Missing the bullseye: Systemic factors blocking the emergence of RET sustainable business models in Indonesia

Student thesis: Master

Abstract

The Government of Indonesia set ambitious targets for its transition towards a low-carbon economy that include boosting the share of renewables in the electricity generation mix to 23% by 2025 and 31% by 2050. However, with renewables accounting for roughly 13% of the total power production in 2017, the progress has been lackluster thus far. In a country of a burgeoning population, rising electricity demand, steadily growing economy, and unequal electricity access across the regions, translating these targets into activities on the ground is an onerous task. Any energy policy has to balance between access, security, and sustainability of electricity supply. The main objective of this exploratory research is to investigate why Indonesia is not moving towards the renewable energy targets it has promised under the Paris Agreement, specifically why significant third-party involvement for the purpose of boosting the share of renewable energy in its electricity sector is not occurring. It delves deeply into the barriers and opportunities for renewable energy penetration and, in doing so, reveals the main obstacles for the emergence of third-party driven activities in RE.

The research combines conceptual insights from three disparate strands of literature: Transitions Studies, Business Models, and System Dynamics. Transition concepts are used to study the actors, institutions, and material elements in the Indonesia electricity sector to uncover how they provide they provide the lock-in mechanisms to stabilize the current regime and prevent the emergence of SBMs. Meanwhile, Business Model Theory exposes the areas of alignment and de-alignment between the organizational logics of the current regime and SBMs. This analysis then feeds into the System Dynamics Modeling, which identifies the interactions and feedback loops between different regime elements, uncovering the leverage points for possible policy interventions. The study used a qualitative approach, involving the collection of both primary and secondary data. The secondary data was gathered through multiple literature reviews using variegated sources, desk research, and informal conversations with Indonesian colleagues. Empirical evidence came from fifteen semi-structured interviews with experts in government, state-owned enterprises, private corporations, startups, development agencies, think-tanks, consultancies, NGOs, and civil society

The findings indicate that, presently, the priorities of the majority of actors in the electricity sector conflict with renewable energy targets. The power over resources is concentrated among actors that have relatively little engagement and interest in developing renewable energy, providing blocking mechanisms for renewable energy targets. Poor electricity infrastructure, low electricity tariffs, high fossil-fuel subsidies make the economic case for renewables unviable, forcing them to compete with cheap coal-based electricity. Meanwhile, inconsistent and unclear policies and energy plans coupled with coordination problems in the multi-level governmental structure provide significant barriers for transforming RE targets into actions on the ground. These institutions and infrastructural elements are geared towards a fossil fuel-based electricity system, reinforcing the carbon lock-in and stabilizing the path-dependence of the existing regime. Concerted efforts by the government are seen to be required to address the aforementioned roadblocks through bold and sufficiently enforced electricity sector reforms. Such reforms could include: the splitting of PLN into multiple entities and liberalization of the generation and retail segments; new financial instruments (such as a coal tax and renewables surcharge) for developing RE and phasing-out subsidies for fossil-fuels; innovative pricing mechanisms for RE such as a mix of auctions, reverse auctions and more attractive Feed-in-Tariffs; establishment of an independent regulatory authority for the electricity sector to curtail discriminatory practices and streamlining processes; and integrated and adaptive energy policy to govern renewable energy targets and to enhance intragovernmental coordination.
Date of Award28 Aug 2020
Original languageEnglish
Awarding Institution
  • Eindhoven University of Technology
SupervisorHenny A. Romijn (Supervisor 1), Floor Alkemade (Supervisor 2) & J.F.G. (Sjef) Cobben (Supervisor 2)

Keywords

  • Sustainable Business Models
  • Electricity System
  • Renewable Energy Technologies
  • Indonesia
  • Technological Innovation System
  • System Dynamics

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