PLN Should Follow Global Transformation to a Cleaner Energy

Kendari, 7 February 2022 – The world is facing major changes in response to the increase in the earth’s temperature which has increased by 1.1 degrees Celsius since the pre-industrial era. Various global commitments have been agreed to limit the increase in the earth’s temperature to no more than 2 degrees Celsius by the middle of this century. The rise of the global temperature is caused by carbon emissions produced by burning fossil fuels, one of which is in the energy sector.

Indonesia is committed to reducing its emissions by 29% with its own efforts and 41% with foreign assistance, and achieving net-zero emissions by 2060 or sooner.

Dr. Kuntoro Mangkusubroto, senior energy observer, during the “Seminar Pertambangan” – mining seminar, celebrating Indonesia’s National Press Day, said that the energy sector plays a crucial role in reducing greenhouse gas emissions.

“But keep in mind, it doesn’t mean that the net-zero emission issue will only become a burden for PLN because it is related to energy issues. It needs collaboration from various parties to ensure that the 2060 target is achieved,” he concluded, ending his keynote speech.

PLN has a big role in creating a market for renewable energy. To achieve the target of renewable energy, the involvement of the private sector is needed. Therefore, policies and a conducive investment climate need to be orchestrated.

Dadan Kusdiana, Director General of EBTKE at the Ministry of Energy and Mineral Resources said that Indonesia is still aligned and on track to meet the international agreement commitments, but there are options for various accelerations.

“We have compiled a national roadmap to achieve net-zero emissions by 2060, and we keep looking for possible options to accelerate existing targets,” he stressed.

Specifically from the electricity sector, Evy Haryadi, Director of Corporate Planning at PLN, stated that his party was currently in a dilemma. On one hand, currently available power plants at affordable prices are fossil generators (coal power) that produce high emissions, replacing them with renewable energy plants requires a huge investment.

“We see a declining trend in electricity prices from renewable energy such as solar and wind currently ranging from 18-21 cents per kWh, compared to coal (6-8 cents/kWh) for now electricity from renewable energy is still more expensive.”

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), reminded that PLN needs to be careful in looking at investment trends in the electricity sector. The commercial and industrial sectors make clean energy the main need and prerequisite for investing in a country.

“Coal-fired power plants are not the cheapest power plants. Government subsidies through the DMO (Domestic Market Obligation) scheme keep coal prices at USD 70/ton, making the price of electricity from PLTU look cheap. Even though the price of coal in the market currently reaches USD 150/ton,” he explained.

Fabby continued, if the coal price of USD 150/ton is transferred to PLTU, the cost of electricity generation will increase by 32% – 61%.

Energy system disruption is happening all over the world. To ensure the reliability, affordability and sustainability of Indonesia’s energy system, PLN must carry out a transformation. This transformation will also reduce the risk of stranded assets for PLN and IPP (Independent Power Producer). As technology develops, it is estimated that in the next few years the cost of installing solar PV and batteries will be cheaper than the operating costs of a coal-fired power plant.

To achieve the common goal of achieving net-zero emissions by 2060 or sooner, increasing the capacity of renewable energy must be carried out. The currently operating coal power plant needs to be managed wisely and gradually reduced. The Indonesian government’s plan to phase down 9.2 GW of coal-fired power plants through the Energy Transition Mechanism scheme is the right step, but the government has the opportunity to take more aggressive steps.

The G20 is Progressing yet far from the 1.5 degree Plan

2021 is marked as the year of the rebound of emission especially in the G20 countries as the economic and social activity is restarting. Previously, emission in the G20 recorded a decrease due to government regulation to overcome the Covid-19 outbreak. Although 14 G20 states have proposed net zero targets which covers around 61 percent of GHG emissions in the world, it is still not aligning with the 1.5 degree Celsius pathway. Climate Transparency Report 2021 finds that some countries such as Argentina, China, India, and Indonesia are projected to exceed their 2019 emissions level. As the window of opportunity to comply with the Paris Agreement is getting narrow, the G20 countries need to raise their climate ambition higher and to move together fighting the climate crisis.

The Climate Transparency Report, an annual report reviewing the climate ambition and policy of the G20 countries, stating several key findings for the 2021 report that was launched on October 14, 2021. They are:

  • Raised ambitions are not complying with the Paris Agreement yet

In the year of 2021, 14 G20 countries are updating their climate ambition and proposing a net-zero target. 13 updated NDC were submitted to UNFCCC and 6 of those countries i.e Argentina, Canada, EU (including France, Germany and Italy), South Africa, the UK and The US increased their NDC target, and that is good news. Unfortunately, all of them are not enough yet to comply with the 1.5 degree plan. By following the current ambition the global temperature will still rise up to 2.4 degrees. A more holistic and communal effort is definitely needed to keep the global temperature in the 1.5 degrees level.

