COP26 cop-out? Indonesia’s clean energy pledge keeps coal front and center
Nov 10, 2021
In an effort to phase out its coal-fired power plants by the 2040s, as part of a pledge signed at the COP26 climate summit, Indonesia plans to start with decommissioning a quarter of its coal capacity by 2030.
While some have welcomed the move, others note that Indonesia’s commitment is so riddled with caveats that it makes the effort essentially “useless” — in particular the fact that the country is on track to add more coal capacity by 2030 than it plans to retire.
The government of President Joko Widodo is also betting big on giving the coal industry a second life through coal gasification, a process that yields a cleaner-burning fuel, but which, in producing it, is even more carbon-intensive than just burning coal.
Other measures the government is rolling out to keep coal plants burning longer include co-firing, where wood pellets are burned alongside coal, and the use of carbon capture technology criticized as unfeasible at scale.
JAKARTA — Indonesia has signed another seemingly landmark pledge at the COP26 climate summit underway in Glasgow, this time to phase out its use of coal, the dominant source in its energy mix, by the 2040s.
But as with the first pledge it made at COP26 — to end deforestation by 2030, which it then immediately backpedaled from — the details of the coal pledge suggest no actual intent on moving away from the highly polluting fossil fuel in real terms, activists say.
The headline figure that Indonesia is touting under this new agreement on a clean energy transition, signed Nov. 4 by 23 countries, is the retirement of 9.2 gigawatts of coal-fired power plants by 2030. This represents a quarter of its total generating capacity from coal, and is more ambitious than its initial plan to decommission 1.1 GW of coal power by 2030.
But such a reduction is meaningless when the country is building or planning to build 13.8 GW of new coal plants during this same period, says Adila Isfandiari, a senior climate and energy researcher at Greenpeace Indonesia.
“So it’s useless if we decommission 9.2 gigawatts of coal but then build 13.8 gigawatts of new coal,” Adila told Mongabay. “We won’t be able to increase the capacity of renewable because the space [for new energy] has already been occupied by these new coal plants.”
The new coal plants are prescribed in the government’s most recent 10-year electricity procurement plan, also known as the RUPTL. They would make up a third of electricity generation expected to be added to the country’s grid by 2030, and would produce 83 million tons of greenhouse gas emissions a year, according to Greenpeace Indonesia — the equivalent of 40 million cars.
Adila said this makes it even harder for Indonesia to meet its Paris Agreement commitment to reduce emissions from the energy sector by 314 million tons.
“Instead of reducing emissions, the government wants to add 83 million tons of CO2 from the new coal plants,” she said.
Indonesia has also made clear it’s not committing to the entirety of the pledge it just signed in Glasgow. Among the clauses that it refused to sign is one that would have obliged it to “cease issuance of new permits for unabated coal-fired power generation projects, cease new construction of unabated coal-fired power generation projects and to end new direct government support for unabated international coal-fired power generation.”
In other words, Adila said, Indonesia is not promising to stop building new coal plants — a critical step in consigning coal to history.
“These announcements [at COP26] are not a game-changer yet,” she said. “As long as we keep building new coal plants, we will be stuck with coal.”
End of coal ‘in sight’?
Others have been more welcoming of Indonesia’s latest move, noting that it advances the country’s coal phaseout deadline from 2056.
“The openness of the Indonesian government to make an energy transition, through one of which is reducing the power plant in stages, should be appreciated,” Fabby Tumiwa, executive director of Indonesian private policy think tank the Institute for Essential Services Reform (IESR), said in a press statement.
Deon Arinaldo, the transformation program manager at IESR, called the move progressive but said the government could be even more ambitious. According to the IESR, for Indonesia to do its part to prevent global temperatures exceeding 1.5° Celsius (2.7° Fahrenheit) above pre-industrial levels, it would need to retire 10.5 GW of coal power plants by 2030.
“There is still a difference of 1.2 gigawatts that needs to be retired,” Deon said.
Amanda McLoughlin, development director at British Embassy in Indonesia, said the country would benefit from bringing its coal phaseout target forward from 2056.
“This will lower the risk of coal assets becoming stranded, and becoming a burden on public finances,” she told a press conference in Jakarta before the COP26 conference kicked off. “It will create space for faster transition towards cheaper renewables, which will also help generate jobs faster.”
COP26 president Alok Sharma said the deal signed by Indonesia and the other countries has put the end of coal “in sight.”
Outside funding needed
There are currently 237 coal-fired power plants in Indonesia, with a combined capacity of 34.6 GW. At full capacity, they would emit 192 million tons of GHGs per year.
