Kompas | Lulled by Coal

The Our World in Data page states that at the turn of the 20th century, half of the world’s energy sources came from coal. The transition from fossil energy to renewable energy, which was previously slow, is now accelerating. In the UK, around two-thirds of electrical energy came from coal in 1990. In 2010 this fell to less than a third and is now estimated to be around 1 percent.

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Assessing the Readiness of Coal Producing Regions for Socio-Economic Transformation

Jakarta, 1 September 2023 – In 2022, Indonesia will be the third largest coal producing country in the world. This has had a number of good and bad impacts on Indonesia, especially coal producing areas, such as Paser Regency in East Kalimantan and Muara Enim Regency in South Sumatra. The coal industry sector directly contributes to Gross Regional Domestic Income (GRDP). The contribution of the coal sector to regional income is quite large. In Paser Regency, East Kalimantan, 70% of GRDP comes from the coal sector. The coal sector also contributes to 20% of the East Kalimantan provincial APBD. Meanwhile, in Muara Enim Regency, the coal industry contributes to 50% of the GRDP and 20% of the APBD of South Sumatra Province. 

Julius Christian, Research Manager of the Institute for Essential Services Reform (IESR), explained that the downward trend in global coal use and demand will accelerate in line with the increasing climate commitments of Indonesian coal export destination countries such as China, India and Vietnam. 

“If these countries increase their climate commitments to be compatible with the Paris Agreement targets, there will be a drastic reduction in Indonesian coal. “This will certainly have an economic and social impact on Indonesia’s coal producing regions,” said Julius. 

Economic dependence on this one sector has become a concern for local governments. This was explained at the launch of the IESR Study entitled “Just Transition in Coal Producing Regions” (1/9). IESR Social and Economic Analyst, Martha Jesica, said that coal producing regional governments sometimes do not understand the risks of the energy transition. However, they understand that economic dependence on one sector is not good. 

“As an effort to get out of this dependency, the regional government is supporting the company’s CSR initiatives and starting to identify opportunities for economic diversification,” explained Martha. 

Ilham Surya, IESR Environmental Policy Analyst, added that preparing human resource capacity is an important point in making a just transition. 

“Considering that there will be changes from economic sectors that are familiar to them, such as mining, towards clean energy, there needs to be capacity building which includes education (including) financial literacy and health quality,” he added. 

Differences in education levels are one of the reasons why local communities in coal-producing areas can only access work at the sub-contractor level. In the response session, Dedi Rustandi, Intermediate Expert Planner, Coordinator of Renewable Energy and Energy Conservation at the Ministry of National Development Planning/Bappenas, conveyed the importance of preparing society for the transition. “Energy transition is an inevitability. Now is the right moment to increase public awareness of the energy transition issue. Our coal reserves actually don’t have that much anymore.” 

On the same occasion, Aris Munandar, Young Expert Policy Analyst, Sub-Coordinator 1, Directorate General of Regional Development, Ministry of Home Affairs, added that the energy transition in coal-producing areas is not only related to the ESDM sector. “We will support it through the RPJMD (Regional Medium-Term Development Planning). The regional vision will be very important to include in these strategic documents because 2024 will be a political year. 

“Regional heads must be thorough in seeing what things must be included in the RPJMD,” he added. 

Verania Andria, as Senior Adviser for Renewable Energy Strategic Program UNDP/Chair of JETP Indonesia’s Just Transition Working Group, believes that there are a number of things that need to be considered in the coal transition process, one of which is economic diversification. 

“The important thing to pay attention to in this economic diversification is related to financial sources that must continue to be explored, we cannot just depend on CSR funds from coal companies (as was the study’s findings),” he said. 

The same thing was also expressed by Uka Wikarya, Head of Regional and Energy Resources Policy Research Group, LPEM UI. 

“The quality of human resources really needs to continue to be improved through education and improving the quality of health. “For the economic sector, it is necessary to look for activities or MSMEs that are independent (not dependent for their operations on coal industry activities), so that the interventions carried out can be sustainable,” explained Uka.

The Important Role of Renewable Energy to Build a Bright Future

Jakarta, June 24, 2023 – Raditya Yudha Wiranegara, Senior Researcher at the Institute for Essential Services Reform (IESR), explained several challenges in retiring PLTU and how renewable energy plays a role in shaping the future. This was discussed in the Energy Talk event held by the Hasanuddin University Society of Renewable Energy (SRE).

Raditya, or mostly referred to as Radit, opened the discussion session by explaining that human activities, especially in the energy sector, are the main contributor to the increase in earth’s temperature. The energy source is still dominated by coal and followed by consumption of fossil fuels. Radit considered this as work to be done for Indonesia, to start making plans to reduce dependence on coal-based power plants.

