After some tough negotiations, the Indonesian government and developed countries grouped in the International Partner Group (IPG) finally launched the multibillion-dollar non-binding Comprehensive Investment and Policy Plan (CIPP) to achieve net-zero emission in the electricity sector by 2050 with more ambitious targets for emission reduction and the development of renewable energy, but excluding off-grid coal-fired power plants.

Off-grid coal-fired power plants, mainly captive power plants built to power mining smelters, remain a contentious issue and Indonesia and IPG countries agreed to revisit the issue at a later date. For now, they will focus on the on-grid power plants as part of the Just Energy Transition Partnership (JETP) process.

Indonesia agreed to lower its emission peak in the electricity sector to 250 million metric tons of CO2 by 2030, much lower than 290 million metric tons agreed by both parties in November 2022, and Indonesia's initial base value of 357 million metric tons. The Indonesian government is also committed to increasing the proportion of renewable energy to 44 percent of all power generations by 2030, much higher than 34 percent agreed in November 2022, and the 29-percent target under state-owned electricity company PLN's 2021-2030 electricity procurement plan (RUPTL).

Despite the higher targets, the funding commitment from IPG countries to help Indonesia achieve the targets remain the same at US$20 billion in total, including $10 billion in public funding from IPG countries and $10 billion in private funding from the Glasgow Financial Alliance for Net Zero (GFANZ), which is comprised of global commercial banks.

This $20 billion JETP funding would be enough to finance about 20 percent of the total funding needs of the US$97.1 billion needed to finance four investment focus areas by 2030, comprising of transmission lines and grid deployment with total investment needs of $19.7 billion, early CFPP retirement and managed phaseout of $2.4 billion, dispatchable/baseload renewable energy acceleration of $49.2 billion and variable renewable energy (VRE) acceleration of $25.7 billion.1  There is one more focus area in the renewable energy supply chain, but this area gets no funding commitment in the CIPP.

Funding for early CPPP retirement is another contentious issue during CIPP negotiations. IPG countries are reluctant to put their money behind CPPPs, even for their early retirement, as it is considered against their green taxonomy of financing.2  As a middle ground, Indonesia's early CPPP retirements under the Energy Transition Mechanism (ETM) platform, funded by the Asian Development Bank, is brought into the JETP. The $2.4 billion for early CPPP retirement in the CIPP is part of the ADB's funding commitment under ETM.

The government is currently facilitating two early CPPP retirement projects, the Cirebon-1 and Pelabuhan Ratu CPPPs, under ETM. Cirebon 1, with a capacity of 660 megawatts (MW), is targeted for early retirement by 2035, from the original date of 2042, with an investment need of around $300 million. The Pelabuhan Ratu plant, with a capacity of 1050 MW, is targeted for early retirement by 2037, from an original date in 2045, requiring about $830 million in investment.

As early CPPP retirement lacks interest from foreign funding sources, the government has no other option but to dip into its own pocket by allowing state budget funding for early CPPP retirement through the issuance of Finance Ministry Regulation No. 103/2023 on Oct. 13. In addition, the government has asked its sovereign wealth fund, the Indonesian Investment Authority, to participate in the early CPPP retirement.