Indonesia has recently unveiled its National Electricity Master Plan (RUKN 2024-2060), which outlines the strategy for electricity generation over the next few decades, projecting a substantial increase in both renewable energy sources and coal-powered generation. The plan is designed to balance the country’s growing energy demands while aiming to meet climate commitments. However, the significant proposed expansion in coal-powered generation has raised concerns about Indonesia’s ability to meet its environmental and sustainability targets, casting doubt on the nation’s dedication to its climate agenda.
Conflicting Goals in the Master Plan
One of the primary contradictions in Indonesia’s electricity master plan is the simultaneous projection of significant renewable energy growth alongside an increase in coal-powered generation. On one hand, the plan calls for a substantial investment in renewable energy resources to support a greener future, aligning with national commitments like the Low Carbon Scenario (LTS-LCCR) and the Just Energy Transition Partnership (JETP). On the other hand, it suggests a marked uptick in coal-fired capacities, which directly conflicts with efforts to reduce carbon emissions and transition to a cleaner energy mix.
Complicating matters further, recent pledges by Indonesian authorities, such as Prabowo’s commitment to retire numerous coal-fired power plants within 15 years, seem misaligned with the continued expansion of coal capacities as outlined in the new master plan. These contradictory goals signal potential setbacks in Indonesia’s progression towards long-term climate objectives, underscoring the need for strategic adjustments to the plan. Enacting strong emission controls and pivoting more decisively towards renewable sources are critical steps to resolve these conflicts and ensure alignment with sustainable development goals.
Captive Coal Capacity Expansion
A particularly critical aspect of the master plan is the forecasted 180% growth in captive coal capacity over the next seven years, driven by the growing demands of Indonesia’s mineral smelting industries. At present, the country operates nearly 49.7 GW of coal-fired plants, with a significant portion (11.2 GW) allocated for captive power to service these industries. This capacity has seen exponential growth, primarily due to the boom in mineral processing activities in regions like North Maluku and Sulawesi.
By 2031, the total coal capacity is expected to surge to 76.5 GW, with an additional 26.8 GW primarily supporting the burgeoning mineral processing sectors. Despite these projections, there remains a considerable amount of unspecified capacity within the plan. Analysts suggest incorporating renewable energy initiatives to occupy the gaps, promoting a decarbonization effort for captive coal while updating Indonesia’s Comprehensive Investment and Policy Plan (CIPP). Addressing these details is pivotal, as unabated expansion of captive coal projects harbors considerable environmental and financial risk.
Financial and Environmental Risks
The financial and environmental risks associated with expanding captive coal capacity cannot be overstated. Indonesian regulations, under Presidential Regulation No. 112/2022, stipulate that captive coal power plants may only operate until 2050, enforcing at least a 35% reduction in emissions within the first decade. Additionally, these plants are required to purchase coal at market prices, likely escalating overall generation costs. This scenario renders the levelized cost of electricity (LCOE) for captive coal higher than the national average generation cost and surpasses that of renewables.
Comparatively, power purchase agreements (PPAs) for solar and wind energy suggest considerably lower tariffs, indicating that renewable energy sources not only offer a more environmentally sustainable alternative but could also lower operational costs for captive power generation. Embracing renewables could help de-risk financial investments and align with Indonesia’s climate targets. Operationally, improved regulations and sustainable development strategies would likely mitigate the adverse impacts of new coal projects.
Lack of Regulatory Oversight
Indonesia’s lack of regulatory oversight for captive coal plants further exacerbates the challenges associated with their expansion. These captive coal plants are not currently subjected to the power sector emissions trading scheme or required to adhere to emissions reporting standards that are mandated for grid-connected plants. This regulatory gap diminishes transparency and significantly reduces environmental accountability, potentially undermining broader climate initiatives.
The master plan projects that electricity demand in Indonesia will grow by about 3.8% annually, driven by factors such as population growth, adoption of electric vehicles, and industrial expansions, including the development of a green hydrogen industry. Despite the anticipated growth in renewables, the next decade expects a rise in coal and natural gas generation, aggravating concerns over meeting renewable energy targets.
