Spotlight Activity: Indonesia Plans to Increase Coal Production
The majority of Indonesia’s consumed coal is produced domestically. As Indonesia electrifies, it has increased its use of coal and intends to continue.
Coal consumption has increased alongside rapidly growing Indonesian energy demands. Only recently has coal production slowed, by 5 million tons, in an attempt to stabilize falling international coal prices. Since 2010, coal production has increased by 50%. Indonesia plans to increase coal production, opening new plants that primarily mine the lower grade coal, lignite, which produces less energy than other, higher grade forms of coal.
Indonesia has significant reserves of coal. There is an estimated 37.34 billion tons of reserves, with 20.11 billion proven. Exhaustion of the reserve is estimated to occur in 2094. There are many more extractive years ahead.
PLN, the state electricity company, has coal at 60% of its energy mix. The RUPTL, the national energy plan, lays out the construction of 58 coal fired plants through 2027, doubling capacity to 51k MW. The rise in coal production is in response to growing domestic consumption. This is necessary given slumping international demand.
Coal prices are at their lowest since April 2018. In one week, coal prices fell 2.29%. The rapid decline has spurred a decrease in the efficiency and quality of coal plants. Many plants are using lower ranked coals and decreasing efficiency to provide cheaper energy, with the consequence of increased emissions from greater, lower quality coal burning. The new power plants set for 2027 use this lower quality coal. The majority (62%) of Indonesia’s coal reserves are lower calorific lignite. Older plants which processed higher grade coal are having to import coal from other countries, particularly Australia.
Despite decreasing demand from the EU and China, countries like Thailand, Vietnam and the Philippines are meeting rising energy demand with coal. Southeast Asia electricity demand is expected to grow by 70% in 2030. The current price slump will not depress Indonesian coal exports for long. India also imports large amounts of low calorific coal from Indonesia.
Indonesia is unlikely to slow its use of lignite coal. Aside from the abundance of the resource and export demand from other Southeast Asian countries, corruption is leading to the proliferation of mine mouth power plants which consume this low-grade coal. PLN recently cancelled the Riau-1 coal fired plant surrounding the shady handling of $900 billion of contracts awarded to its construction. Riau-1 is one of 18 such power plants underway. Plants like Riau-1 are built alongside lignite coal mines. Environmental activist groups contend that PLN’s opaque licensing process is behind the proliferation of these mine mouth plants; miners of lignite want customers for their product. Lignite producers will lobby governments and engage in potentially corrupt practices with PLN to approve mine mouth plants near mines.
Status: Falling Behind
Indonesia remains overly reliant on coal despite large endowments of alternative energy sources such as natural gas and renewables. PLN’s licensing process is opaque and corrupt. Indonesia’s use of lignite coal, which produces more emissions than higher grade coal, is not in line with its Paris Agreement pledge.
Contact PLN and urge them to change their licensing practices, especially for mine mouth plants that process lignite coal.
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The International Institute for Sustainable Development (IISD) conducted a study on the true costs of coal energy per megawatt/hour at $61.50 in Indonesia. The cost of wind power is $30-60 per megawatt/hour and large scale solar is $43-53/MWh. Hydropower in the U.S. is 40% the cost of fossil fuel and 25% the cost of natural gas. Geothermal is estimated at $50 per megawatt hour. There are many cheaper alternatives to the use of lignite coal. PLN should move away from lignite coal and invest in renewable projects. This would improve the health of Indonesian citizens and help Indonesia achieve its targets under the Paris Agreement.
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