Economic, Social, and Environmental Impact of Renewable Energy Investment: Empirical Study of Indonesia

Shofie Azzahrah, Sasmita Hastri Hastuti, Djoni Hartono

Abstract


Stipulated by the Paris Agreement, the Indonesian government has committed to reducing CO2 emissions from the power generator sector by achieving a national renewable energy mix share of 23 percent by 2025. Although the environmental impact may be obvious, there is a potential trade-off in environmental and social aspects of the energy mix transition that should be considered.  This study aims to identify the effect of renewable energy investment in the power sector based on economic, social, and environmental aspects. This was assessed through the examination of several indicators, including Gross Domestic Product (GDP), household income in rural and urban areas, employment, and CO2 emissions. Using Social Accounting Matrix (SAM) analysis, two scenarios are simulated in this study (1) we identify which renewable energy investment has the most significant impact (2) we examine the impact of non-renewable energy investment substitution to renewable energy investment. The result shows that the construction of hydropower plants generates the least emission but also moderate impact on socio-economic aspects compared to other renewable energy. In addition, emissions may be reduced higher if coal power plants are being substituted to only hydro and geothermal power plants.

Keywords


Emission; Investment; Power plant; Renewable energy; SAM

Full Text:

PDF

References


Ritchie H. and M. Roser. 2020. CO₂ and Greenhouse Gas Emissions. Our World in Data [On-line serial], Retrieved April 27, 2023 from the World Wide Web: https://ourworldindata.org/co2-and-greenhouse-gas-emissions.

Dimitrov R.S., 2016. The Paris Agreement on Climate Change: Behind Closed Door. Global Environmental Politics 16(3): 1-11.

IEA. 2019. CO2 emissions from fuel combustion highlights. International Energy Agency Publication [On-line serial], Retrieved April 20, 2022 from the World Wide Web: https://iea.blob.core.windows.net/assets/eb3b2e8d-28e0-47fd-a8ba-160f7ed42bc3/CO2_Emissions_from_Fuel_Combustion_2019_Highlights.pdf.

Dunne D., 2020. The Carbon Brief Profile: Indonesia. The Carbon Brief.

MOEF. 2018. Greenhouse gas inventory and monitoring, verification reporting in 2018. Ministry of Environmental and Forestry Publication [On-line serial], Retrieved April 16, 2022 from the World Wide Web: https://ditjenppi.menlhk.go.id/reddplus/images/adminppi/dokumen/igrk/lapigrkmrv2018.pdf.

MEMR. 2016. Energy Sector GHG Emission Inventory Data. Ministry of Energy and Mineral Resources Publication [On-line serial], Retrieved April 16, 2022 from the World Wide Web: https://www.esdm.go.id/assets/media/content/KEI-Data_Inventory_Emisi_GRK_Sektor_Energi.pdf.

NEC. 2019. Indonesia Energy Outlook 2019. National Energy Council Publication [On-line serial], Retrieved April 15, 2022 from the World Wide Web: https://www.esdm.go.id/assets/media/content/content-indonesia-energy-outlook-2019-english-version.pdf

Lucena J. de A.Y. and K.Â.A. Lucena. 2019. Wind energy in Brazil: an overview and perspectives under the triple bottom line. Clean Energy 3: 69–84. https://doi.org/10.1093/ce/zkz001.

Hahn Menacho A.J., Rodrigues J.F.D., and Behrens P., 2022. A triple bottom line assessment of concentrated solar power generation in China and Europe 2020–2050. Renewable and Sustainable Energy Reviews 167: 112677. https://doi.org/10.1016/j.rser.2022.112677.

Lerman L.V., Benitez G.B., Gerstlberger W., Rodrigues V.P., and Frank A.G., 2021. Sustainable conditions for the development of renewable energy systems: A triple bottom line perspective. Sustainable Cities and Society 75: 103362. https://doi.org/10.1016/j.scs.2021.103362.