“If the G20 were to align its targets and policies with one and a half degree pathways and implement those policies,  the global emissions gap of around 23 gigatons can be reduced significantly,” said  Justine Holmes, Solutions For Our Climate

  • Fossil fuel subsidy is still remaining

During the economic recovery, most of the G20 countries are injecting subsidies for the fossil fuel sector. In fact, the amount of fossil fuel subsidies are way bigger than the green recovery package prepared by the G20 governments. From January 2020 to August 2021 the G20 committed USD 298 billion to subsidise the fossil fuel industry. USD 248 billion of the USD 298 billion has gone without the ‘green pact’ attached. Meaning the fossil fuel industry has no obligation to for instance lowering their emissions, or other deals to consider the environment or climate change situation.

  • Emission is rebounding

As the economic activity is restarting, emission in the G20 country is rebounding again. Total emissions in 2020 were decreased up to 6% and it is projected to rise 4% this year. Countries like Argentina, China, India, and Indonesia are even projected to exceed the 2019 emissions level. This is actually predicted, that the decreased emissions in 2020 are closely related to the social activity restriction during the pandemic outbreak.

  • It is urgent to phase out coal power plant

Coal-fired power plants are known for their intense carbon emissions. As of 2020, China (163 GW), India (21 GW), Indonesia (18 GW), and Turkey (12 GW) still have coal power plants on the pipeline. All G20 members will need to phase out coal between 2030 – 2040 to limit global average temperature to 1.5 degrees Celsius.

Fabby Tumiwa, Executive Director of IESR, during his presentation explained that currently Indonesia is still dominated by coal in its energy mix. In October, the Indonesian government issued a new RUPTL which accommodates more renewables share rather than thermal power plan, plus PLN plan to decommission the supercritical coal power plant starting from 2030.

“Recently we are also discussing the possibility to do an early coal moratorium before 2025 but it’s still the plan, not yet settled and we still provide subsidies on fossil fuel. Phasing out fossil fuel subsidies will help to expedite the energy transitions,” he concluded.

Energy Crisis in UK and Europe: Lessons learned for Indonesia’s energy transition

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Clean, Affordable, and Secure Energy (CASE) for Southeast Asia (SEA) is a regional programme running in Indonesia, Thailand, Philippines and Vietnam. CASE’s objective is to change the direction of the energy sector in Southeast Asia to substantially shift towards an evidence-based energy transition, aiming to increase political ambition to comply with the Paris Agreement.

Through CASE Indonesia, we would like to organize a discussion with speakers from the UK, and Europe representative to discuss what happens and what are the lessons learned. Indonesia does not have winter and reliance on natural gas is still small. However, with more intermittent power plants (e.g. solar) are planned to be installed, the government looks at using gas-fired power plants to balance this intermittency. We also hope this discussion will help set the right direction for the Indonesian energy transition.

Presentation Materials




Agora Energiewende







Coal as Stranded Assets: Potential Climate-related Transition Risk and Its Financial Impacts to Indonesia Banking Sector

An important issue to be discussed at the G20 Summit

Based on the Task Force on Climate-related Financial Disclosures (TCFD), transition risk is one of the financial risks that can arise from the process of adjusting to a low-carbon economy, both from policy/legal, technology, market, and reputation risks. One of the financial impacts of these risks is stranded assets, in which assets suffered devaluations and even became unusable. As a coal-producing country, this study can serve as a reminder for Indonesia which has the potential to lose if it does not consider the potential value of stranded assets in the future. Therefore, all parties, especially investors and financial institutions, must pay attention to this risk and be cautious in making investment decisions.

Coal contribution in the national energy mix is still high. With the power sector still being the largest domestic coal consumer, the government is reluctant to move away from coal-fired power plants (CFPPs). CFPPs are likely to become stranded assets due to more competitive investment costs from renewable energy power generation technology. With the existence of a merit order, the utilization of the CFPPs in the power system will decrease.

The government also looked at coal downstream industries as an attractive opportunity to increase the added value of coal. This industry is likely to engender stranded asset risks in the future since the economic viability of these projects is still in doubt with the need for various incentives from the government. The coal upstream/mining industry also has the potential to become stranded assets where the proven reserves must remain below the surface of the earth.

