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Coal reliance hampers growth of Indonesia’s smelting industry
The requirement to drop coal is burdensome for miners as the country has yet to build an adequate electricity grid powered by renewable energy.
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Environment and Forestry Ministry officials inspect an unlicensed bauxite mining in Bintan, Riau Island.
(Antara/Henky Mohari)
C
ompanies have reported that acquiring loans to build smelters has become increasingly challenging as financial institutions and investors now require such projects to be powered by clean energy, putting the country’s drive for downstream industry development at risk.
Coal-fired power plants made up more than half of the 4,204 megawatts of energy demand needed by the mineral ore smelting industry, followed by gas and diesel, according to an Energy and Mineral Resources (ESDM) Ministry estimate in 2019.
A Rizqi Darsono, who heads the permanent committee of coal and mineral resources at the Indonesian Chamber of Commerce and Industry (Kadin), said coal had remained one of the most abundant sources of energy miners could use to power their smelters, while banks have become increasingly selective in financing coal-related projects, including those electrified by coal-based power plants.
The requirement to drop coal is burdensome for miners, he said, as Indonesia has yet to build an adequate electricity grid powered by renewable energy.
ESDM Ministry data show renewables only comprised 13 percent of installed capacity in Indonesian electricity, which would only rise to a third of total installed capacity by 2030, indicating a slow transition to renewable energy.
“We want to find funding [for our smelters], but acquiring it is difficult if the [energy source] is a steam power plant,” Rizqi told The Jakarta Post on June 29, adding that in a normal situation, their smelting business already struggled to access financing for being considered high risk.
Read also: OJK launches green finance taxonomy