Zafrilla J.-E., Arce G., Cadarso M.-Á., Córcoles C., Gómez N., López L.-A., Monsalve F., and Tobarra M.-Á., 2019. Triple bottom line analysis of the Spanish solar photovoltaic sector: A footprint assessment. Renewable and Sustainable Energy Reviews 114: 109311. https://doi.org/10.1016/j.rser.2019.109311.

Chatri F., Yahoo M., and Othman J., 2018. The economic effects of renewable energy expansion in the electricity sector: A CGE analysis for Malaysia. Renewable and Sustainable Energy Reviews 95: 203–216. https://doi.org/10.1016/j.rser.2018.07.022.

Hartono D., Hastuti S.H., Halimatussadiah A., Saraswati A., Mita A.F., and Indriani V., 2020. Comparing the impacts of fossil and renewable energy investments in Indonesia: A simple general equilibrium analysis. Heliyon 6: e04120. https://doi.org/10.1016/j.heliyon.2020.e04120.

Bulavskaya T. and F. Reynès. 2017. Job creation and economic impact of renewable energy in the Netherlands. Renewable Energy. https://doi.org/10.1016/j.renene.2017.09.039.

Chen Y., 2019. Renewable energy investment and employment in China. International Review of Applied Economics 33: 314–334. https://doi.org/10.1080/02692171.2018.1513458.

Garrett-Peltier H., 2017. Green versus brown: Comparing the employment impacts of energy efficiency, renewable energy, and fossil fuels using an input-output model. Economic Modelling 61: 439–447. https://doi.org/10.1016/j.econmod.2016.11.012.

Effendi Y. and B.P. Resosudarmo. 2022. Development of renewable electricity in ASEAN countries: socio-economic and environmental impacts. Asia-Pacific Journal of Regional Science 6: 247–266. https://doi.org/10.1007/s41685-021-00206-7.

Fuentes-saguar P.D., Vega-cervera J.A., and Alejandro M., 2017. Socio-economic impact of a nuclear power plant: Almaraz ( Spain ). Applied Economics 00: 1–11. https://doi.org/10.1080/00036846.2017.1293793.

MEMR. 2018. Electricity Statistic 2016. Ministry of Energy and Mineral Resources Publication [On-line serial], Retrieved April 20, 2022 from the World Wide Web: https://www.esdm.go.id/assets/media/content/content-statistik-ketenagalistrikan-tahun-2016-1.pdf.

Kalirajan K. and A. Syed. 2017. The Indonesian Energy Technology Assesment. The Australia-Indonesia Centre: Energy Research Cluster Publication [On-line serial], Retrieved April 20, 2022 from the World Wide Web: https://bridges.monash.edu/articles/report/The_Indonesia_Energy_Technology_Assessment_IETA_2017/9037442.

Quaschning V., 2022. Regenerative Energiesysteme. Munich: Carl Hanser Verlag München.

Lubis A., 2007. Renewable energy in sustainable development (Energi terbarukan dalam pembangunan berkelanjutan). Jurnal Teknologi Lingkungan 8(2): 155-162.

Kemp R., Loorbach D., and Rotmans J., 2007. Transition management as a model for managing processes of co-evolution towards sustainable development. International Journal of Sustainable Development and World Ecology 14: 78–91. https://doi.org/10.1080/13504500709469709.

MEMR. 2019. National Electricity General Plan. Ministry of Energy and Mineral Resources Publication [On-line serial], Retrieved April 16, 2022 from the World Wide Web: https://jdih.esdm.go.id/storage/document/Kepmen-esdm-143-Thn%202019%20RUKN%202019.pdf.

Ministry of Energy and Mineral Resources (MEMR), 2020. Renewable energy roadmap and policy (Roadmap dan kebijakan energi terbarukan). Jakarta: Renewable Energy and Energy Conservation.

Elkington J., Enter the triple bottom line, in: A. Henriques, J. Richardson (Eds.), Triple Bottom Line Does It All Add Up, Earthscan, London, : pp. 1–16. https://doi.org/10.4324/9781849773348.