Under the government’s plan, total, about 5.5 GW of coal plants will be decommissioned early without any replacement, which should reduce emissions by 36 million tons. Another 3.7 GW will be retired and replaced with renewables, cutting a further 53 million tons of emissions.
Retiring this combined 9.2 GW of coal capacity by 2030 is considerably faster than what the government’s long-term climate strategy prescribes. Under the strategy, a roadmap to achieving net-zero emissions by 2060, decommissioning of coal plants would only begin in 2031.
But the phaseout commitment comes with another catch: funding from the rest of the world. In signing the pledge at COP26, Indonesia said that “as part of its commitment to reach net zero by 2060, or sooner with international assistance, Indonesia will consider accelerating coal phase out into the 2040s, conditional on agreeing additional international financial and technical assistance.”
The government estimates it will need at least $48 billion to retire coal plants over the next eight years, and another $23 billion to subsidize renewable power projects through 2030.
“Ending the use of coal as a source of electricity in 2040 will need funding support for the process of early retirement [of coal plants] because there’s a financial consequence there as well as huge investment in new and renewable energy,” Dadan Kusdiana, the director-general for renewable energy at the Indonesian energy ministry, told Mongabay.
Some of that funding will come from the Asian Development Bank (ADB), which, together with Indonesia and the Philippines, launched the Energy Transition Mechanism (ETM) program at COP26. The program is expected to raise around $3.5 billion to retire coal plants in Indonesia and the Philippines. The long-term goal is to retire 50% of the countries’ coal fleet over the next 10 to 15 years.
“ETM is an ambitious plan that will upgrade Indonesia’s energy infrastructure and accelerate the clean energy transition toward net-zero emissions in a just and affordable manner,” said Indonesian Finance Minister Sri Mulyani Indrawati.
IESR’s Fabby said it’s important for industrialized countries help less-industrialized ones in making the transition to clean energy.
“Indonesia has to be ambitious [in phasing out coal], but at the same time we have to demand funding [from other countries],” he said. “This is in accordance with the Paris climate agreement, which entails the mobilization of $100 billion [from industrialized countries] for tackling climate change. We’ve missed the 2020 deadline [for the $100 billion funding].”
The early phaseout plan, combined with overcapacity of Indonesia’s main power grid, means the continued building of new coal-fired power plants over the next decade makes even less sense, said Adila from Greenpeace Indonesia.
The 13.8 GW of new plants will have an operating life of just 15 to 20 years if they are to be retired by the 2040s, which makes it highly doubtful that the independent power producers building them and the banks funding them will see a return on their investments. At the same time, 90% of these new plants will serve the Java-Bali and Sumatra grids, which already have a glut of electricity: there’s 46% more power supply than demand available in the Java-Bali grid, and 55% in the Sumatra grid, thanks largely to existing coal plants.
“Their operational costs will be more expensive than renewable energy,” Adila said. “So it’s much better to facilitate cancellation [of new coal plants] rather than facilitating early coal retirement. But unfortunately [the government] doesn’t want to adopt the clause [that stops the construction of new coal plants].”
Fabby of IESR agreed that there’s no economic or technological case to make for building new coal plants.
“With innovation and the price of renewable energy and storage technology [being] more competitive than fossil energy, the use of renewable energy to ensure the reliability of energy supply to achieve net-zero emission is becoming more feasible,” he said.
Yet even if it does eventually stop burning coal to make power, the Indonesian government has made clear it’s not actually done with the fossil fuel.
The country is the world’s second-biggest producer of coal, and the government of President Joko Widodo says it wants to continue making money from the commodity, particularly through coal gasification.
Coal gasification turns solid coal into dimethyl ether (DME), a gas that can replace liquefied petroleum gas (LPG), which Indonesia currently has to import. And while burning DME for power doesn’t produce the soot and other pollutants associated burning coal, the actual process of gasifying the coal is much more carbon-intensive. Still, the Indonesian government targets replacing all LPG imports with locally produced DME by 2027.
The coal gasification industry received a major boost last year from the highly controversial omnibus law on job creation. The law eliminates royalties for coal destined for downstream value-added domestic use — like gasification. The change means less revenue for both Jakarta and local governments, but provides a windfall for miners, and cost savings for gasification plants.
Major coal miners have since responded by investing heavily in gasification plants across Indonesia.
Widodo has justified this support for the coal industry as an opportunity to boost the economy.
“I believe that developing this coal derivative industry can increase the added value of commodities many times, reduce the core of raw materials needed by domestic industries, such as the steel industry, the petrochemical industry, and no less importantly, we can create as many jobs as possible,” the president said.