Furthermore, Radit points out that Presidential Decree 112/2022 regulates the acceleration of renewable energy development, and the third article contains a mandate for the Ministry of Energy and Mineral Resources (MEMR) to start making scenarios for accelerating retirement of coal power plants. There are also restrictions not to build coal fired power plants (CFPP) after this Presidential Decree is passed, except for those that are currently being planned, and those that are included in national strategic projects.

“The existing CFPP must also start reducing their emissions, until all are retired in 2045. However, this plan is still in dynamic discussion; the State Electricity Company (PLN) plans to retire CFPPs in 2030,” Radit explained.

Moreover, Radit mentioned , the benefits of early retirement from CFPPs are 2-4 times the cost that can be saved, based on an IESR study with the University of Maryland. Radit emphasized that these benefits include the benefits of health costs on air quality and reduced electricity subsidies that must be issued considering that our electricity is now subsidized. However, retiring coal-fired power plants includes several challenges, including the need for quite large upfront costs, around USD 4.6 billion by 2030 and USD 27.5 billion by 2050, which require substantial international support to achieve them. Second, USD 1.2 trillion is needed to replace PLTU electricity generation with renewable energy. Third, the legal aspect. Radit assessed that both PLN and independent power producers (IPP) have several scenarios that must be met in retiring their generators. For example, PLN needs to be investigated by an auditing agency if there is a loss to the state due to a reduction in the power plant, and the IPP can file a claim for the loss.

“From the results of the study we conducted, we found that in terms of mitigation costs, canceling the PLTU project is the most affordable option in reducing carbon emissions. Canceling will also avoid the big costs that will occur when you have to retire later, “said Radit.

Radit emphasized that with the Just Energy Transition Partnership (JETP) momentum, Indonesia must be able to catalyze more investments and build an attractive market climate in Indonesia for foreign investors. JETP is a climate change and energy transition funding partnership from the G7 countries plus Norway and Denmark for the development of electric vehicles, technology, and the early retirement of fossil-based power plants in Indonesia. This partnership also promotes an equitable energy transition that takes into account the lives and livelihoods of affected communities at every stage of the energy transition journey, so that no one is left behind. Indonesia has received an allocation of USD 20 billion to support the energy transition in Indonesia through the JETP framework.

The Importance of Terminating Coal Power Plant Operations to Pursue Emission Reduction Targets

press release

Jakarta, 20 June 2023 – The Institute for Essential Services Reform (IESR) urges the Indonesian government to transform the energy sector to achieve peak emissions in 2030 and carbon neutral in 2050. This align with President Joko Widodo’s commitment to achieve net-zero emissions in 2060 or earlier as a form of Indonesia’s responsibility to reduce the threat of global warming.

According to Climate Watch’s data, the energy sector is the largest contributor to greenhouse gas emissions. Globally, the sector produces 36.44 gigatons of carbon dioxide equivalent (Gt CO2e) or 71.5% of total emissions. Meanwhile, based on the Ember Climate report, Indonesia ranks as the 9th largest CO2 emitter from the electricity sector in the world, reaching 193 million tons of CO2 in 2021. For this reason, the government must reduce emissions significantly in the energy sector, especially in the electricity sector.

Fabby Tumiwa, Executive Director of IESR stated that as one of the world’s largest economies as well as the largest emitters, Indonesia is expected to show leadership and commitment to decarbonize its energy sector through energy transition policies and plans. President Joko Widodo’s (Jokowi) political commitment must be translated into a series of policies, regulations and plans that align with one another.

“There are signs that President Joko Widodo’s (Jokowi) political commitment is trying to be countered and hindered by a number of parties who are reluctant to make an energy transition, and ultimately want to maintain the status quo, which is to not reduce coal consumption to supply electricity. For this reason, the President must observe in detail which parties are reluctant to do energy transition or try to downgrade the government’s ambition and buy time until they can change the political decision,” Fabby added.

Deon Arinaldo, Manager of the Energy Transformation Program said that IESR views the termination of coal-fired power plants in Indonesia as an important matter. As one of the recipients of Just Energy Transition Partnership (JETP) funding, Indonesia is committed to achieving a peak emission of 290 million tons of CO2 by 2030, and increasing the renewable energy mix in the electricity sector to 34% by 2030,” said Deon.

“The target stated in the JETP commitment is higher than the policies and plans that have been set at this time. For example, the emission target covers the power sector as a whole as well as the renewable energy mix which is 10% higher than PLN’s RUPTL 2021-2030. This means that in order to achieve this target in approximately 7 years, transformation is needed not only in planning the electricity system, such as stopping the operation of coal-fired power plants,” said Deon.

