GREEN AMMONIA AND REVERSE AUCTIONS: A POLICY INNOVATION TOWARD INDONESIA’S NET ZERO GOAL

Abstract

This study analyses potential regulatory frameworks for procuring green ammonia via a reverse-auction mechanism to facilitate Indonesia’s transition to clean energy and achieve Net Zero Emissions. The discussion starts by emphasising the significant carbon intensity associated with coal-fired power plants, which averages 1.05 kg CO₂/kWh. It then examines the national legal framework, including the Paris Agreement Ratification Law and the Renewable Energy Bill. It also considers the financing mechanisms detailed in these laws and the Ministry of Finance Regulation No. 22 of 2023. The reverse-auction approach is suggested due to its ability to reduce production and distribution costs through price competition, transparency, and efficiency in time management. A comprehensive review of global literature indicates that successful implementations in India, Mexico, the UAE, and Brazil have led to significant reductions in electricity prices through renewable-energy auction schemes. The primary challenges recognised are the substantial expenses associated with electrolysis technologies, a lack of public awareness, and the inadequacy of CCS/CCUS infrastructure development. The study, framed by the Theory of Planned Behaviour, highlights the significance of attitude, social norms, and perceived control in adopting green ammonia. Proposed actions consist of: (1) revising the Law and the Renewable Energy Bill to clearly define and categorise green ammonia; (2) creating a coordination body that involves multiple stakeholders; (3) incorporating principles of transparency, equity, and national interest; and (4) enacting a Government Regulation to establish technical procedures, sustainability standards, and requirements for domestic products. Implementing these measures is anticipated to enhance the adoption of green ammonia within the energy and agriculture sectors, strengthen energy security, and reduce Indonesia’s carbon footprint.