He previously said Indonesia shouldn’t miss out on the economic opportunity provided by the recent increase in the prices of coal and other minerals. Indonesia’s benchmark coal price has hit record levels, reaching $215 a ton in early November on expectations of higher export demand with the onset of winter.
“In the past, there was a boom in oil, we missed out [on that]. And then there was a boom in logging, we also missed out,” Widodo said in September. “This time, no more. Coal and mineral resources have to be our foundation in developing our nation, Indonesia.”
IESR’s Fabby called on the government to reevaluate these plans to assess their economic and environmental impacts.
“If the development of the downstream coal industry results in an increase in greenhouse gas emissions, then of course it shouldn’t be done by our government because that will violate our climate commitments,” he said.
Adila said the focus on developing the domestic coal industry is a response to growing rejection internationally for the fossil fuel.
“The global trend is to shift away from coal, with more than 100 financial institutions issuing a statement that they will no longer finance coal power plants. Furthermore, the number of cancelled coal plants is increasing,” she said. “That’s why Indonesia is now trying to increase its domestic market by pushing for the downstream coal industry and continuing to build new plants.”
By maintaining coal as a core part of its economic development, Indonesia risks running out of steam when the reserves are depleted, Adila said.
“Indonesia has 3% of the global coal reserve. Our coal reserve is actually small and yet we’re the biggest exporter,” she said. “Indonesia is too reliant on [natural] resources.”
Industry still bullish on coal
Hendra Sinadia, executive director of the Indonesian coal miners’ association, APBI, said he’s still bullish about coal’s future in Asia, where nearly 200 coal plants are under construction, including 95 in China and 28 in India, according to data from U.S. nonprofit Global Energy Monitor (GEM).
Chinese President Xi Jinping announced in September that the country would no longer build coal plants overseas, but China still has the world’s largest pipeline of projects by far.
“This is an opportunity for Indonesia to fulfill China’s market,” Hendra said. “Even though [domestic] coal [consumption] will decline, we’re sure that as long as China open up its market, there’s still room [for coal] because our coal is still needed and the price is competitive.”
Indonesia is already seeing an increase in coal shipments to China as the latter undergoes its worst power crisis in years due to a coal shortage. This has made Indonesia the biggest overseas supplier of coal to China, accounting for two-thirds of its imports.
Hendra said China’s power crisis should serve as a lesson for Indonesia in its energy policies, emphasizing that coal is the cheapest source of energy and will remain so for the next one to two decades. But experts say coal is only perceived as cheap because external costs like environmental damage and health issues, especially respiratory diseases, aren’t accounted for in the coal production cost.
The cost of coal-based power is also expected to increase due to a decline in the efficiency of power plants and the growing competitiveness of renewables.
In addition to coal gasification, Indonesia is looking at various measures to “clean up” the coal in its energy mix. This includes technologies such as carbon capture and storage (CCS) and carbon capture, utilization and storage (CCUS), which can lower emissions from existing coal plants.
Both technologies trap emissions and bury them underground, but neither is at the commercialization stage. That hasn’t stopped the government from requiring that three-quarters of all coal plants will be retrofitted with CCS and CCUS technology under its “Long-term Strategy on Low Carbon and Climate Resilience 2050.”
Experts, however, have questioned the feasibility of such a plan, saying the technology is still prohibitively expensive and largely unproven at such a scale. And it’s also unclear whether the cost of carbon capture could ever compete with the cost of renewable energy, which keeps declining as more countries develop it. According to IESR, implementing carbon capture technology will increase the cost to invest in coal-fired power plants by 74%.
This is yet another reason why Indonesia should fully abandon coal and embrace renewable energy, instead of relying on “false solutions” like carbon capture and co-firing (burning wood pellets alongside coal) to extend the life of the coal industry, Adila said.
“Technologies like co-firing and CCS are like keeping coal at all costs,” she said. “Can CCS be truly feasible? It’s still very expensive and we don’t how effective it’ll be, whether it can absorb a huge amount of greenhouse gas emissions or not.”
She called on the government to revise its 10-year electricity procurement plan, the RUPTL, as its first order of business.
“The RUPTL is our guideline for what we want to do [with coal plants] in the future,” Adila said. “The president [should] order the revision of the RUPTL next year.”
She added there’s hope that the COP26 summit can spawn a road map for Indonesia’s path away from coal, but that such a road map would have to be clear and based on the best available science.
“The policy focus is no longer coal as the first option, but renewable energy must be the main choice,” said IESR’s Fabby. “The energy transition needs to be carefully designed, with the priority of developing and utilizing renewable energy as much as possible and optimizing energy efficiency.”
Banner image: A coal-fired power plant in Batam, Indonesia. Image courtesy of Dj Onces Saputra/Wikimedia Commons.
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