Stranded assets from the coal industries will directly have a negative impact on the financial sector which is involved in financing these projects. The global trend of moving away from coal financing projects is expected to increase the demand for domestic financing sources, including from the banking sector. This can further increase risks and impacts on the domestic financial system. Furthermore, if this risk is not properly managed, it could have a wider impact on financial stability through various transmission mechanisms.

In response to the emergence of climate-related risks, the Indonesian government has developed policies and regulations to foster sustainable finance. However, the implementation is still focused on efforts to take advantage of opportunities that arise. Meanwhile, efforts to mitigate risks are still low. Indonesia should begin to explore the lessons learned from the responses that have been made at the global level so as to improve the utilization of sustainable finance towards climate mitigation.

This study encourages recommendations for various actors to avoid the risk of coal project-stranded assets. The government should present clear signals in implementing climate policies so that economic actors can anticipate. The central bank and financial regulator should undertake thorough research such as assessment of climate-related financial risks, and disclose it by following the TCFD recommendations. Meanwhile, financial institutions/investors should manage investments and portfolios that are exposed to climate-related risks, as well as disclose this risk information to the public. This information is important to avoid incorrectly price or value assets, which are leading to a misallocation of capital.

The transition risks are not a single country issue, so it needs also to be mainstreamed through various means including through the international discussion forum. The momentum of the Indonesian presidency at the G20 Summit in 2022 and Indonesia’s Minister of Finance as co-chair of the Coalition of Finance Ministers for Climate Action in 2021-2023 can be used as a medium for discussion and raise the awareness of global countries towards this issue.

Are coal power plants the best option to provide electricity? A Climate perspective

The Government of Indonesia will stay committed to the implementation of the Paris Agreement. At least, it is the message that the Indonesian delegate wishes to communicate in the UNFCCC-COP25 in Madrid last December. Despite the critics that the COP 25 is not successful because the world has failed to come to an agreement, especially in article 6 of the Paris Agreement, Indonesia’s vice minister is positive that Indonesia as a country has gained success in the negotiation. One of the evidence he later provided is that Indonesia is among the countries that promote renewable energy as a key mitigation activity in the energy sector to fulfill the NDC[1].

But how does Indonesia contribute to the climate mitigation goal, especially in the energy sector? With the ratification of the Paris Agreement through Law no. 16/2016, Indonesia is committed to limit global warming below 20C. However, is our commitment explained in the Nationally Determined Contribution (NDC) target enough? Let us have a closer look at this document.

The latest report from Intergovernmental Panel on Climate Change (IPCC)[2] states that the commitment to limit global warming below 1.50C means that the world should see a greenhouse gas (GHG) emission peak before 2030 and achieve the net-zero emission by 2050. Indonesia NDC targeted a 29% reduction of GHG emission by 2030 against Business as Usual (BAU) scenario and an additional 12% if there is international support toward mitigation efforts. In numbers, these targets are actually translated into an increase of total GHG emission from 1334 Mton CO2e in 2010 into 2034 and 1784 Mton CO2e in 2030 (without and with international support respectively). The energy sector contributes to 67-71% of the total GHG emission in 2030. Compared to its 2010 level, the energy sector emission grows by three times even if Indonesia achieved its NDC. The power sector shares the highest GHG emission in the energy sector, and the coal power plant is the source of 70% of the power sector GHG emission[3].

A quick assessment by distributing the 1.50C GHG emission limit proportionately to each sector show that Indonesia should limit their GHG emission from coal power plant into 182 Mton CO2e by 2020, 112 Mton CO2e by 2030 and achieve net-zero emission before 2050 (possibly by 2047). On the other hand, the current RUPTL is planning to add 27 GW of coal power plant up to 2028, which will increase the GHG emission from coal power plant from 192 Mton CO2e into 301.3 Mton CO2e[4]. The large gap between 1.50C GHG emission limit with PLN projection for coal power plant emission suggests that, contrary to current RUPTL, Indonesia should not build any new coal power plant and would need to carry out a phase-out plan in the next few years.

