Aligning Transition and Energy Security for “Net Zero Emissions”

November 15, 2022 - Changes are always happening. With civilization rapidly growing, energy must catch up with existing needs for many people's lives.

Specific discussions about the energy production process to a better form always flow. The G20 momentum created the B20 discussion with the theme Energy, Sustainability and Climate (TF ESC) Business 20 (B20) Task Force Indonesia.

Chair of Energy, Sustainability and Climate Business 20 Task Force (TF ESC-B20), Nicke Widyawati, in the "BloombergNEF (BNEF) Net Zero Summit" discussion, a series of B20, initiated by the Coordinating Ministry for Maritime Affairs and Investment and The Asia Natural Gas and Energy Association (ANGEA), explained that the sustainable energy transition process must occur to maintain sustainability.

However, the energy transition process cannot be achieved in a short time. It requires a variety of technologies, costs, and human resources that can fulfill the standards of meeting renewable energy needs.

Meanwhile, when the transition process occurs, the demand for energy needs also increases. Therefore, large-scale energy security must be maintained.

Pertamina's Strategy

Straightforwardly, Nicke Widyawati, also the President Director of PT Pertamina (Persero), explained various strategies to face alignment challenges between transitions and energy needs. To achieve the Net Zero Emission (NZE) aspirations while maintaining energy security in Indonesia, PT Pertamina has developed a comprehensive strategy that is delivered through two main pillars and three intermediate implementations. From the two main pillars, the first is to focus on the decarbonization business activities, and the second is a green, integrated energy business development.

Moreover, the three medium-term strategies that support the plan to drive Net Zero Emissions include developing carbon accounting standards that fulfill national and international standards.

The second is stakeholder engagement to fully support national NZE targets and commitments. This goal is supported by Pertamina's long-term investment strategy. Third, Pertamina's environmentally friendly sustainability business initiatives will focus on Biofuels, renewable energy sources, Carbon Capture System (CCS/CCUS), batteries and electric cars, hydrogen, and the carbon business itself.

Pertamina has also developed a strategy to support the energy transition by allocating capital costs (CAPEX) for low-emission energy and renewable energy development.

"We have set a goal to increase the Green Business share in Pertamina's revenue mix from 5 percent in 2022 to 13 percent in 2030," said Nicke when capital costs share for green energy.

Predictably, revenues from fossil fuels are expected to decline significantly from 86 percent in 2022 to 66 percent in 2040. The optimism's aim of the capital allocation has been coordinated with the Indonesian government and ensured that it is aligned with Indonesia's energy mix targets for new and renewable energy.

To offset the financing, Pertamina has also formulated a long-term investment strategy consisting of 14 percent Capex for green energy business actions. Furthermore, Pertamina continues to invest in fossil fuels and petrochemicals as the current business' backbone, to ensure that the energy transition will not interfere with energy security.

In addition to the capital investment strategy, Pertamina also collaborates with various parties to accelerate target achievement. Collaboration is needed in facing the same challenges during the energy transition, especially in technology and financing.

“Technology costs are still higher than fossil fuels. That is why we are open to partnerships and collaborations, to drive innovation and lower technology costs," explained Nicke.

Collaboration efforts are intensified because technology utilization in new and renewable energy still requires expensive costs, so the selling price to consumers is still high. In reducing these operational costs, financing issue is expected to attract more inward investment, both international and domestic to improve global financing mechanisms to support energy transition and decarbonization projects.**