But economics of coal means it will make up large part of country's energy mix for decades
Indonesia's coal miners are slowly making the move to go greener and cleaner, announcing plans to invest in renewable energy projects. While Indonesia looks set to use coal as its base load energy source for the foreseeable future, miners are increasingly keen to diversify their portfolios as a backlash against use of the so-called black diamond grows across the world.
Three major Indonesian coal miners -- Adaro Energy, Indo Tambangraya Megah and Tambang Batubara Bukit Asam -- have all made public their forays into renewable energy, in part to diversify their portfolios and manage fluctuations in the price of coal.
While Asia's benchmark price for thermal coal reached a near seven-year high in August this year, the price has plummeted around 13% since. Miners are keen to mitigate that volatility by earning steady revenue from renewable energy power plants.
In August, Indo Tambangraya Megah, one of Indonesia's major coal miners, reiterated its readiness to step into the renewable energy power plant business. "We will try to focus on two -- hydropower and solar energy," Bramantya Putra, deputy president director at the company, told investors at an event, promising to give them an update within the next two to three months. "I think we're quite progressive [with the plans]."
The company is planning to start investing in renewable energy from next year, with aims for the business to contribute around 20% of its revenue, according to local media.
Miners Adaro Energy and Tambang Batubara Bukit Asam are also in the process of developing renewable energy power plants.
Adaro Power, a power plant deveopment subsidiary of Adaro, has a 100kW solar power cell being utilized by sister company Adaro Indonesia, to "prove that we have the readiness to move into renewables whenever there is a requirement for it," said Adrian Lembong, director of Adaro Power. The company is also looking into the possibility of building a 100MW solar power plant in Sumatra, as well as conducting feasibility studies on developing an off-grid power project -- which generates energy on-site -- consisting of a combination of biomass, solar and battery, with an estimated installed capacity of 6.5MW.
There are "two big trends that we have to watch" regarding coal, said Dharma Djojonegor, deputy CEO of Adaro Power. "One is that financing [for coal-fired power plants] is getting more difficult... The second is renewables are decreasing in cost. As a power company, we have to recognize these two trends. Therefore we are quite keen to go into renewables."
Banks, in particular Western ones, are increasingly reluctant to fund coal power projects. At the same time, the cost of electricity generation for renewables has fallen drastically over the years, according to the International Renewable Energy Agency.
Fossil fuel-fired power generation costs vary between G20 countries, of which Indonesia is a member, and is estimated at between $0.05-0.17 per kilowatt hour. The cost for new hydro power, onshore wind, bioenergy and geothermal projects is between $0.05-0.07 per kilowatt hour, according to the agency. The cost for solar, the agency notes, has fallen 73% since 2010, standing at $0.10 per kilowatt hour for new projects commissioned in 2017.
Bukit Asam reportedly participated in three solar power project tenders in Sumatra, of 35MW, 33.68MW and 30MW, through its subsidiary Bukit Energi Investama. These projects could be operational in 2022, while it is studying the development of solar power plants in South Sumatra, according to local reports.
The green move by the coal miners is a welcome boost for Indonesia. As a signatory of the 2015 Paris Climate Agreement, the country is planning to increase the use of renewables in its energy mix going forward. Jakarta expects the country to increase its energy supply more than twofold in 2025 to 400 million tons of oil equivalent, with renewable energy targeted to contribute 23%.
Whether or not it can achieve the target remains to be seen. Indonesia has prioritized the use of coal as its main energy source, as it is the easiest and cheapest way to meet energy demand in the nation, which has the world's fourth largest population with inhabitants dotted across some 17,000 islands. Coal is also in abundance in the country; it has the 10th-largest coal reserves in the world, according to oil and gas group BP, and nearly 40% of the country's energy came from coal in 2016.
"Let's talk about clean energy when our society has developed, but who cares about clean energy when our people are still fighting hunger every day?" said Tumbur Parlindungan, the newly-appointed chief of the Indonesian Petroleum Association, to the Jakarta Post in December. "We are still growing in Indonesia, why do we have to think about [clean energy]?"
Indonesia's plan to up the usage of renewable energy to 23% by 2025 is aimed at substituting the use of oil and not coal power; the black diamond is still expected to contribute 30% to the energy mix, only fractionally down from 31.4% in 2016. Coal is still expected to make up 25% of the archipelago nation's energy mix in 2050.
"Despite Indonesia's push for more renewables and cleaner energy, we expect coal to still dominate the fuel mix... This is due to better coal economics and relatively unsupportive renewable energy policies," said Vicky Adijanto, research analyst at Wood Mackenzie, in a memo.
"Another reason for the rise in domestic consumption is that Indonesia's reserves of higher calorific value coal are declining...more coal needs to be burnt to generate the same amount of electricity to compensate for its lower energy value," she added. "New power plants are being designed to suit the declining average calorific value in Indonesia."
Source: Shotaro Tani/Nikkei Asia Review
21 December 2018