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Coal to remain dominant in power generation

The government will do everything it can to boost the use of renewable energy in power generation by 2025, before eventually shifting its focus on using coal again in its search for an affordable and reliable source of power

Viriya P. Singgih (The Jakarta Post)
Jakarta
Thu, March 15, 2018

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Coal to remain dominant in power generation

T

he government will do everything it can to boost the use of renewable energy in power generation by 2025, before eventually shifting its focus on using coal again in its search for an affordable and reliable source of power.

The Energy and Mineral Resources Ministry announced on Tuesday it had approved and launched state electricity firm PLN’s new electricity procurement business plan (RUPTL) for the 2018-2027 period.

In the new business plan, PLN plans the development of new power plants with a total capacity of 56,024 megawatts (MW) by 2027, down significantly from the 77,900 MW stated in the previous plan for the 2017-2026 period.

Energy and Mineral Resources Minister Ignasius Jonan said the reduction in new capacity was triggered by the country’s sluggish electricity demand.

“We previously assumed that the electricity demand would be higher than the actual condition today,” Jonan said at a press conference on Tuesday evening.

“The new plan is more realistic, including in terms of our capacity to develop all of these projects, as we will only need to construct around 5,000 to 6,000 MW worth of power plants per year within the next decade.”

The 2017-2026 business plan was based on assumptions that Indonesia’s economy would grow 6.17 percent annually and electricity sales would climb by 8.3 percent per year.

In fact, PLN’s electricity sales only increased by 3.57 percent last year, thus raising concerns over the possibility of a power oversupply that can choke the company with billions in costs in US dollars.

Therefore, PLN has revised its economic growth assumption to 6.1 percent and its electricity sales growth to 6.86 percent in the newly launched business plan. Subsequently, the allocation of new power plant projects has also been significantly reduced.

The company has scrapped the allocation for new coal-fired facilities by around 5,000 MW, gas-fueled and combined-cycle plants by 10,000 MW and renewable projects by 6,600 MW. The commercial operation date (COD) of around 15,000 MW worth of plants included in the government’s 35,000 MW program has also been postponed from 2019 to 2024 or 2025.

Jonan said the slashed allocation was subsequently put on a potential list and could only be developed if the demand was there.

He said the most important thing for the government was to increase the renewable energy portion in the energy mix for electricity generation from 12 percent in 2017 to 23 percent in 2025, while the coal portion was set to fall from 57.2 percent in 2017 to 54.4 percent in 2025.

Nonetheless, according to the draft business plan for the 2018-2027 period that was seen by The Jakarta Post recently, the renewable energy portion will fall to 20.4 percent in 2027, while at the same time the coal portion will increase once again to 58.5 percent.

When asked about this matter, Jonan only said, “What matters most is the 2025 targets.”

Meanwhile, PLN corporate planning director Syofvi Felienty Roekman said the company would indeed try to boost the use of coal-fired power plants in the long run.

“After we are able to ensure the reliability of our supply, we will need to think about decreasing our electricity supply costs. […] By doing so, we will be able to set attractive electricity tariffs, particularly for the industrial sector,” Syofvi said.

For now, she said PLN would try to boost national electricity sales, particularly in regions outside Java, such as Kalimantan, so that they would be ready once the time had come to develop coal-fired facilities there.

“We will keep coal-fired power plants for our children and grandchildren. That’s our main thought today, because if we want to build such facilities, we need to have sufficient demand first in those regions [outside Java],” Syofvi said.

Indonesia has also aimed to gradually increase the renewable energy portion in national energy mix, which includes the transportation and power generation sectors, from 6.4 percent in 2014 to 10.9 percent in 2017 and 23 percent in 2025.

However, such goals remain up in the air as the country could only reach 8.4 percent progress last year.

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