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

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