Indonesia’s potential to produce decarbonized shipping fuels

A new report by UK-based consulting group Ricardo finds that Indonesia’s location, economic development, and vast renewable energy sources make it well suited to produce green maritime fuel. Entitled “Indonesia: fuelling the future of shipping – Low carbon shipping fuels for Indonesia’s shipping sector,” the report explores the context and potential for the adoption of zero- and low-carbon shipping fuels through the shipping sector of Indonesia.

The Ricardo study was funded by for the P4G Getting to Zero Coalition Partnership, which is jointly implemented by the Global Maritime Forum, Friends of Ocean Action, World Economic Forum, Environmental Defense Fund, University College London and International Association of Ports and Harbours. The aim of the partnership is to make zero emission vessels and fuels a reality and identify concrete and actionable growth and business opportunities that can contribute to sustainable and inclusive economic growth in the following target countries: Indonesia, Mexico and South Africa.

About 47% of Indonesia’s gross domestic product (GDP) comes from manufacturing, which relies on the export of manufactured goods across the world to large economies such as China and the United States.
Being able to offer low carbon fuels to shipping vessels and hence to decarbonize these exports will, according to the study, enable Indonesia to serve a future growing market and facilitate an attractive manufacturing hub to be established as the demand for low-carbon goods increases.

Indonesia’s strategic maritime location

Indonesia serves a large number of international vessels and occupies a key position along busy and important shipping routes. Among these are the Strait of Malacca and the Sunda Strait, which open even more international opportunities due to proximity to existing ports in Jakarta. Its strategic maritime position could enable the country to become a key player in the reaching zero-emission shipping by 2050.

“The study has identified that the most suitable options are hydrogen and ammonia for large commercial vessels such as containers and bulk carriers; small passenger and cargo vessels can be supplied through direct and onboard electrification. Along with Indonesia’s insular composition, its shipping traffic capture area, and its regional partners, this positions Indonesia as a key enabler for the decarbonization of the global fleet. Furthermore, this strategic position in the maritime sector allows Indonesia to further advance its ambition in reducing its national carbon footprint,” says Dr. Santiago Suarez De La Fuente, lecturer in Energy and Transport at the University of College London’s Energy Institute.

Fossil fuels make up 84% of Indonesia’s energy production

Currently, fossil fuels make up about 84% of energy production in Indonesia, having historically depended significantly on fossil fuels for electricity generation. The country has set renewable and decarbonization targets — to install 45 gigawatts (GW) of renewables by 2025 and an overall 29-41% GHG emission reduction by 2030. However, reaching these targets will require collaboration and government action.

“Regardless of the millions of tons of carbon dioxide emitted either by Indonesian or foreign ships crossing the Indonesian waters, Indonesia has determination to gradually lower its national carbon emission levels. The Indonesian government has promoted the transition of oil fuel to gas fuel for small boats. However, it is important to collaborate and to have collective actions by domestic maritime and energy industries as well as international organizations, such as the IMO, UNCTAD, and the World Bank to assist our efforts to introduce low-carbon technology,” says Basilio Dias Araujo, Indonesia’s deputy minister for Coordination of Maritime Sovereignty and Energy.

Benefits of zero-carbon shipping fuels extend beyond shipping

The adoption of zero-carbon shipping fuels has significant benefits and synergies for Indonesia far beyond the shipping sector. In particular, there is the potential to create a wide range of jobs within the supply chains of zero-carbon fuels, which can support Indonesia’s economy.

“There is the potential to create a wide range of jobs within the supply chains of zero carbon fuels, which can support Indonesia’s economy. Creation of green jobs across the whole range of skill and education levels will support a just and equitable transition towards a low carbon economy. In addition, the availability of zero carbon fuels can be used to decarbonize other sectors, such as heavy transport, mining, agriculture, manufacturing, and industry,” says Ingrid Sidenvall Jegou, project director at Global Maritime Forum.

However, although there is potential and several pathways available for Indonesia to develop new decarbonized fuels to serve its shipping sector, there lies a challenge in ensuring a sustainable and environmentally sensitive fuel production.

“Production of decarbonised shipping fuels is heavily dependent on the availability of natural resources. Within Indonesia, the options for generating renewable electricity or supplying biofuels in such a way that is truly sustainable, environmentally sensitive, and scalable vary between locations and contexts. The shipping fuel needs vary greatly as well — from servicing the large, international shipping lanes that pass through Indonesian waters, to supporting the thriving domestic shipping trade and transport sector. This means that there is a challenge, and an opportunity, to find the best option for decarbonised shipping fuels for each setting across Indonesia,” says Olivia Carpenter-Lomax, principal consultant engineer at Ricardo Energy & Environment.

The development of Indonesia’s zero carbon fuels sector should be approached with consideration to the synergies beyond the shipping sector to gain full benefit and to avoid potential pitfalls. The country has a limited but diverse renewable energy potential — enough to supply its domestic electrical demand as well as production of zero-carbon fuels for vessels bunkering in its ports; however, further thought is required to investigate these synergies, the report says.

“To accelerate the adoption of decarbonized shipping fuels, Indonesia needs to establish a roadmap consisting of national targets and strategies of shipping decarbonization as declared in 2020 by the High-Level Panel for Sustainable Ocean Economy, in which Indonesia is a member. This roadmap should contain clear and concrete steps towards the shipping decarbonization,” says Dr. Mas Achmad Santosa, CEO, Indonesian Ocean Justice Initiative.