Part Three: Indonesia to Close Coal Plants by 2050—But How?

A group of birds fly in front of the skyline in Jakarta, which is barely visible because of air pollution
CNN Indonesia
Part Three: Indonesia to Close Coal Plants by 2050—But How?

Hundreds of attendees at the Hannover Masse Industrial Exhibition, Germany, in April 2023, witnessed President Joko Widodo vow that all Indonesian coal plants (PLTU) would be closed by 2050. Renewable-energy-fueled (RE) power plants would be built instead.

No lip service here, or so he claimed. "We walk the talk, not only talk the talk," pledged the president to a loud applause.

This closing target had been agreed upon when the Indonesian government and its international partners signed the Just Energy Transition Partnership (JETP) agreement on the sidelines of Indonesia's G20 Summit last November in Bali.

An important step when one considers that 88% of Indonesian electricity is mostly coal-generated.

Members of the Association of Indonesian Private Electricity Producers (APLSI), an industry directly affected by this decision, admit that they are eager to learn more, as details of the closure is still hazy.

Around 30 APLSI generator companies currently have an installed capacity of close to 19 gigawatts—the majority of which are coal-fired. A small portion are RE generator, fueled by, for instance, geothermal.

As PLN's supplier, most APLSI members have been bound by a purchasing power agreement (PPA) for 30 years. The agreement provided a blanket guarantee that production of electricity would be purchased by PLN.

Despite President Jokowi’s pledge, up until this year and most likely next, PPA still oversees the development of several new power plants, some of which are still in the construction stages. As power plants conventionally run between 30 to 40 years, the consequence of Jokowi's target, if met accordingly, will force the retirement of those new power generators.

"As long as the rules of the (retirement) game are clear. Since there are specific provisions regarding contractual agreements, funding, concrete timelines and transparent tender implementation for the transition to RE, we have no problem," said Arthur Simatupang, Chair of APLSI, when contacted in July.

PLN claimed that steps towards the termination has already begun. Including to power plants under the PPA mechanism.

"PLN has removed 13 gigawatts of PLTU from planning. This will reduce around 1.8 billion tons of CO2 in the next 25 years.... (Also) PLN has successfully terminated 1.3 gigawatts of PLTU under PPA agreement. This will reduce 175 million tons of CO2 emissions in the next 25 years," said Gregorius Adi, a spokesman for PLN in a written message to CNN Indonesia.

PLN plans to replace 1 gigawatt of PLTU with RE base load, with another 800 megawatts from PLTU to be replaced by gas.

Silence from coal regions

Apart from the PLTUs and its workers, closing the plant will have serious consequences for Indonesia’s coal industry. In 2020, according to the Ministry of Energy and Mineral Resources, there are an estimated 150,000 workers in the coal mining industry.

The contribution of non-tax state revenue from coal constitutes 80% of Indonesia's total mining industry. In the midst of booming coal prices in 2021, it was valued at more than 60 trillion Indonesian rupiah.

"Therefore it is very urgent for the main coal-producing regions to map the phase out strategy, how to survive and grow after coal. Because impact will be long-term and systemic," said IESR Director Fabby Tumiwa.

East Kalimantan Province, said Fabby, is one such region. 40% of its economy is supported by coal mining. Closure of PLTUs will seriously hit the local economy, including its own regional income.

The host region needs to at least rethink its economy, future employment, training and education. 

However, Fabby suspects its officials are reluctant to discuss the post-coal future. They did not respond when asked to engage.

"We have communicated with (officials of) East Kalimantan and South Kalimantan, two coal-laden regions, to raise this issue. It so happens that (the price of) coal skyrockets today. (It is) very difficult to convince them that production of coal will one day need to be stopped. It's impossible because the focus is currently short-term," Fabby added.

CNN Indonesia has also contacted governor-level officials, the region’s body for development and planning (Bappeda) officials, regents, the Public Mining Service Office, and even the Public Relations Office in Jambi, South Sumatra, East Kalimantan, Samarinda and East Kutai—all of which are Indonesia’s biggest coal producers. Not one has answered.

Coal-fired power plants in Indonesia
The government has determined that all coal-fired power plants will be closed by 2050 in Indonesia / Credit: Willy Kurniawan for Reuters.

Presidential decree to phase out

One of the key aspects of closing a power plant is cost. To achieve all zero-emission targets by 2060, including by closing the power plant and converting it into an RE generator, the Indonesian government estimated the cost equal to 1 billion US dollars annually.

Through the Just Energy Transition Partnership, partner countries and a number of global private banks agreed to infuse 20 million US dollars (around 310 trillion rupiah) in funding to help Indonesia achieve the emission target.

Currently the JETP Secretariat is tasked with calculating aspects of the target and funding needed for this transition. Details will be uploaded to a document titled the Comprehensive Investment and Policy Plan (CIPP). Information on the list of plants that will be terminated by a certain year, for example, is still being calculated.

"Discussions regarding the projects that will be included in the JETP scheme are still ongoing and will not be final before August 16, 2023 (the issuance date of the CIPP)," said Edo Mahendra, head of the JETP Secretariat.

Edo said the document will focus on five investment areas; in the transmission and distribution sector, early retirement of coal-fired power plants, baseload renewable energy, intermittent renewable energy, and strengthening of supply chains and the renewable energy industry.

Among questions about the interests of the electricity industry and the hundreds of thousands of people who depend on this industry and whose livelihoods would be threatened if PLTUs cease to operate, Edo said JETP is trying to find the "most optimal" scheme.

"It should also be noted that the mobilization of JETP funds is set between the 3rd and 5th year after the joint statement is signed (November 2022)," he added.

Even though it carries a mandate worth hundreds of trillions of rupiah, many are worried about the coal phase out scheme if it relies on JETP funding—meaning the fate of zero emission target is in the hands of foreign entities' sole willingness to fund.

IESR Director Fabby Tumiwa proposed a legal umbrella through a presidential instruction (Inpres).

"A top down directive is needed—the president's order. If necessary, a special presidential decree for the termination of the PLTU. There should be regulations that protect the target, otherwise it will become a legal issue later in court. I heard that APLSI members are interested in converting their plants to RE. What’s not clear is how—the decree could help," he said.

This story was produced with support from Internews' Earth Journalism Network. It was first published in CNN Indonesia on August 11, 2023. It has been lightly edited for length and clarity.

Banner Image: One of the impacts of PLTU is air pollution in several cities in Java, including DKI Jakarta / Credit: Willy Kurniawan for Reuters.

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