New Study Finds Cancelling Coal Plants as Cost-Effective Way to Cut Global CO2 Emissions

Preventing nine planned Indonesian coal plants would avoid nearly 300 million tons of emissions for less than 80 cents per ton of CO2, per IESR analysis supported by The Rockefeller Foundation

JAKARTA, INDONESIA | May 30, 2023 ― The Institute for Essential Services Reform (IESR), a leading energy and environment think tank based in Jakarta, Indonesia, released a first-of-its-kind analysis, commissioned by The Rockefeller Foundation, which examines what it would take to prevent planned coal plants from being built. Delivering Indonesia’s Power Sector Transition found that nine coal plants in Indonesia could be cancelled with minimal repercussions for supply or grid stability and affordability, while avoiding an estimated 295 million tons of CO2 emissions. The study recommends cancelling planned, permitted, or pre-permitted plants as one of the most cost-effective and environmentally impactful approaches to accelerating just energy transitions in Indonesia.  

 “We developed an entirely new approach to undertake this analysis. We looked individually at each planned coal plant in Indonesia. Based on a multi-criteria scoring system, we identified plants that could be cancelled, and then assessed the legal, financial, system resilience, energy security, and carbon emission implications of this intervention. Our team used satellite images to track plants’ development progress over time, “said Fabby Tumiwa, Executive Director of IESR.  

“There are some 950 coal plants planned or under construction around the world, which if built, would emit an estimated 78 billion tons of CO2 into the atmosphere over their lifetime,” said Dr. Joseph Curtin, Managing Director for Power and Climate at The Rockefeller Foundation. “This first-of-its-kind analysis illustrates that, in many cases, there are better options available to policy makers, utilities, regulators, and systems planners that can accelerate the shift from fossil fuels. This analysis could also be replicated in other countries with a large coal pipeline.”

If constructed, the nine coal plants, which are predominantly at the financing state, would account for nearly 3,000 megawatts (MW) of coal capacity, or about 20% of total planned additions in Indonesia. A power system analysis was undertaken using seven separate models, representing each part of the country’s existing grid, to examine the power system reliability and affordability associated with cancelling. IESR’s analysis found that cancelling the nine plants: 

  • Would avert 295 million tons of CO2 emissions. With USD 238 million already invested to date into the nine, the calculated carbon abatement is less than 80 cents per ton of CO2 emissions avoided.
  • Could be achieved without compromising system stability, and that the power would mostly be replaced by existing power plants operating at greater capacity. This route, however, would likely imply additional costs from power system operation of $2.5 billion per annum in the period to 2050. It also should be noted that IESR’s analysis did not include adding more renewables to the energy mix, which would help reduce the average generation costs even further. 
  • Requires incorporating the legal risks associated with the unilateral cancellation of any project for the Republic of Indonesia and PLN, Indonesia’s government-owned electricity company, which were identified in the study. Independent power producers (IPPs) enjoy long-term power purchase contracts with PLN on favorable terms, and negotiations will be necessary in each case to ensure that cancellations do not amount to a breach of existing agreements. In some cases, offering the project developer the option to replace the power with renewables could be considered.
  • Will not be sufficient to meet Indonesia’s Just Energy Transition Partnership (JETP) target.

More than two-thirds of Indonesia’s electricity currently comes from burning coal, and with the PLN predicting an additional 13,822 MW of capacity via new coal plants by 2030, Indonesia has the third largest coal pipeline in the world, following China and India. At the same time, through JETP, Indonesia also aims to achieve peak emissions from the power sector at 295 million metric tons of CO2 per annum by 2030 and net-zero emissions in the power sector by 2050. In order to do so, the Republic of Indonesia and International Partnership Group (IPG) signed a JETP agreement in 2022, and in March 2023, the Indonesian Ministry of Energy and Mineral Resources signed a Memorandum of Understanding with the Global Energy Alliance for People and Planet (GEAPP), which is funded by The Rockefeller Foundation, IKEA Foundation, and Bezos Earth Fund. 