Delay in Renewable Energy Targets
The planned increase in coal generation is poised to significantly delay achieving key renewable energy targets. Under the National Energy Policy (KEN) set in 2014, renewable energy’s share should reach 23% by 2025; however, current projections indicate this could be delayed until 2030, reaching only around 21%. Similarly, the Just Energy Transition Partnership (JETP) goal for a 34% share of renewables by 2030 could face similar setbacks, challenging Indonesia’s potential economic gains in the global shift toward renewable energy.
Increasing reliance on coal for electricity generation not only undermines national low-carbon scenarios but also risks misalignment with international climate agreements. Missteps during this critical transition period could erode investor confidence and hinder Indonesia’s capacity to compete in the increasingly global renewable energy market, jeopardizing the economic benefits anticipated from a sustainable energy future.
Divergence from Paris Agreement Goals
Another stark concern is the master plan’s deviation from scenarios compatible with the Paris Agreement. Achieving a Paris-compatible trajectory necessitates a steep decline in unabated coal generation by 2050. However, the master plan projects only a modest reduction in coal generation by mid-century, falling well short of the benchmarks required to meet the agreement’s targets. This deviation forecast significantly higher emissions levels, potentially undercutting Indonesia’s climate commitments.
To genuinely align with a Paris-compatible scenario, significant action is required. Unabated coal generation needs to decrease to about 180 TWh by 2050. Current projections suggest coal emissions will rise, peaking at approximately 598 MtCO2e by 2037, vastly exceeding the emission targets set in the JETP framework for 2030. This trend indicates that without immediate and robust policy interventions, Indonesia will struggle to achieve its stated climate targets.
Increasing Coal Demand
The anticipated expansion in coal generation will inevitably drive higher demand for coal, increasing its consumption from 183 million tonnes (Mt) in 2024 to an estimated 298 Mt annually by 2037. This spike in demand will likely amplify activities within the coal mining sector, increasing annual production to a peak of 917 Mt by 2025. The environmental ramifications of this increased activity are significant, contributing to both elevated carbon dioxide and methane emissions, which are major greenhouse gases.
The upswing in mining activity aligns poorly with Indonesia’s broader environmental commitments, exacerbating pollution and habitat degradation concerns. Moreover, rising coal production underscores an urgent need for intense regulatory scrutiny and enhanced sustainability measures to mitigate the adverse impacts on ecosystems and local communities, confronting both climatic and socio-economic challenges head-on.
Recommendations for Mitigation
To navigate the complexities of expanding coal capacity while adhering to climate goals, reassessing captive coal development is crucial. Shifting new captive power projects towards renewable energy sources is a viable strategy to lower operational costs and enhance sustainability. Employing renewable energy can substantially contribute to meeting Indonesia’s climate targets while providing a more sustainable and economic power supply to industrial operations.
In terms of regulatory approach, enforcing stringent operational standards for captive coal plants by aligning them with grid-connected plants’ emissions criteria is fundamental. Incorporating captive coal plants into the emissions trading scheme and ensuring compliance with the 35% emissions reduction target under Presidential Regulation 112/2022 can close the current regulatory gap, promoting accountability.
Aligning Renewable Energy Additions
Indonesia has recently introduced its National Electricity Master Plan (RUKN 2024-2060), a comprehensive blueprint for the country’s electricity generation for the next few decades. The plan forecasts a significant increase in both renewable energy sources and coal-powered generation. This dual approach aims to balance the country’s escalating energy needs while striving to meet its climate commitments. Indonesia’s ambitious goals include ramping up energy production to support economic growth and ensure energy security.
However, the Master Plan’s emphasis on expanding coal-powered generation has sparked apprehension among environmentalists and policymakers. Despite the commitment to increasing renewable energy sources like solar, wind, and hydroelectric power, the substantial inclusion of coal contradicts the country’s environmental targets. Critics argue that this reliance on coal will jeopardize Indonesia’s ability to achieve its sustainability objectives and adhere to international climate agreements.
This controversy highlights the challenges Indonesia faces as it juggles immediate energy needs with long-term environmental responsibilities. Balancing rapid development with ecological preservation remains a complex issue, calling into question the nation’s dedication to a greener future. As Indonesia charts its energy course, the world watches closely to see if it can align its energy policies with its environmental aspirations.
