Global Energy Transition and the Future of Coal

May, 22 2019

Penulis :

As a part of work of Climate Transparency comparing G20 climate action by the Government, Institute for Essential Services Reform (IESR), together with other Climate Transparency partners, in 2018, researched the coal transition. Having finished the research, IESR launched the study result on April 01, 2019, in Jakarta, with the event title of International Seminar on Global Energy Transition and The Future of Coal.

This seminar consisted of three sessions of panelist discussion:

  1. A Just Energy Transition: Energy, Climate and Economic Development
  2. International Experiences on A Just Energy Transition
  3. Energy Transition and Climate Change Agenda on G20 Summit

Key findings of the study

Moderated by Suzanty Sitorus, Fabby Tumiwa, Executive Director of IESR, opened the first session, by presenting the results of the IESR study. This study highlights Indonesia’s coal dynamics, so it is concluded that coal transitions are inevitable. Specifically, this study wants to capture the challenges of the energy transition from the coal industry’s point of view and the driving factors for Indonesia to make the energy transition, from coal particularly.

Following are the challenges facing Indonesia to be able to make an energy transition:

  • The coal industry is closely related to political interests.
  • There are various supports from the government, both financially and in regulations issued, for the coal industry and the coal power plant.
  • There are inconsistencies in the implementation of regulations; regulations that have recently enacted tend to encourage coal use as a source of state electricity.
  • The provision of financial support, directly or indirectly, can then be categorized as a subsidy from the government.
  • Policy makers and power generation companies regard coal as a cheap energy source for state electricity.

Even so, there are several supporting factors for Indonesia to make an energy transition, namely:

  • There are risks when Indonesia relies its economy on coal exports, given the fluctuating global coal prices and the volatility of global coal demand. The risk is because the trend of coal use in Indonesia’s coal export destination countries will decline in the future.
  • Levelized Cost of Electricity (LCOE) from hydropower plant, geothermal, and solar power plant in 2020 will be the same as LCOE from coal power plant with ultra-supercritical technology.
  • The inefficiency of coal mining and coal power plant, due to the increasing costs incurred in extracting coal.

On this launching event, IESR invited some experts to give feedback to the study, which are from the Ministry of Energy and Mineral Resources (Muhammad Wafid) and also the Indonesian Coal Mining Association (Hendra Sinadia). They agreed that the trend of coal exports will decrease so that the coal industry currently is being transformed to increase the value added. The Ministry of Environment and Forestry (Yulia Suryanti) said, in the future, the emissions number from the coal industry has to be included in Indonesia’s National Determined Contribution (NDC), given the potential increase in emissions from the coal industry as the increase in national coal production.

Study in Three Countries: South Africa, India, China

After learning about coal dynamics in Indonesia, it is necessary to look at how energy transition happens in other countries. Hannah Schindler from Climate Transparency guided the discussion in the second session, which presented panelists from four countries. Ursula F. Hutfilter from Climate Analytics (Germany) explained about the Paris Agreement as a background for global energy transitions. Energy transition in the electricity sector is significant in achieving the Paris Agreement targets, whereas it must be fully decarbonized before 2050. In other words, the coal use in power plants must be stopped globally before 2050. Then Alvin Lin from Natural Resources Defense Council (China) said that renewable energy is currently competitive compared to coal in China. Moreover, the Chinese Government has a 5-year plan to reduce coal production capacity by 500 million tons. The steel industry will be affected since then, in which it has to reduce by 150 million tons. The same situation also occurs in India, where renewable energy is already economically attractive in India. Furthermore, Thomas Spencer from The Energy and Resources Institute (India) stated that there is a surplus in coal production capacity in India yet. Nowadays, the coal transition is also happening in South Africa. According to Bryce McCall from the Energy Research Center (South Africa), Trade Unions in South Africa encourages the government to do a lot of discussion with them regarding the labor transition from the mining sector.

Energy Transition Issues at the G20 Summit

As a partnership that assesses climate action from G20 countries, it is necessary to look at how this energy transition issue is discussed in G20 meetings, including the G20 Summit to be held in Japan on 28-29 June 2019. Thus, Suzanty Sitorus guided the discussion at the third session, which presenting Muhammad Hadianto Wirajuda (Coordinating Ministry for Economic Affairs / the G20 Sherpa team) and Awang Riyadi (Ministry of Energy and Mineral Resources / the Energy Transition Working Group). The two panelists agreed that green fuel is an alternative form of energy in the process of transitioning energy from fossil fuels to renewable energy. Indonesia will continue to promote green fuel (bio-diesel and green-diesel) at the G20 Summit at the end of June. The context of green fuel here is to promote palm oil as renewable energy.

 Conclusions

  • Coal transition is multi-dimensional because there is governance, business, technology, welfare, and a few other aspects in planning the coal transition.
  • A fundamental change, namely ‘paradigm shift,’ is needed to make coal transition happens. There are many steps forward, to sit together to discuss some of the dimensions, especially for those that are still unknown.
  • There must be “just” word in planning energy transition because the energy transition affects the economy (national and regional) as well as corporate; it, therefore, has to be planned comprehensively at the macro level.

Energy transition in Indonesia is inevitable as other countries switching to more carbon-neutrally technologies.


You can have access and download the Presentation Materials from the Panelists below:

SpeakersMaterial
Coordinating Ministry of Economic Affairs of The Republic of IndonesiaIndonesia Agenda in G20 Osaka Summit 2019
Alvin LinChina's Power Sector Energy Transition
Fabby TumiwaCoal Transition in Indonesia
Ministry of Energy and Minerals Resources, Republic of IndonesiaEnergy Transition Agenda in G20 Forum
Thomas SpencerIndia's Energy Transition
Dr. UrsulaClimate Analytics
Bryce McCallCoal in South Africa's Future
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