Indonesia commitment on climate targets 

In 2021, Indonesian government shown more eager commitment to achieve the net zero emission by 2060, is which stronger targets than the enhanced national determined contribution (e-NDC).  The total emission reduction target under the e-NDC is 951 MT CO2eq without any international assistance compared to the baseline by 2030.  Emission reduction from energy sector is expected to contribute for 12% of the total emission reduction target in 2030. In 2021, the total emissions from energy sector in Indonesia was approximately 600 million tonnes of CO2-eq with power generation took up to 40% of it. Transport and industry sectors accounted for 25% of the total energy emission in 2021.  

The deployment of low carbon and emerging technologies (such as CCUS and hydrogen) is expected to contribute significantly to achieving the net zero target by 2060. Hydrogen can offer an alternative solution for decarbonizing the energy system in Indonesia considering its significant renewable energy potential. To accelerate the development of hydrogen, the MEMR of Indonesia released its national hydrogen strategy in 2023. Under the 2023 national strategy, the Indonesian government aims to implement three key measures covering diversification on energy supply sources, expansion of  domestic demand, and creation of export market for hydrogen.  

What are Indonesia’s Main Initiatives to Utilise Hydrogen? 

The high potential of bioenergy, hydropower, solar, and other renewable energy types provide huge potential for hydrogen development in Indonesia. The excess energy from renewable energy sources could be further utilised to produce green hydrogen, with the potency to provide stability and reliability to the power grid to some extent. The utilization of green hydrogen in supporting net zero emissions (NZE) is expected to start in the transportation sector in 2031 and the industry sector by 2041. The current hydrogen consumption in Indonesia is mostly dominated by the industry sector (urea (88%), ammonia (4%), and oil refinery (2%)). Highlighting the projected demand increase of hydrogen in 2060 (about 609 Petajoule (PJ), ensuring expansion of domestic supply and demand for hydrogen is crucial, particularly in the transportation sector. The total demand for hydrogen in the transportation sector in Indonesia is estimated to be 29.2 kilo tons of H2.  

Given Indonesia’s archipelagic background with a strategic geographical location in the world’s trade route, Indonesia has the potential to export hydrogen and its downstream products to the global market. To support it, Indonesia needs to develop low-carbon hydrogen products, expand low-carbon fuels as export commodities, and establish bilateral agreements and cooperation to supply the national demand for hydrogen. These strategies serve as the fundamental initiatives for hydrogen development in Indonesia. 

What are Indonesia’s Challenges in Utilising Low-Carbon Hydrogen Technology and proposed ways to tackle? 

Although the above-mentioned strategies should allow Indonesia to fully utilise its hydrogen potential, the country faces several challenges. The main challenge is the high production cost of hydrogen due to the early stage of its development and deployment.  Moreover, the undeveloped national hydrogen market, the uncertain demand and supply of hydrogen, and uncertain funding availability, not to mention the absence of a long-term regulation to govern hydrogen development, create additional huge obstacles for Indonesia to fully utilise its hydrogen potential. Indonesia also lacks infrastructure for hydrogen storage and logistics, mainly due to insufficient investment from the public and private sectors. Certain measures need to be implemented to tackle the existing challenges in utilizing hydrogen technology in Indonesia.  

High cost of low-carbon hydrogen production posed as the main challenge amongst other obstacles. Low-carbon hydrogen from electrolysis would cost approximately USD 3.4 – 12/kg H2, compared to hydrogen production from unabated fossil-based sources, which ranges from USD 1.0 – 3.0/kg H2. It is estimated that low-carbon hydrogen from solar PV could reach USD 1.6/kg H2 by 2030, assuming drastic cost reduction for electricity. To tackle this challenge, the Indonesian government should provide supporting policies and regulations to ensure the development of hydrogen technology in the long-term, such as facilitating and securing investment opportunities from the private sector through the certain investment environment and ensuring a safe, reliable, and efficient production of hydrogen through a standardised procedure.  

In addition, the investment in renewable energy should be optimally allocated to achieve the best possible outcome for low-carbon hydrogen utilisation. For instance, Sumba and Timor Island in the southern part of Indonesia possess high solar irradiance which could be harnessed to produce solar energy optimally. Consequently, high solar irradiance could be translated into cheaper hydrogen costs, due to the lower Levelized Cost of Electricity (LCOE) as it would produce more power (per land area) than other regions in the country. Besides renewable energy, nuclear also serves as a versatile source of hydrogen, where hydrogen could be produced through steam reforming, thermo-chemical water splitting, electrolysis, etc. Although speaking from the cost perspective, hydrogen production from nuclear energy would be less competitive, ranging from USD 3.18 to 6.77/kg H2 without incorporating the capital expenditure of nuclear power plants, compared to fossil fuels or even renewable sources. Alternatively, other countries have different measures to tackle the challenges, as highlighted in their own national strategies. 

What Could We Learn from Other Countries’ Strategy? 

Many Advanced Markets and Emerging Markets and Developing Economies (EMDEs) have developed some sort of hydrogen strategy to pave the way for implementing hydrogen technology in the future. Japan is the first country to establish a national hydrogen strategy, with the target to achieve lower hydrogen power generation costs below gas-fired power generation costs by 2050. Japan’s national hydrogen strategy emphasizes the industry and safety aspects of hydrogen. To lower hydrogen production costs, Japan stressed expansion demand and ensuring a stable supply of hydrogen by incentivizing the private sector and strengthening international cooperation.  

The same goes with South Korea, which released its national hydrogen economy strategy in 2019. South Korea’s national hydrogen economy roadmap provides comprehensive strategies to fully utilise low-carbon hydrogen in the transportation and energy sector as a means of decarbonisation. Supporting policies, such as clear hydrogen guidelines and financing schemes could provide price stability so that hydrogen/ammonia could compete with liquified natural gas (LNG) in a hydrogen economy.  

In the ASEAN context, Singapore is the first to release a national hydrogen strategy in ASEAN back in October 2022, followed by Malaysia a year later with its national hydrogen economy and technology roadmap. Both countries agreed that low-carbon hydrogen posed one of the most feasible ways to achieve the nation’s decarbonisation targets and both countries aimed to develop the nation’s hydrogen economy. Singapore focused more on international cooperation and supporting hydrogen technologies advancement with key decarbonisation solutions for maritime and aviation sectors, while Malaysia used a multiphase approach to develop the country’s hydrogen economy. The roadmap implied that the funding for hydrogen needs to be sustainably sourced for creating domestic & export hydrogen economy.  

What Should We Do to Support Hydrogen Development in ASEAN? 

As the ASEAN energy demand will triple by 2050, new and emerging technologies from cleaner sources of energy like hydrogen should be further studied and developed to support the region in meeting the rising demand. To accelerate its development and deployment in ASEAN, a holistic assessment and clear hydrogen roadmap are necessary.  

Amid the situation differences between the above-mentioned hydrogen strategy with ASEAN, lowering the cost of hydrogen production is the centre of the target which significantly affects the stability of hydrogen supply. Eventually, it affects the demand expansion target of hydrogen. Supporting to this centre targets, incentives for the private sector and technology innovation are two key measures applied in most of the hydrogen strategies available. Under this context, a holistic approach and clear roadmap for policy direction on hydrogen strategy is crucial. Finally, fostering cooperation among ASEAN and with international dialogue partners would be also needed.