No easy solutions for Indonesia as it looks to wean itself off coal

[JAKARTA] Indonesia – one of the world’s largest producers and exporters of coal – released a draft road map last week that aims to secure US$20 billion from wealthy nations in an effort to wean itself off coal.

What caught many observers by surprise as they scrutinised the Comprehensive Investment and Policy Plan (CIPP) was the lowering of the country’s 2030 target for carbon emissions from the power sector and the exclusion of captive coal-fired electricity plants.

The release of the road map was closely watched as it specified how Indonesia would use the funding from the Just Energy Transition Partnership (JETP). This partnership was signed in late-2022 by Indonesia, the US, Japan, Canada and six European nations.

Indonesia is now looking to slash its emissions to 250 million tonnes by 2030, instead of the 290 million tonnes that it committed to last November.

As for the so-called “captive” power plants – which are off-grid systems that are developed and managed by industries for their own use – these were left out of the CIPP because the government felt it was an “extremely complex” issue.

In another setback for Indonesia’s green transition, the earlier promise to retire a sixth of its coal-fired power plants by 2030 was replaced by a revised target of starting to close these plants only in 2035 at the earliest.

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There was some cheer, however, as Indonesia now wants to increase its share of renewable energy generation to 44 per cent in the next seven years, up from the earlier target of 34 per cent.

The 327-page draft explained why captive power plants were left out of the text. Many industrial power users, such as companies that mine and process nickel, require “highly reliable, 24-hour power” at a high volume. What’s more, these industrial operations are often located in remote or ecologically sensitive areas that are not on the public grid.

New plants on the way

Analysts have noted that many new coal-fired power plants are still being built in Indonesia, despite a moratorium on such new projects that was announced in 2021.

As at the end of 2022, Indonesia had 18.8 gigawatts (GW) of coal-fired power plants under construction. About 70 per cent of these are captive plants.

According to the Center of Economic and Law Studies (Celios), this persistence in issuing permits is due to a 2022 regulation issued by President Joko Widodo, which exposed loopholes in the coal moratorium that companies have since exploited.

The regulation states that new coal plants can still be built and run until 2050, if they are integrated with industries such as nickel that can increase the added value of natural resources, or are included in national strategic projects that can create jobs and boost economic growth.

Celios director Bhima Yudhistira described the regulation as “the root of the problem” because it effectively removes any limitations on the number of captive coal plants that can be built to serve these industries.

For instance, nickel is a crucial component in the batteries used in electric vehicles (EVs). Even as the government wants to wean itself off coal in the long run, it also wants to make the most of the country’s vast nickel reserves to position Indonesia as a prominent regional EV player.

What’s clear is that Indonesia remains extremely dependent on coal as it accounts for around two-thirds of the country’s electricity generation, with the industry employing some 250,000 people.

Bhima called on the three candidates running in Indonesia’s upcoming presidential election to make clear their plans as to how they intend to accelerate the country’s transition from fossil fuels to clean energy.

“We can’t let environmental issues become the last thing that’s talked about in politics and during this election cycle. These are important discussions that will have an impact on future generations,” he said.

As things stand, the draft road map is still not finalised as the public has until Nov 15 to review the text and submit their inputs through the JETP website.

“The CIPP is a living document that will be updated annually to reflect the latest global economic condition and domestic development priorities,” said Edo Mahendra, the head of the JETP secretariat in Indonesia.

The final version of the road map will be launched in Indonesia later this month, just before world leaders and climate officials gather in Dubai for the next United Nations Climate Change conference.

The text of the draft version, however, sheds some light on the problems Indonesia is facing when it comes to shutting down coal-fired power plants, and just how difficult it will be for South-east Asia’s largest economy to pivot to clean energy.