DMO and DPO May Slow Energy Transition, Says JETP

The JETP Secretariat recently deemed DMO and DPO coal policies to hinder energy transition in the electricity supply sector potentially. The DPO policy is also said to create an illusion that coal prices for power plants are cheaper and stable.

Lukman Nur Hakim

21 Nov 2023 - 18.01
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DMO and DPO May Slow Energy Transition, Says JETP

Illustration - Coal mining activities at the Air Laya Mine, Tanjung Enim, South Sumatra, Sunday (3/3/2019)./Bisnis-Felix Jody Kinarwan.

Bisnis, JAKARTA — The continued enforcement of domestic market obligation (DMO) policy and domestic price obligation (DPO) policies for coal in Indonesia is considered to impede the energy transition process in the country.

This has also cast uncertainty on the funding commitment from the Just Energy Transition Partnership (JETP), which was expected to accelerate the energy transition in Indonesia through the early retirement program of coal-fired power plants.

Although Indonesia is said to be ready to implement various energy transition programs, including the planned shutdown of coal-fired power plants with funding from the JETP partnership agreed upon during the G20 summit in November 2020, the JETP Secretariat has recently assessed that the DMO and DPO policies for coal could hinder the energy transition program in the electricity sector.

Elrika Hamdi, a specialist in finance and policy at the JETP Secretariat, said the DPO policy needs to be revised because it creates the illusion that coal prices for power plants are cheap and stable. In contrast, the commodity's prices are fluctuating, leading to instability. “This part of the DPO policy is what we consider to pose some risks,” Elrika said in a Civil Society Dialogue organized by JETP on Tuesday (11/14/2023). 

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DMO and DPO May Slow Energy Transition, Says JETP

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