Assuming that all power plants, including coal-fired power plants, planned in the 2021-2030 RUPTL are built, IESR calculates that to achieve the JETP target,  at least 8.6 GW coal-fired power plants must be retired before 2030 followed by the termination of 7.6 GW CFPP operations before 2040. On the policy side, accelerating  renewable energy development and investment disincentives for fossil energy generators also need to be continuously encouraged.

Based on the Delivering Power Sector Transition report, IESR found that of the 13.8 GW PLTU which is planned for development in the 2021-2030 RUPTL as many as 2.9 GW could be canceled, 10.6 GW needed to end operations early, and 220 MW to be replaced with renewable energy power plant such as biomass. The cancellation of the 2.9 GW PLTU is the cheapest option to avoid GHG emissions in the electricity sector.

“From the analysis we conducted in this report, canceling the construction of coal-fired power plants coupled with early retirement for power plants can help achieve the peak emission target agreed upon in the JETP. We estimate that a 5.6 GW PLTU must be retired before 2030 if the 2.9 GW PLTU can be canceled,” said Akbar Bagaskara, Researcher of the Electricity System.

Based on the IESR study entitled Financing Indonesia’s coal phase out: A just and accelerated retirement pathway to net-zero, the cessation of coal-fired power plants is beneficial from an economic and social perspective, such as avoiding the cost of subsidized electricity produced from coal-fired power plants and health costs, respectively. Amounted to $34.8 and $61.3 billion—2 times to 4 times as much—of the cost of stranded assets, decommissioning, job transition, and losses in coal revenues.

“Until 2050, it is estimated that investment costs will be required to develop renewable energy and supporting infrastructure, as a substitute for the retired coal power plants, amounting to $ 1.2 trillion. International funding support will certainly be needed to make this happen. However, by retiring PLTU early and accelerating the development of renewable energy in Indonesia, it is estimated that there will be 168,000 deaths that can be avoided by 2050,” said Raditya Wiranegara, IESR Senior Researcher.

Translator: Regina Felicia Larasati

Possible Intervention Options to Reduce Energy Sector Emissions

Jakarta, 30 May 2023 – Transforming the power sector into a low carbon energy system is an absolute necessity. One of them is to pursue emission reduction targets in order to maintain the increase in global average temperature to be at the level of 1.5 ℃. It is stated in the IPCC AR6 Synthesis Report that from 2011 – 2020, the average global temperature has increased by 1.1℃, amidst various human activities that continue to produce emissions. The energy sector is one of the largest contributors to emissions in Indonesia after forestry and land use. Plans to develop fossil-based energy generators are an obstacle in efforts to reduce emissions from the electricity sector.

Indonesia is in the top three rankings as a country with CFPP in the pipeline after China and India. A total of 13.8 GW of CFPP with various development progresses have been included in the PLN RUPTL 2021 – 2030.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), during the launching report and public discussion ‘Delivering Power Sector Transition’ said that one of the reasons for the increase in the global average temperature is the burning of fossil fuels.

“Thus, reducing coal capacity in the electricity system is one of the key actions in efforts to achieve the target of the Paris Agreement, which is to keep global temperature rise at 1.5 degrees Celsius,” he said.

In the Indonesian context, commercial issues have become one of the aggravating factors for the coal phase-out. Dadan Kusdiana, Director General of New and Renewable Energy and Energy Conservation, Ministry of Energy and Mineral Resources, conveyed that coal phase out still requires joint encouragement from all parties.

“We still have to fight for this (phasing out coal and adding renewable energy capacity). Because, according to current regulations, they are not in the same regulations. However, I want to encourage that the process must be done in the same rhythm,” he said.

IESR considers the coal phase-out in Indonesia as an important matter, because as one of the recipients of the Just Energy Transition Partnership (JETP) funding commitment, Indonesia has an obligation to reach a peak emission of 290 million tons of CO2 in 2030 and increase the renewable energy mix by 34% in 2030.

“To achieve the target of the Paris Agreement, the target set by JETP is actually not enough. However, this can be a starting point for accelerating the development of renewable energy in Indonesia,” explained Raditya Wiranegara, IESR Senior Researcher who is a member of the study author team.

Raditya added that in the Delivering Power Sector Transition report, IESR found that of the 13.8 GW PLTU planned for construction in the 2021-2030 RUPTL, 2.9 GW could be cancelled, 10.6 GW needed to end operations early, and 220 MW were considered for repurposing with renewable energy-based power plants such as biomass.

Akbar Bagaskara, power sector researcher in IESR added that the reduction in emissions will be directly impact the cost of the electricity system.

