State-owned electricity firm PLN plans to acquire coal mines in Kalimantan and Sumatra in the next one or two months in order to secure long-term supply for its coal-fired power plants.
As of last year, the country’s electricity off-taker and a number of independent power producers (IPPs) had developed and were operating power facilities with a total capacity of 51,860 megawatts (MW) nationwide, 48 percent of which were coal-fired.
It will also see an additional capacity of 31,900 MW from coal-fired power plants built in the 2017-2026 period, according to PLN’s latest electricity procurement business plan (RUPTL). Consequently, its coal consumption is estimated to soar to more than 150 million tons a year by 2020, much higher than 86 million tons at present.
That is despite the government’s push for increased power generation from cleaner and greener energy sources.
PLN was still heavily dependent on coal because the commodity was the cheapest source of energy to provide affordable electricity for the public, said PLN procurement director Supangkat Iwan Santoso. Despite the country’s abundant coal reserves, it also exported most of its domestic production, raising concerns around the firm’s possible shortage of supply in the upcoming years, he added.
“That’s why the government has given PLN the green light to secure its supply by acquiring coal mines,” Iwan said recently. “We have been approaching some coal miners and, hopefully, it will be a done deal in August or September.”
Indonesia, the world’s biggest thermal coal producer, generated 434 million tons of coal last year, surpassing the initial target of 419 million tons. Of the figure, 124 million tons were absorbed in the domestic market, while another 310 million tons were shipped overseas.
The targeted coal mines are located in Kalimantan and Sumatra, regions with coal reserves amounting to 15.4 billion tons and 13 billion tons, respectively.
It has been reviewing more than three coal mining sites on both islands and will acquire those located in “strategic locations” to allow easy transport to its power plants in Java.
The acquisition will enable PLN to think solely about coal production costs and ignore the volatility of global coal prices.
“It will be hard if we just follow the market price mechanism. [But] if we own the coal mines, we can maintain the production costs and make our electricity supply costs [BPP] more stable,” PLN spokesman I Made Suprateka said.
In the first half of this year, PLN and partner IPPs managed to commence operations of new power plants with a combined capacity of 1,361.6 MW, more than half of the total 2,688 MW in additional capacity it aims to gain before the end of this year.
Of the government’s goal to generate 35,000 MW by 2019, only 768 MW from new power plants began commercial operation in the January-June period. Construction is underway on other facilities with 14,193 MW in capacity, while power purchase agreements (PPAs) were recently signed for another 8,550 MW from new facilities.
The remaining 12,325 MW from new plants are still in the planning and procurement phase.
Energy and Mineral Resources Minister Ignasius Jonan said earlier that only 20,000 MW from new power plants out of the 35,000 MW project could be fully completed by the designated deadline. The rest would commence operations by 2024 or 2025.
However, Jonan also demanded PLN expedite efforts to expand its transmission lines, especially to remote regions across the country, while maintaining the electricity prices at the current level, at least until the end of this year.
Source: Viriya P. Singgih
8 August 2017