Jakarta, 17 March 2023 – The decision by Air Products and Chemicals Inc (APC), a company from the United States, to withdraw from the coal gasification project consortium in Indonesia will affect the plan to substitute Liquefied Petroleum Gas (LPG) with 1.4 million metric tons/year of Dimethyl Ether (DME) results from coal gasification or equivalent to 1 million tons of LPG. The Institute for Essential Services Reform (IESR) believes that it is a good decision for APC to withdraw from the DME project. Meanwhile, for the government, the mitigation effort to overcome the failure of the DME project, reduce LPG imports, and reduce greenhouse gas emissions is to encourage the conversion of gas stoves to induction electric stoves nationally, followed by an increase in the renewable energy mix.
“APC’s decision to withdraw from the DME project in South Sumatra and the ethanol project with PT Kaltim Prima Coal (KPC) in East Kalimantan is the right decision. These projects do not economically align with rising coal prices and increasing investment costs by incorporating Carbon Capture and Storage (CCS) technology to capture carbon. APC’s withdrawal from this project can save state finances in the future because it does not have to subsidize DME products whose production costs are more expensive than imported LPG,” said IESR Executive Director, Fabby Tumiwa.
Fabby explained, even so, the government still had to try to suppress LPG imports which had reached 80% of supply in Indonesia. The scheme is to encourage the use of induction electric stoves. Last year, the public criticized this program plan until it was finally canceled due to problems with poor public communication. However, the induction cooker program must be discussed again and supported for its implementation.
The use of induction electric stoves will also cut LPG imports which are a burden on the state budget. Citing data from the Ministry of Energy and Mineral Resources, the majority of LPG is consumed by the household sector as much as 96%, the commercial sector 2.5%, and the industry 1.5%. According to the Coordinating Ministry for Maritime Affairs and Fisheries, Indonesia has imported LPG worth IDR 80 trillion out of a total requirement of IDR 100 trillion. Meanwhile, the LPG subsidy provided by the government reaches IDR 70 trillion. LPG consumption in 2021 will reach 7.95 million tonnes, with 6.4 million tonnes coming from imports.
“LPG subsidy savings can reach 1-2 million per year per household that switches to electric stoves, this range depends on how often the household cooks, of course. The government can launch a gradual transition program for hundreds of thousands of households and increase it every year by providing incentives to purchase electric stoves and increase household electricity,” said Deon Arinaldo, Energy Transformation Program Manager, IESR.
Implementation of the electric stove program will bring economic and environmental benefits to the community. Moreover, besides its less pollution, the costs incurred by the community when using an induction stove can be 10-30% lower than using a gas stove.
“If LPG is without subsidies, electric stove operating costs are more efficient by up to 47% per year as compared to gas stove operating costs,” explained Faris Adnan, IESR Researcher.
In terms of emissions, the electrification of cooking equipment will reduce greenhouse gas emissions if the renewable energy mix in Indonesia’s energy system is more than 50% in 2030. Every one million households using an electric stove can increase electricity demand by ~1 TWh. For this reason, this additional electricity demand must be supplied by renewable energy.
“For electric stoves to have at least the same emissions as gas stoves, the mix of renewable energy in power plants in 2030 needs to reach 54% and the coal mix down to 29%, so that electricity generation emissions become 0.415 kgCO2/kWh from 0.781 kgCO2/kWh. For this reason, the government also needs to ambitiously increase the mix of renewable energy in power plants and reduce the portion of coal in power plants,” said Faris.
However, he added, when compared to using DME, emissions from electric stoves will be lower by 34% in 2025 and 46% in 2030. This calculation assumes that DME production facilities from coal are not equipped with carbon capture and storage technology, resulting in high emissions. If the 1.4 million metric tons/year of DME used for cooking is replaced by electricity, then in 2025 it is predicted to save emissions of 2.92 million tons of CO2 and 3.94 million tons of CO2 in 2030. In addition, transition 1, This 4 million metric tons of DME to electricity can increase electricity demand by 7.2 TWh per year.
The IESR views that the use of electric stoves to substitute LPG, coupled with accelerating the increase in the renewable energy mix, can be one of Indonesia’s GHG mitigation actions, and can be included in the GHG emission reduction plan in the 2nd Nationally Determined Contribution (NDC), which will be published in 2025 future. ***