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Net zero commitment and the need to halt coal energy
This commitment is surprising news and was greeted with great fanfare by various parties. As an entity that has been known to rely heavily on coal energy, PLN is considered to have chosen bold and progressive electricity policies.
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tate electricity company PLN has recently pledged to stop building new coal-fired power plants to achieve a net-zero emission target. A commitment to become carbon neutral by 2050 is also written in the Energy and Mineral Resources Ministry’s Intelligent Strategies for Power and the Utility Sector report.
This commitment is surprising news and was greeted with great fanfare by various parties. As an entity that has been known to rely heavily on coal energy, PLN is considered to have chosen bold and progressive electricity policies.
Apart from being expected to have a notable impact on efforts to overcome the global climate crisis, this commitment is also expected to accelerate the share of renewables in the country’s energy mix to 23 percent by 2025.
Unfortunately, PLN’s net zero target still appears to be a half-hearted commitment because within the policy’s framework, PLN has inserted problematic provisions that favor coal energy development.
It turns out that PLN's plan to no longer build coal-fired power plants will only be carried out after completing the 35,000 Megawatt project and the 7,000 MW Fast Track Program (FTP) number two by 2023.
At this time there are around 6,000 MW of coal-fired power plant projects that are still in the planning and contract stage. If PLN insists on completing this project simultaneously with coal-fired power plants that have reached the funding and construction stage, then in 2023 there will be an additional total capacity of 16,000 to 17,000 MW.
From an environmental perspective, new coal-fired power plant construction is alarmingly dangerous. The existence of new coal-fired power plants with such a large total capacity (16,000 to 17,000 MW) will result in a significant increase in carbon emissions, with around 107 million tons of CO2 produced per year. As a consequence, the climate crisis problem will likely get worse and become increasingly difficult to tackle.
New coal-fired power plant projects are intentionally targeting Kalimantan, Sumatra and populated islands such as Java. Around 40 coal-fired power plants are expected to be built in this area. These pose a serious threat to the health conditions of more than 220 million people – 81 percent of the total population of Indonesia.
Additionally, the upstream areas for coal energy sources are major environmental threats in Kalimantan and Sumatra. At the downstream level, coal-fired power plants will contaminate agricultural and coastal areas, which are the main sources of livelihood for communities in Java, Sumatra and Kalimantan.
With estimated operating lifetimes of between 30 and 40 years, the new coal-fired power plants, with massive capacities, will remain in operation until between 2053 and 2063, despite a study from Climate Analytics stating that coal-fired power generation must be completely stopped by 2040. This deadline is vital to global efforts to prevent a global temperature increase of above 2 degrees Celsius.
From the economic perspective, imposing massive coal-fired power plant development is also a non-strategic and detrimental move.
The 35,000 MW electricity program is an ambitious project that was part of the campaign agenda of President Joko “Jokowi” Widodo and was implemented after his win in the 2014 presidential election. This project was designed based on a national economic growth projection of 7 percent per year, which was predicted to increase electricity demand in the range of 8 percent.
However, in the last few years, Indonesian economic growth has missed the target, reaching only 5 percent on average. In line with this, electricity demand growth has fallen below the target at only 4.5-5 percent per year. Even worse, as a result of the COVID-19 pandemic, Indonesian economic growth in 2020 reached minus 2.07 percent year on year (yoy). The World Bank states the global economy is still facing uncertainty and will take approximately five years to recover. This means that in the next few years, the road of economic growth will be rocky.
The mismatch between the economic projection and electricity development has resulted in an oversupply problem for PLN’s electricity balance, with nearly 40 percent of electricity production remaining unabsorbed. This is a particularly detrimental situation because the Take or Pay scheme requires PLN to buy all the electricity production, whether it is used or not. Thus, new coal-fired power plants in the future are likely to be a stranded asset for PLN.
A new coal-fired power plant will further burden PLN’s finances, which are already in a debilitated condition. Until 2021, PLN has the staggering debt of Rp 694 trillion, almost a quarter of the annual state budget. PLN stated that the debt was inseparable from the 35,000 MW project, whose main energy source comes from coal.
With the estimated range of capital expenditure (CAPEX) per 1 GW of installed capacity being US$2 billion, the continuation of the 6,000 MW coal-fired power plant projects will add approximately Rp 156 trillion ($11 billion) to PLN’s financial burden.
These facts show the importance of linking commitments to achieve zero-emission targets with the right and concrete choices of action. Otherwise, the “business as usual” strategy in energy development, which still depends on coal with a veil of net-zero commitment, will lead to more complicated problems.
A serious net-zero commitment means taking a firm stance on an energy transition and halting the use of coal immediately. The choice to keep building coal-fired power plants would thus become irrelevant. Renewable energy sources in Indonesia are so abundant, reaching 417.8 GW or nearly 7 times the country's current installed capacity. The cost of producing renewable energy according to a recent study by the International Energy Agency is also much cheaper than coal.
The government and PLN must reorient their energy development plans, which have to prioritize a low-carbon and climate-conscious strategy. The utilization of renewable energy must be accelerated to replace the cancellation of new coal-fired power plants and the closure of old coal-fired power plants.
If they are unwilling, then the net-zero commitment will just be the latest in high-flown jargon without any valuable impact.
The writer is researcher and program manager at Trend Asia
