are going to invest in a certain country that the PPAs will stand up to regulatory and legal frameworks,” he said.

He added that governments could consider making initial investments in such projects and then transferring them over to the private sector at a later stage.

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At a panel discussion in the Indonesia-Singapore Business Forum, Jeffrey Jaensubhakij, group chief investment officer of Singapore's sovereign wealth fund GIC says it is important that governments come in with standardised Power Purchase Agreements.

Singapore Manpower Minister Tan See Leng, who was a member of the panel, echoed the importance of collaboration on climate change, especially when it is a central issue for countries across the world.

“I think when countries come together, where clarity is provided in terms of pathways, then the costs can actually be distributed and shared. Likewise, the risk profile, given the fact that clarity also breeds certainty... actually drops. Then there is a lot more confidence from the private sector to come in and invest in the public sector,” he said.

He added: “This is a perfect, wonderful opportunity especially for Asean... especially for close neighbours, for instance like Singapore and Indonesia and the rest of Asean, to come together to develop the regional grid for renewable energy.”

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