“The cancellation of CFPP construction accompanied by early retirement for the existing CFPP will be the best scenario for reducing emissions. Cancellation of CFPP in the pipeline will reduce emissions significantly. However, it is felt that this is still not optimal to achieve the JETP target in 2030,” he added.

IESR calculates that to achieve the JETP target, at least 8.6 GW of coal must be retired before 2030, followed by the phase out of 7.6 GW of coal-fired power plants before 2040.

Gigih Udi Utomo, Director of Energy Conservation at the Ministry of Energy and Mineral Resources, commented that the coal phase-out and the cancellation of the CFPP need to be seen as two different things.

“When we talk about the early retirement road map, we are referring to the mandate of Presidential Decree 112/2022. Early retirement is for existing CFPPs, while this 13.8 GW topic is for CFPP that is not yet operating and is already in the RUPTL, so that each of the options and scenarios offered in the study needs to be explored again and requires dialogue with relevant stakeholders,” he explained.

Independent Power Producers as PLN’s partner in meeting national electricity demands state that energy business actors are basically willing to support the government in the transition.

“However, what needs to be noted is that the participation of projects that will be canceled or CFPP units whose retirement age will be accelerated must be based on the voluntarily principle not mandatory because basically the project owner has secured the contract with PLN,” said Chairman of the Association of Indonesian Private Electricity Producers (APLSI), Arthur Simatupang.

Kirana Sastrawijaya, Senior Partner of Umbra, reminded that it is important to review the PPA (Power Purchase Agreement) document between IPPs and PLN especially for the proposal to cancel the CFPP construction.

“Presidential Decree No. 112/2022 can be used as a legal basis for phasing out coal, but there needs to be list of criteria of which CFPPs unit eligible for phase-out. This Presidential Decree can also become a basis for canceling a CFPP, although it does not specifically talk about cancellation,” she said.

In the context of legal law, Karina stressed that potential legal disputes could occur. So, in addition to the applicable government regulations, the contract document (PPA) must be a reference document because it regulates in detail various restrictions on the parties and funders.

Excess Power Supply, PLN Needs to Evaluate the 35 GW Megaproject

Jakarta, February 8, 2023 – The State Electricity Company (PLN) is currently in the midst of a crisis of oversupply of electricity. Several factors cause this, including the pandemic and global recession. In addition, there is a 35 Gigawatt coal power plant megaproject that has been initiated since 2015 and operated at only 47% in 2022. However, there are also several misconceptions about this crisis. In a news program at the CNBC Energy Corner (6/2/2023), Herman Darnel Ibrahim, a member of the National Energy Council, and Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), discussed some of these misconceptions.

According to Herman, it is common for electricity service providers, including PLN, to set a percentage of reserve margin. Referencing other countries, 40-50% is a normal rate for the reserve margins to anticipate growth and maintenance. In 2022 alone, electricity growth was recorded at 6.15% (including from private power producers) and is expected to continue to increase in the coming years.

“On the island of Java itself, the reserve margin is probably 60%, while in other places there is a shortage of power. So in the next two years, it is estimated that there will be no overcapacity,” explained Herman.

According to Fabby, the growth percentage stated by Fabby does not reflect the actual rate of growth inside PLN, which is less than 5%. He considers that the current oversupply situation is due to a mismatch in demand projections that form the basis for planning and realizing the 35 GW. 

“Of the 35 GW that have been planned, 5.4 GW have not been contracted and have not received funding. It would be good if this amount could be canceled or diverted to renewable energy,” explained Fabby.

Herman and Fabby agree that there needs to be an evaluation from PLN in various aspects. First, it must sharpen demand forecasting for electricity use, while taking into account electricity supply from private generators. This can reduce the possibility of excess capacity, which can result in costs to be borne by the government or increased tariffs on customers.

Second, there needs to be an evaluation of electricity purchase and sale contracts with private power producers, especially those using take or pay clauses. 80% of the excess supply of electricity comes from private producers, and each GW costs the state IDR 3 trillion.

Third, it is necessary to evaluate the schedule between projects. The tendency is that project completion is adjusted to government tenure. This does not match the gradual demand growth for electricity, instead there is a sudden increase in power capacity, which causes overcapacity.

“The COD schedule (commercial operation date) should be determined by PLN, not the government’s term of office. Usually, projects are planned year by year so that there is no under capacity or overcapacity,” said Herman.

“The remaining 5.4 GW is important to monitor. The project is mostly funded by China, while since a few years ago, China has not financed coal plant projects anymore, so if it is certain that there will be no funding, it is better to cancel or divert to renewable energy. Evaluation is then important to provide stability of supply and affordable electricity prices,” concluded Fabby.