Jakarta—Stranded assets are one of the most significant risks of asset impairment facing fossil fuel-based energy systems, especially in an increasingly urgent climate crisis. Stranded assets occur when an asset is judged to be obsolete, uneconomic, uncompetitive, or unproductive before it reaches its productive or useful life. This becomes increasingly relevant with the global push to stop coal-fired power plants (PLTU) construction and use.
Farid Wijaya, Senior Analyst at the Institute for Essential Services Reform (IESR), explained that coal-fired power plants are one of the largest sources of carbon dioxide emissions, contributing to more than a third of energy sector emissions. The country’s policy to fulfil global commitments to reduce GHG emissions and mitigate global warming will undoubtedly impact PLTU operations in this country. The Paris Agreement urges the world to keep the earth’s temperature below 2 degrees Celsius, even maintaining an increase of 1.5 degrees Celsius or lower.
“Stalled assets can be buildings, equipment, logistics and transportation, or the project value of fossil fuel-dependent industrial activities. Based on IRENA’s 2022 study in Indonesia, 85 per cent of idled assets are estimated to come from the fossil fuel exploration industry. Some of the factors that trigger stalled assets include government policies that limit the use of fossil fuels, the implementation of carbon taxes and trading, energy price fluctuations, the removal of fossil fuel subsidies, and the shift to renewable energy as part of efforts to realise Indonesia’s golden 2045 target and NZE 2060 commitments,” Farid said.
Farid suggested that there is at least a roadmap for an energy transition from fossil energy to renewable energy, a detailed emission reduction roadmap, and a detailed renewable energy development roadmap to minimise the risk of stranded assets. This roadmap will serve as a reference for stakeholders when making decisions and taking steps in the face of the energy transition. To effectively mitigate risks, it is also necessary to map national policies and strategies, analyse asset impacts and risks, determine critical variables that affect stalled assets and plan for potential possibilities of utilising assets that have the potential or are assessed as stalled assets.
One easy and inexpensive step is to conserve energy. Energy conservation can be done in all sectors, including industry, transportation, and buildings, in line with the government’s target to reduce final energy intensity and final energy consumption nationwide. In addition, with energy conservation, the need for renewable energy assets to replace fossil energy will be less than if energy conservation is not carried out.
“Along with the commitment to the early retirement of power plants amid the climate crisis, the government needs to be careful in building new infrastructure for fossil fuels because this can make energy transition more expensive and increase the risk of stalled assets. In contrast, the transition to renewable energy is faster and cheaper,” Farid added.
The Indonesia Energy Transition Dialogue (IETD) 2024 event, which will take place on November 4-6, 2024, can be an essential moment to discuss the direction of Indonesia’s energy transition policy so that it can provide renewable energy for the industrial sector. The theme of IETD 2024 is “Realising a Just and Directed Energy Transition.” Indonesians can register at ietd.info to get involved in the IETD 2024 event.
This article is part of a collaborative media partnership between tanahair.net and the Institute for Essential Services Reform (IESR).
Source: https://iesr.or.id/mengantisipasi-aset-mangkrak-energi-fosil/