The report also includes a series of further recommendations that outline a systematic approach to reaching net-zero emissions by 2050 or earlier. 

Employment Readiness for Renewable Energy in Indonesia

Jakarta, May 2023 – Indonesia has made important commitments to achieve climate and development targets, and it has begun to pay attention to reducing carbon emissions while at the same time strengthening economic and social resilience. As a developing country, committing to decarbonized development while maintaining economic growth is critical, particularly for Indonesia, which has set a target of 5.7% annual economic growth in its long-term plan, Visi Maju 2045. No country has transitioned to high-income status while also reducing emissions, despite the fact that this is the implicit challenge of the low-carbon transition (World Bank, 2023). Decoupling economic growth from carbon emissions will necessitate significant and sustained improvements in many aspects beyond environmental matters, encompassing economic, social, innovation, and fiscal policies, to drive transformational change (Fankhauser & Jotzo, 2017; OECD, 2022). Indonesia’s employment conditions, as one of its socio-economic and welfare indicators, will also be affected by numerous changes brought about by decarbonization, including the increased use of renewable energy and the reduction of the use of fossil fuels. These changes will shift the demand for employment towards cleaner economic activities and energy sources.

How is the future employment of the energy and related sectors?

Globally, in 2019, over 65 million people were employed in the energy and related sectors, accounting for almost 2% of formal employment worldwide, where half of the energy workforce is employed in clean energy technologies (IEA, 2019).  The number of workers employed in the energy sector by 2030 globally could rise to 139 million under the 1.5°C scenario, including more than 74 million in energy efficiency, electric vehicles, power systems/flexibility and hydrogen; while currently the worldwide employment in renewable energy is up to 12.7 million in 2021 (IRENA & ILO, 2022). Thus, there are still many potential jobs in renewables globally, including in Indonesia, where losses in fossil fuel sectors would be more than compensated by gains in renewables and other energy transition technologies.

Indonesia can expect to see both changes in potential new green jobs and changes in the nature of the existing jobs – in which not all green-related jobs in Indonesia have high skill requirements, yet trends in high-income countries suggest that the demand for advanced green skills will grow, thus requiring a commensurate shift in training and education (World Bank, 2023). Approximately 40 percent of existing Indonesian firms reported having a green strategy; 58 percent of firms reported having dedicated energy teams or personnel, and, while about 37 percent of surveyed firms indicated that they monitor emissions from energy use, only 15 percent set energy and emissions targets (IRENA & ILO, 2022), while the new green job opportunity is also emerging with the increasing number of renewable energy and energy efficiency related firms in Indonesia. Renewable energy jobs in Indonesia are expected to increase throughout the transition, from 0.63 million currently to 0.74 million in 2030 and 1.07 million in 2050, with bioenergy and solar technologies dominating renewable energy jobs in Indonesia in this first decade of transition (IRENA, 2023). However, on the human capital preparation front in 2022, there has been no notable improvement from last year, and the government has not established any clear strategy for preparing the workforce required in the energy transition, let alone preparing the existing workforce to shift from fossil-based generation to renewable ones (IESR, 2022a).

What can we do to improve employment readiness?

As the renewables sector expands and evolves, a skilled renewable energy workforce will need to emerge, and to close the skill gap, a set of well-designed labour market policies and forward-looking education and training programs will be needed (IRENA, 2023). Especially in Indonesia, there will be no one strategy fit for all in order to improve human capital readiness; thus, a general approach with local understanding and action will be more powerful in this context because employment and demographic conditions vary. Policy considerations based on geographic or specific areas of impact and potential need to be carefully considered in the energy transition in Indonesia, with some matters in policies for greening including industrial and enterprise policies, skill development policies, active labour market policies, occupational safety and health policies, and social protection policies (ILO, 2023). In the bigger picture, employment readiness is one of the important aspects that determine successful economic transformations in low-carbon development. Furthermore, government interventions, transformation approaches, community revitalization, and comparative advantages are needed to ensure more sustainable economic development in transition impacted areas (IESR, 2022b).

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