Jakarta, 15 June 2022 –  The dominance of coal-fired power plants (CFPP) in Indonesia’s electricity system is one of the causes of the below optimal utilization of the abundant technical potential of renewable energy. Around 70% of electricity generation in Indonesia still comes from CFPP, where most of CFPP units are under 10 (ten) years old. Moreover, the growth in electricity demand is not as high as projected, thus causing more electricity supply. This condition closes the opportunity for massive integration of renewable energy generation in this decade which is even greater due to the transition of the electricity system towards net-zero emission.

The Institute for Essential Services Reform (IESR), in its study entitled The Flexible Thermal Power Plants analyzed that as a temporary measure, it is necessary to retrofit the coal power plant to be operated flexibly. This will shift the role of the CFPP, which originally functioned purely as a baseload, to be able to adjust the output according to the intermittent renewable energy, thereby helping the stability of the electricity network. This option can be implemented before the CFPP is permanently phased out. It means that flexible power plants will be discontinued after the supply of renewable energy can meet demand and the interruption can be overcome with other options, such as the interconnection of the electricity grid, management of electricity demand through market mechanisms, and alternative energy storage such as batteries, hydrogen gas turbines.

“Based on the IESR study, for Indonesia’s electricity system to be in line with the Paris Agreement targets, by 2030 around 47% of electrical energy in Indonesia must come from renewable energy plants. The challenge is that the over the capacity of PLN’s power plants which reaches 5 GW, makes the renewable energy mix in the system unable to be increased without reducing the capacity of the CFPP through early retirement or reducing the capacity factor of the CFPP by carrying out flexible operating modes. The government and PLN’s plans to retire 5 GW of CFPP and replace 3.7 GW with renewable energy generators give little hope. This step needs to be complemented by a more flexible CFPP operation to increase the use of renewable energy,” said Fabby Tumiwa, Executive Director of IESR.

IESR views the flexible operation of the CFPP as something that can be technically done by Indonesia. CFPP in Indonesia is dominated by sub-critical CFPP so that it can replicate the practice of flexible operation of CFPP in other countries, which is generally also applied in sub-critical CFPP.

In addition, CFPPs in Indonesia are generally young (0-22 years old), with an average age of 9 years. About 55% are outside Java-Madura-Bali (Jamali), and the island of Sumatra, and about 34% are in Jamali and Sumatra. Retrofitting a young CFPP to operate flexibly can be a better choice because it does not require an expensive investment, even without cost, compared to modifying an old CFPP. Thus, IESR encourages the government to map power plants by age group to prepare a flexible PLTU operation plan. The plan needs to be integrated with a larger renewable energy mix target.

Not only that, the current oversupply of electricity should be an opportunity to operate the CFPP flexibly. According to the latest PLN RUPTL, the ideal reserve margin for the Jamali system is around 35% (PLN, 2021). Meanwhile, the Jamali system’s reserve margin has even reached 46.8%.

“The excess reserve margin in some systems means that some of the power plants in the system do not need to be fully operated, so there is an opportunity for retrofitting which will require the power plant to stop operating for approximately 6 months to a year,” explained Raditya Wiranegara, Senior Researcher, IESR who is also is the author of the Study of Flexible Thermal Power Plants: An Analysis of Operating Coal-Fired Power Plants Flexibly to Enable the High-Level in Variable Renewables in Indonesia’s Power System

This IESR study shows that flexible CFPP operation retrofit can be focused on reducing the minimum load of CFPP, from 50% to 30%, increasing the CFPP’s ability to ramp rate of 2 times the usual load, and speeding up start-up time from 2-10 hours to 1.3-6 hours. The benefit of reducing the CFPP minimum load is to reduce costs due to the start-up/shutdown process, which will become more frequent if the electricity mix from renewable energy is higher. Another reason, apart from producing high emissions, is that if the CFPP frequently does start-up/shutdown, it will have implications for high operating costs because start-up/shutdown requires expensive diesel oil. Furthermore, the flexibility of the CFPP will reduce system costs because the flexible operating costs of the CFPP are cheaper than using power storage. In addition, the flexible operation of the CFPP can provide a wider role for other generators and energy storage, such as batteries and natural gas-fired power plants.

Reflecting on the experiences of Germany and India, which had earlier retrofitted steam power plants that were more flexible, IESR submitted recommendations to the Indonesian government covering the following 3 categories, namely policies and contracts, market, as well as technical and stakeholder involvement.

In terms of the regulatory framework, the government needs to restructure the terms of a flexible Power Purchasing Agreement (PPA) for CFPP. This includes revising the Electricity Purchase Agreement (PPA), which currently places the CFPP as the base load.

“For flexible operations to be implemented, a revision of the PPA, which still has a long tenor, 30 years, and requires generators to operate at a high capacity factor, 80 to 85%, needs to be done. On the other hand, the revised PPA should encourage generators to operate flexibly by negotiating clauses in the Take or Pay (ToP) scheme. This negotiation should consider reducing the ratio of 80% in the calculation of the ToP scheme, as well as encouraging generator operators to participate in the ancillary services and capacity market. By participating in these two markets, it is hoped that the losses from decreasing the ratio in the ToP scheme can be covered,” said Raditya.

Meanwhile, for a market mechanism that allows for greater development of renewable energy, the government needs to build a supply mechanism to determine the price of renewable energy that is more competitive. For this market to work, there must be an independent body set up to regulate the newly formed market and its supply mechanism.

Technically, the government must identify CFPP units for flexible CFPP pilot projects such as subcritical CFPPs that are less than 5 years old, with capacities between 100 MW and 600 MW. In addition, you can choose a CFPP located in the Sulawesi system for this pilot project.

“The power plant in this system is dominated by young units. In addition, the trend of using renewable energy in this system is quite optimistic. By 2030 it is estimated that half of the generation in this system will come from renewable energy based on the electricity system planning to model using PLEXOS that is being carried out by IESR. It is hoped that this project will assist in determining economic viability and identifying initial capital investment as well as operational and maintenance costs,” concluded Raditya.

IESR also encourages capacity building for policymakers, regulators, and electricity operators to run CFPP flexibly. It is useful to provide them with the knowledge they need to prepare market regulations and reform existing electric power markets.***