GHG emission from coal power plants with moratoria of new coal plant and coal phase out policies (based on 20 years of lifetime) implemented. Source: IESR

GHG emission from coal power plants with moratoria of new coal plant and coal phase-out policies (based on 20 years of lifetime) implemented. Source: IESR

So what is (are) the policy (policies) that can help Indonesia to meet climate goals in the power sector? By using a specific emission factor from IEA, we could estimate a GHG emission from the coal power plant. Using combination of phase-out policy, moratoria on new coal power plant, and efficiency improvement in our model, we found that a combination of moratoria on new coal plant and phase-out strategy (based on 20 years lifetime of coal power plant) are the policy options that could bring Indonesia back on track in achieving the 1.5 C climate target. Consequences of these policies are that PLN has to shut down their oldest coal power plant (Suralaya 1-4 & Paiton 1-2) by 2020. By 2030, PLN has to phase-out 30% of its current capacity while only allowing coal power plant that is currently under construction and has received PPA contract to be built, and by 2048 all coal power plant should not operate anymore[5]

Following through with this policy scenario will require multi-sectoral consideration. In the power sector, the government will have to build a strategy on integrating more renewable energy sources and mitigating economic losses in the coal power plant. It is a major task, as the current power system structure, and the market might not be able to support a quick transition. As a vertically integrated utility and a single off-taker of electricity, PLN would probably bear the majority of the losses. A moratorium on new coal plant would be necessary to cut the possible losses for PLN in the future.

In a broader sense, less coal power plant means less coal is needed. The coal industry, thus, will be impacted, as well as the provinces where this coal industry is located. The coal industry is the backbone of the economy in the four coal-producing provinces: East Kalimantan, South Kalimantan, Central Kalimantan, and South Sumatera. About 35% of GDP in East Kalimantan in 2017 is coming from the coal sector[6]. This is not counting the multiplier effect of the coal industry for other sectors.

On the national level, Indonesia would also have to diversify its economies so as not to rely on coal export to balance the trade deficit. The government should identify key potential industry/sector to be developed in the near futures, which could replace the possibly declining coal export revenue. It is a significant task for the government and Indonesia to pave a way that could minimize adverse impacts from such a plan. Ultimately, the decision will be in the hand of the government and has to be made soon.




[3] Analyzed from GHG Emission Inventory MEMR

[4] PLN RUPTL 2019/2028

[5] IESR Discussion paper 2019

[6] IESR Study report 2019

JawaPos | IESR Dorong Pemanfaatan Batu Bara untuk Kebutuhan Domestik

20 Januari 2020, 18:23:46 WIB – Direktur Eksekutif Institute for Essential Services Reform (IESR), Fabby Tumiwa menyebutkan bahwa saat ini banyak negara yang berlomba-lomba untuk memanfaatkan cadangan batu bara. Pasalnya, saat ini sedang terjadi transisi dari pemanfaatan energi fosil menjadi energi terbarukan.

“Ada transisi dari fosil fuel ke renewable (atau) energi terbarukan. Negara-negara yang menjadi tujuan ekspor kita beberapa juga punya batu bara, seperti Tiongkok dan India. Negara-negara tersebut juga ingin memanfaatkan batu bara mereka karena mereka tahu waktu pemanfaatan batu bara itu tinggal sedikit,” jelasnya di Balai Kartini, Jakarta, Senin (20/1).

Ia menyebutkan bahwa saat ini, dua negara tersebut tengah melakukan pembatasan ekspor. Tentu mereka ingin memanfaatkan batu bara sebagai energi alternatif di luar gas ataupun liquid natural gas (LNG).

“Jadi, mereka mencoba memodifikasi sumber daya alam, makanya sekarang Tiongkok atau India mengurangi ekspornya. Ini akan menjadi tren baru menurut saya,” tuturnya.

Indonesia diketahui sebagai salah satu pemain batu bara terbesar di dunia. Pada 2019 lalu produksi yang dihasilkan lebih dari 400 juta ton. Padahal, produksi untuk batu bara telah dibatasi oleh Kementerian Energi dan Sumber Daya Mineral (ESDM).

“Paling tidak kita bisa melihat dan regulasi itu tidak konsisten, seperti rencana energi nasional itu dengan tegas mengatakan membatasi produksi batu bara 400 juta ton di 2019. Kenapa perlu dibatasi? karena dampak pertambangan itu sangat dahsyat,” terangnya.

Di sisi lain, ada negara-negara yang terus menggenjot ekspor batu bara. “Rusia yang melakukan ekspor di sejumlah bagian di Asia Selatan. Afrika Selatan dan Kolombia juga masuk ke pasar Asia. Artinya produk batu bara Indonesia menghadapi saingan di pasar-pasar yang didominasi oleh Indonesia,” katanya.

