Jakarta, November 15, 2023 – The government is taking steps on Presidential Regulation (Perpres) No. 112/2022 concerning the Acceleration of Renewable Energy Development for Electricity Supply by drafting a road map for the operational termination of coal-fired power plants. The Institute for Essential Services Reform (IESR) views preparing a road map for the early termination of coal power plant operations as a first step to encourage renewable energy development. Furthermore, after the road map is determined, the government should prepare a regulatory framework that can support the implementation of a financing structure or scheme for the operational termination of coal-fired power plants in Indonesia.
Deon Arinaldo, Program Manager of Energy Transformation at IESR, mentioned that there have been several proposed structures for terminating coal-fired power plants (CFPP) operations, such as write-offs or deletion of CFPP assets from company records because they are considered no longer economical or for example, spin-offs, namely the sale of assets to a new company to manage these assets with a shorter operating period. In addition, according to him, the government needs to make several pilot projects for the termination of the ongoing CFPP operations, such as the Cirebon CFPP, as a proof of concept and provide certainty to PLN and Independent Power Producers (IPP) as CFPP asset owners.
“Apart from a clear scheme or structure in the early termination of coal-fired power plant operations, a mechanism is also needed to allocate the funding obtained from the early termination of the power plant to renewable energy plants. The current regulations in Indonesia do not allow this. Therefore, it is necessary to conduct a thorough study and propose changes to allow the use of renewable energy funding, which is cost-effective, for retiring CFPP assets,” Deon said at the Enlit Asia panel discussion entitled “Leapfrogging to NZE: Accessing ASEAN readiness to retrofit or early retire coal fleets” (15/11).
Deon sees that a significant amount of work still needs to be done concerning the early retirement of CFPP. Some of the tasks include ensuring a legal framework that explicitly states that the early termination of CFPP operations is part of the country’s energy transition policy aimed at reducing emissions. Additionally, there needs to be regulations that permit modification of the power purchase agreement (PJBL) and other related tasks.
“It is even better if the strategy at the CFPP is part of an energy transition effort that wants to integrate renewable energy on a large scale to reduce GHG emissions. If the goal is like that, CFPP assets will be optimized to ensure renewable energy can enter the electricity mix quickly and cheaply. For example, instead of waiting to be retired, CFPP can be operated flexibly to help maintain system stability and reliability as the mix of intermittent solar and wind power increases,” Deon added.