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No New Coal in Java: Indonesia Takes a First Step at Phase-Out

Indonesia’s Ministry of Energy and Mineral Resources Ignasius Jonan recently announced that there would be no new coal plants in Java. The announcement heralds, at last, a step away from the coal-dominated future that had been proposed. Why has this decision been taken? And how should Indonesia seek to power its economy with coal now taken off the menu?

The Government of Indonesia had planned to add 35 GW of coal power capacity by 2026, as stated in the RUPTL, the procurement business plan of PLN (the state-owned electricity generation company). Most of the new developments and half of the new capacity (13 GW) were planned to take place on Java. In Central Java, six new plants were proposed totalling nearly 6 GW of capacity. These were to be built by independent power producers. The future of these projects has now been thrown into doubt following the reported change of heart. Commentators have previously raised concerns that Indonesia’s pro-coal policy stance was out of step with the true costs of coal, risked creating dangerous levels of air pollution and was a barrier to renewable energy deployment.

A key reason for the decision is that mounting research has shown that the costs of coal far outweigh cleaner alternatives. In addition to the financial cost of building and operating coal plants, research from IISD has been highlighting that the cost of the subsidies that coal producers and generators receive, the cost to society of air pollution and the costs of carbon emissions together make coal a very expensive source of generation.

Figure 1. Distribution of cost of coal power generation in Indonesia, including subsidies and externalities

When all the costs of coal power generation are included, IISD estimates that the total cost is more than USD 100 per MWh, far more than the cost of renewable energy. The latest results from renewable energy auctions for solar and wind power show that renewable electricity can be delivered in many other countries, including India, China and the United States, for around USD 40–50 per MWh. With renewable costs increasingly converging with the financial cost of coal, and the growing realization that the additional environmental and social costs of coal are very significant, it simply doesn’t make sense to pursue a coal-based energy policy in 2017.

The decision to place a ban on new coal is a welcome step that brings Indonesia, or at least Java, into line with the growing global consensus that the costs of new coal far outweigh the benefits. However, there are still barriers in place preventing the deployment of renewable technologies, including the recent caps imposed on renewable power purchase agreements, which could replace the cancelled coal plants and ultimately replace the coal plants that are already operating. Creating a political environment in which renewable energy projects that can thrive should be a priority for the government if they are to achieve their renewable energy commitments of 23 per cent by 2025.

By Richard Bridle

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Nathan Wilson's picture
Nathan Wilson on October 23, 2017

Indonesia is another tragic example of how developing nations suffer because they are so very under-served by the embattled nuclear industries in developed countries. With 52 GW of generation spread across numerous islands, the 2.2-4 GW power plant designs offered by US and European nuclear companies are a very poor fit.

Renewables aren’t well suited to islands: without continent-scale grids (sub-sea cables make big grids very expensive), and no cheap storage, even low priced renewables lead to an expensive system. Developing countries are generally plagued by frequent power outages (Indonesia is no exception), so adding more sophisticated demand responses systems will be too little, too late.

So we can expect the Indonesia grid evolution to stall for a few more years (i.e. it will continue to be based on coal, gas, and oil, with a few solar PV farms added for greenwashing) until a robust supply chain develops for SMR nuclear plants: perhaps China be first with their 600 MW pebble-bed nuclear plant (build from 6 modules), and perhaps NuScale (small LWR) and Thorcon (molten-salt, with Indonesia cited as a potential early customer) will get there too.

Engineer- Poet's picture
Engineer- Poet on October 23, 2017

If there’s a market for SMRs in the USA, Hawaii would appear to top the list.  It is isolated and even Oahu’s grid is too small for a conventional LWR, but SMRs would do the job nicely.  Something like NuScale might serve smaller islands too.

I don’t know if the specs for NuScale allow them to be barge-mounted, but tying them to the ocean’s infinite heat sink would eliminate any threat of meltdowns.

Bob Meinetz's picture
Bob Meinetz on October 23, 2017

The only reason there is a “ban” on new coal, which sounds very courageous and greenish, is a self-serving one: Indonesia is a top producer of natural gas, exporting 400 bcf yearly, and it’s become cheaper to produce electricity burning that fossil fuel. It generates less CO2 as well, but renewables? Hah! Fuhgeddaboudit.

Mark Heslep's picture
Mark Heslep on October 23, 2017

BP Statistics 2017 shows Indonesia increased coal consumption 22% from ’15 to ’16, increased 13% the year prior, and doubled coal consumption from ’08 to ’16. The coal industry data aggregator End Coal reports Indonesia has 6.8 GW of new coal power under construction as of July ’17, against the existing coal power in operation of 28 GW. The most populous island of Java itself has seven new coal plants under construction, and most of the other islands show dozens of new plants planned or permitted or under construction.

In total, another 35 GW of new coal power is listed as in some stage of permit or announcement in Indonesia. If the no-new-approval coal ban holds on the island of Java, apparently coal still has a free hand on the numerous other islands.

The declaration in this article that Indonesia has taken a step to “phase-out” coal appears to depend entirely on the reported statements from a politician, and not at all on outcomes to date.

Mark Heslep's picture
Mark Heslep on October 23, 2017

Indonesia is currently the 9th largest coal consuming nation at 63 MTOE/yr. If it continues a strong coal growth of 20%/yr, it will pass the 2016 consumption level of #4, Japan, in 3 to 4 years, and pass the coal declining #3, the US, in ~8 years. Such is the extent of the global coal problem.

Helmut Frik's picture
Helmut Frik on October 23, 2017

The “bit of solar power ” for greenwashing can exceed 50% of power demand (in TWh) easily. And prices for sub sea cables are falling, and I do not see why Indonesias mayor island should not get as many external grid connections as e.g. UK is getting. Different from SMR’s this technology is available on the market.