Wiebe K.S., Norstebø V.S., Aponte F.R., Simas M.S., Andersen T., and Perez-Valdes G.A., 2022, Circular economy and the triple bottom line in Norway. Circular Economy and Sustainability, . https://doi.org/10.1007/s43615-021-00138-6.

Shumilkina E. Casabianca B.A., and Diamond A., 2015. Power Sector economic multiplier tool: estimating the broad impacts of power sector projects. International Finance Corporation White Paper [On-line serial], Retrieved April 27, 2023 from the World Wide Web: https://silo.tips/download/power-sector-economic-multiplier-tool-estimating-the-broad-impacts-of-power-sect

Hartono D. and B.P. Resosudarmo. 1998. The existence of multiplier and decomposition matrix of pyatt and round multiplier matrix of the socio-economic balance system (Eksistensi matriks pengganda dan dekomposisi matriks pengganda pyatt dan round dari sistem neraca sosial ekonomi). Economics and Finance in Indonesia 46: 473–495.

Sadoulet E. and D.-J. A., 1998. Quantitative development policy analysis. Agricultural Economics 19: 369–370. https://doi.org/10.1111/j.1574-0862.1998.tb00540.x.

Pyatt G. and J.I. Round. 2016. Accounting and Fixed Price Multipliers in a Social Accounting Matrix Framework. Wiley on behalf of the Royal Economic Society Stable URL : http://www.jstor.org/stable/2231503 Accessed : 20-04-. 89: 850–873.

Hartono, D. and Resosudarmo, B.P., 2008. The economy-wide impact of controlling energy consumption in Indonesia: An analysis using a Social Accounting Matrix framework. Energy Policy 36: 1404–1419. https://doi.org/10.1016/j.enpol.2007.12.011.

Endriana L., Hartono D., and Irawan T., 2016. Green economy priority sectors in Indonesia: a SAM approach. Environmental Economics and Policy Studies 18: 115–135. https://doi.org/10.1007/s10018-015-0114-5.

Fuentes-Saguar P.D., Vega-Cervera J. A., and Cardenete M.A., 2017. Socio-economic impact of a nuclear power plant: Almaraz (Spain). Applied Economics 49: 4782–4792. https://doi.org/10.1080/00036846.2017.1293793.

Farag N. and N. Komendantova. 2014. Multiplier effects on socioeconomic development from investment in renewable energy projects in egypt: Desertec versus energy for local consumption scenarios. International Journal of Renewable Energy Research 4: 1108–1118. https://doi.org/10.20508/ijrer.35275.

Resosudarmo B.P. and E. Thorbecke. 1996. The impact of environmental policies on household incomes for different socio-economic classes: The case of air pollutants in Indonesia. Ecological Economics 17: 83–94. https://doi.org/10.1016/0921-8009(95)00113-1.

Van Nguyen C., 2021. Examining the economic impacts of restricted energy supply chain on the vietnamese economy with structure path analysis. Asia-Pacific Social Science Review 21: 1–22.

MEMR. 2017. National Blueprint of Energy in Indonesia. Regulation of the President of the Republic of Indonesia On-line serial], Retrieved April 20, 2023 from the World Wide Web: https://www.esdm.go.id/assets/media/content/content-rencana-umum-energi-nasional-ruen.pdf.

Alexander T., Dziobek C., and Galeza T., 2018. Sustainable Development Goals (SDGs) and GDP; what national accounts bring to the table. IMF Working Paper 18 (41) 1.

IRENA. 2016. Renewable Energy Benefits: Measuring the Economics. IRENA International Renewable Energy Agency Publication [On-line serial], Retrieved April 20, 2022 from the World Wide Web: https://www.irena.org/publications/2016/jan/renewable-energy-benefits-measuring-the-economics.

IRENA. 2011. Renewable Energy Jobs: Status, Prospects and Policies Biofuels and grid-connected electricity generation. IRENA International Renewable Energy Agency Publication [On-line serial], Retrieved April 20, 2022 from the World Wide Web: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2012/RenewableEnergyJobs.pdf.