An analysis using the Just Energy Transition Finance Needs tool // JET-FIN
Indonesia’s Just Energy Transition Partnership (or ’JETP’) places a central focus on peaking and then cutting power sector emissions with the support of public and private finance. To help inform critical considerations in kick-starting the transition away from fossil fuel reliance to clean technologies we have developed an open-source Excel model, ‘JET-FIN’. This tool facilitates an analysis of the key finance needs for a just energy transition in Indonesia’s power sector. It covers different pathways, allowing users to adjust critical parameters and test their influence on potential investment needs over time.
Our analysis uses electricity sector pathways to systematically analyse the key elements of the energy transition in Indonesia that require financing, including:
- phase-out of coal
- clean build-up of new infrastructure
- regulatory interventions to facilitate a just transition, and
- additional institutional capacity needs.
The main findings are outlined in the report available for download on the left, with further details on our approach set out in the accompanying methods document.
Key findings
Delivering the JETP goals requires a major pivot in investments away from fossil fuels towards a rapid scaling-up of renewable capacity, storage, and grids.
We estimate almost USD 1 trillion of investment is required by 2050 for renewable technologies under the JETP scenario, presenting major opportunities for public and private investors to participate in driving clean energy growth. Around USD 4.3 billion of public subsidies would help catalyse a cost competitive roll-out of new solar PV and wind this decade.
Limiting the use of existing and new coal plants is fundamental to accelerating the transition.
Our analysis suggests that coal plant owners may face potential losses from reduced use of their assets in the order of USD 20-60 billion to meet the JETP scenario targets. Sharing this burden between owners, the Government of Indonesia, and IPG members, is critical for success. An incrementally rising carbon tax is one instrument that could raise revenues to compensate for their losses.
Phasing out coal will deliver enormous health benefits to Indonesians.
We find that limiting coal use to align with the JETP scenario can avoid 240,000 premature deaths up to 2050 in Indonesia and neighbouring countries, delivering economic benefits of USD 150 billion. These alone well exceed both coal plant owner potential losses and the volume of funding committed as part of the JETP.
Management of a just transition for workers requires early planning to mobilise financial and institutional capacities today.
Our analysis for the JETP scenario indicates a potential need to offer support packages for reskilling, relocation, and to cover temporary income losses, totalling at least in the order of USD 2.4 billion for employees in the coal sector that are disadvantaged by the energy transition. Further measures to boost economic activity in coal regions and support the social transition, beyond the scope of our analysis, will add to overall finance needs.
To capture the opportunities presented by the energy transition, it must be accompanied by enhanced institutional capacity.
To effectively manage the change, new and enhanced institutions at both national and sub-national levels need to cover activities such as system planning, licencing, policy implementation, as well as key aspects to enshrine justice throughout the process. These aspects include overarching governance structures, labour and social protection, and environmental safeguards.
