Indonesia opts for less ambitious option than early coal retirement

Indonesia will not put the early retirement of coal plants at the forefront of its emissions reduction ambitions, the government said.

Divya Karyza

Divya Karyza

The Jakarta Post


Representational image. PHOTO/Shutterstock Terekhov Igor/THE JAKARTA POST

November 28, 2023

JAKARTA – Indonesia will not put the early retirement of coal plants at the forefront of its emissions reduction ambitions and instead will focus more on controlling emissions from coal plants, which will remain operational until the end of their operational lifespans, the government said on Wednesday.

The Energy and Mineral Resources Ministry and state-owned electricity utility PLN have agreed to keep coal-fired power plants running until their operational periods end, but they vowed to implement means to reduce carbon emissions from these plants, a program that they describe as a coal phase-down.

This is as opposed to a coal phase-out, a scheme to retire the country’s coal plants early ahead of their operational lives, which the government has now decided to make conditional, depending on the funding being available.

“The energy ministry and PLN have agreed to focus more on [other] emissions-reduction efforts instead of [shutting down] coal-fired power plants,” Jisman Hutajulu, the energy ministry’s electricity director general told reporters in Jakarta on Wednesday.

“The [early retirement program] will continue if funding is available and if it does not interfere with [electricity] system reliability,” he said, adding that the government had chosen not to put too much faith in international funding.

Jisman explained that before the power purchasing agreement (PPA) of each plant is over, the government will slowly reduce electricity use from these coal-plants, allowing them to reduce emissions in the process.

“We already have a coal fleet with a total capacity of 48 gigawatts that we’ve agreed to phase down. Later we will reduce the share until the PPAs end,” he said.

According to PLN presentation material, reducing emissions would include implementing carbon capture and storage (CCS), hydrogen co-firing and use of ammonia.

Read also: Coal phase-out scheme draws minimal JETP funding

Previously, the energy ministry and stakeholders had prepared a study showing that by 2030, 15 coal-fired power plants, with a total capacity of 4.8 GW, could potentially be shut down ahead of their operational periods.

However, this was based on the expectation that Indonesia could rely on more than US$20 billion from the Just Energy Transition Partnership (JETP) climate pledge to fund its early retirement program. However, after months of complicated negotiations, the program has only received paltry funding pledges from the initiative.

According to the draft investment plan, only around $1.5 billion of the $21.5 billion total pledged for Indonesia’s JETP is designated for the early retirement and managed phase-out of coal-fired power plants in the country.

Experts say the lack of funding combined with miniscule grants for the program have made it challenging for Indonesia to carry out its early retirement plan.

Darmawan Prasodjo, president director of PLN said, that the coal phase-down scheme would be accompanied with accelerated renewable energy development.

Under the scenario, PLN’s modeling laid out a target for Indonesia to have 75 percent of its power generated from renewable energy sources and the remaining 25 percent from gas and phased-down coal plants in the 2031-2040 period.

It is stipulated that renewable energy will produce 31 GW of baseload power, the electricity generated to meet day-to-day use outside of emergency and peak demand, which currently is produced by coal and gas plants.

This was chosen rather than another scenario made by PLN that stipulated there would be early coal retirement and an even more accelerated renewable energy development.

“It turns out [under the scheme with coal retirement] the renewable baseload requirement is close to 84 GW; the costs are too high and the systems operations are not feasible. The capital expense is also very high,” Darmawan told lawmakers of House of Representatives Commission VII overseeing energy and mineral resources on Wednesday.

Under the chosen scheme, the power sector emissions are projected to reach 334 million tonnes of carbon dioxide by 2030, according to PLN presentation material.

This is higher than the 290 million tonnes initially agreed in the JETP plan by Indonesia and the international partners group (IPG), coled by the United States and Japan, which previously included the coal phase-out scheme.

Read also: Govt publishes JETP plan for review, skirts thorny captive power issue

Fabby Tumiwa, the executive director of the Institute for Essential Services Reform (IESR) told The Jakarta Post on Friday, that he regretted the change.

“Emissions reduction from deploying a coal phase-down and reducing coal plants’ capacities will not be as significant compared with a coal phase-out,” he said.

Forgoing a plan to retire coal plants instead will prevent PLN from getting fresh funding needed to build more renewable energy power plants in 2024-2034.

Putra Adhiguna, an energy analyst at the Institute of Energy Economics and Financial Analysis (IEEFA) told the Post on Friday, that the government must assess the risk of investment opportunity loss caused by PLN’s inability to integrate more renewable energy into its electricity networks, following the change.

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