Artikel asli

Clean Energy Poses Challenge to Coal-Reliant Indonesia

Stefanno Reinard Sulaiman
The Jakarta Post
Jakarta   /   Wed, April 17, 2019   /  08:01 am

The government, which is highly dependent on coal for power generation, will be facing challenges from consumers as more and more people are shifting to clean energy, an energy expert says.

Fabby Tumiwa, the executive director of local energy think tank the Institute for Essential Service Reform (IESR), made the statement after the institute published a report titled “Indonesia’s Coal Dynamics: Toward a Just Energy Transition” recently.

In its report, the IESR concludes that two types of renewable energy will be cheaper than coal-generated electricity by 2030 and wind power will be on par with coal by 2050.

“For example, the price of solar photovoltaic [PV] electricity in 2030 will stand at 4.69 US cents per kilowatt hours [kWh], while the price of coal will stand at 5.15 to 5.25 US cents per kWh,” he said.

“In other words, PLN [the state electricity firm] will lose customers soon even though the demand is growing.”

PLN’s latest 10-year electricity plan, which is called the electricity procurement plan (RUPTL), for the  2019 to 2028 period states that projected electricity consumption growth this year will stand at 6.4 percent, which is 0.46 percent lower than its previous plan.

Even though the procurement plan has been revised, it is still being seen as “too ambitious”, because a calculation from a global energy think tank, the Institute for Energy Economics and Financial Analysis (IEEFA), recorded that the average demand growth in the last five years (2013 to 2018) stood at only 4.6 percent.

Aside from losing customers, Fabby said, PLN also faced another problem related to its coal-fired power plants (PLTU) — assets that could not be operated optimally due to an electricity oversupply.

“In Indonesia, we calculated that in 10 years from now there will be an overcapacity of 13.3 gigawatts (GW) on the Java-Bali power grid with the total investment standing at US$12.7 billion,” he said, referring to a recent study by the IESR, Monash University Malaysia Campus and German energy think tank Agora Energiewende.

In its latest plan, PLN is also still heavily reliant on coal as the projection share in its electricity energy mix in 2025 will stand at 54.6 percent or 0.2 percent higher than the previous plan, while renewable energy remains at 23 percent.

It is contrary to the global movement to phase out coal, especially in Europe and even some Asian giants like China and India, which have slashed their coal consumption, including in the electricity sector.

“This is a [downward] trend [of phasing out coal power plants] that should have been anticipated by our government, especially in line with the agreement to cut greenhouse gas emissions to below 2 percent,” he said, adding that to reach that climate goal, Indonesia had to stop building new PLTUs starting next year.

A recent report from the International Energy Agency (IEA) stated that global coal demand will only increase slightly from this year until 2023, with China’s coal demand to decrease 2.8 percent from 2.7 billion tons to 2.6 billion tons in 2023 due to air pollution concerns.

China was Indonesia’s biggest coal export market with an annual output of around 110 to 120 million tons or around a 25 percent share of Indonesia’s export market, according to the Indonesian Coal Mining Association (APBI).

Meanwhile, India — Indonesia’s second biggest market — is predicted to cut coal imports from Indonesia due to higher domestic coal production because the IEA predicted that India’s coal import volume would be down 13.4 percent from total consumption in 2022 and 2023.

Therefore, the IEA predicted that coal exports from Indonesia would decrease 15.7 percent by 2023. It is well-known that 80 percent of Indonesia’s coal production is for the export market.

The APBI’s executive director, Hendra Sinadia, said the possibilities to expand coal exports, especially to Asian countries, were still wide open as some of the markets were only beginning to operate their PLTUs, which could last 25 to 30 years.

“Vietnam is currently developing massive PLTUs, of which 100 percent of the coal is from us. So, the government should have a perspective on the political side before taking any decision on cutting coal exports,” he said.

Hendra is criticizing one of the plans to cut coal exports gradually in the General Planning for National Energy (RUEN), which stipulates that Indonesia is committed to stopping coal exports no later than 2046.

The Energy and Mineral Resources Ministry’s mineral business supervision director, Muhammad Wafid, confirmed the coal export-termination plan by 2046, saying the government had been pushing since 2009 for an increase in domestic coal consumption.

“We still absorb coal for the electricity sector, but we are also pushing for a diversification program for coal, such as transforming it into gas as a substitute for liquefied petroleum gas [LPG],” he said, referring to a type of fuel called dimethyl ether.

The program was started last year by state coal miner PT Bukit Asam and state energy holding company Pertamina, which inked a partnership deal with United States-based chemical firm Air Products and Chemicals Inc. for coal gasification.

This Article originally Published at The Jakarta Post