Captive coal power plants holding back Indonesia’s energy transition

Indonesia’s energy transition pledge is undermined by a surge in captive coal power, raising doubts about its commitment to cutting emissions

In November 2024, Hashim Djojohadikusumo, head of the Indonesian delegation to the 29th United Nations climate conference (COP29), revealed Indonesia’s commitment to energy transition through the addition of 75 gigawatts (GW) of renewable energy power generation capacity in the next 15 years. Hashim said the plan is part of Indonesia’s efforts to reduce global greenhouse gas emissions. 

The commitment also complements Indonesia’s efforts to draft its latest climate action document, the Second Nationally Determined Contribution, which must be completed by March 2025 at the latest. This document will contain the government’s latest conditions and commitments to address the climate crisis — including issues related to the energy transition. 

At first glance, the renewable energy electricity capacity addition figures may seem like good news. However, Hashim does not present the real problem with Indonesia’s current energy transition efforts — which is the increase in captive coal-fired power plants. These plants are operated by private parties — mostly nickel smelter operators — and are outside the scope of the national grid operated by PT PLN.

Research by the Center for Research on Energy and Clean Air (CREA) and the Global Energy Monitor (GEM) shows a 7.5 GW or 15% increase in Indonesian CFPPs (coal-fired power plants) between July 2023 and July 2024. About 4.5 GW of them are captive power plants.

Amidst of the promise of energy transition, Indonesia is contradicting itself by increasing its captive CFPP capacity by 42%. This significant increase showcases the government’s half-hearted commitment to reducing the use of coal as Indonesia’s main source of electricity. Instead of reducing emissions, burning coal for captive CFPPs will increase greenhouse gas emissions which exacerbate the climate crisis.

The irony of the rise of captive power plants

The growth of captive power plants has increased rapidly since 2019, four years after Indonesia signed the Paris Agreement to keep the earth’s temperature rise below 1.5°C. Since then, the total capacity of captive CFPPs tripled from 5.7 GW to 15.2 GW in July 2024. 

This capacity continues to grow, reaching 17.1 GW by the end of 2024. In fact, until 2026, there will still be 11 GW of captive CFPPs planned. More specifically, 5.8 GW is still under construction, with 1.64 GW in the process of permit applications and 3.6 GW newly announced. These captive CFPPs are mostly located in nickel-producing areas such as Sulawesi and Maluku.

Over the past year, the capacity of captive CFPPs in Central Sulawesi, where the Indonesia Morowali Industrial Park (IMIP) is located, increased from 2.8 GW to 5.19 GW. Meanwhile, in the area of Indonesia Weda Bay Industrial Park (IWIP), North Maluku, the capacity of these plants has almost tripled to 4 GW. This shows that captive CFPPs construction in the past year has been centered on the nickel industry, accounting for 76% of total Indonesian CFPP capacity. 

If combined with the 132 captive power plants that have been operating with a capacity of 15.2 GW, the total capacity of captive CFPPs in Indonesia has reached 26.2 GW. This figure is greater than the capacity of all CFPPs in Australia (22.9 GW) or almost equivalent to all CFPPs in Vietnam, which is 27.2 GW in 2023.

The Climate Action Tracker report shows that these plants could increase Indonesia’s emissions by around 150 megatons of CO2 by 2030. In addition to emissions, captive power plants also endanger surrounding communities. River and sea pollution caused by CFPPs reduces residents’ access to clean water, food sources, and their income. On the other hand, air pollution is proven to increase cases of respiratory problems and increase premature deaths.

Without strengthening emission standards, air pollution from captive CFPPs is projected to cause 5,000 deaths and economic losses of US$3.42 billion by 2030. The catastrophe will be even greater if captive CFPPs are excluded from the coal plant early retirement target by 2040 with an additional risk of 27,000 deaths and US$20 billion in cumulative health impacts.

Putting it into perspective

The total capacity of captive CFPPs is currently equivalent to the entire capacity of CFPPs in Australia – even though Australia is the fifth-largest coal producer, second-largest exporter, and has the third-largest coal reserves in the world. Meanwhile, Indonesia is the world’s second-largest coal producer with coal production increasing by 690% during 2000-2022, although it has a smaller coal reserve compared to Australia.

In general, the trend of coal supply in Australia continues to decline with the renewable energy mix increasing. Data from The International Energy Agency (IEA) shows that Australia’s coal-fired emissions will decrease by 20% between 2000 and 2022. Coal-fired electricity generation in Australia also decreased by 27% in 2023. 

In contrast, Australia’s renewable energy use has increased by 46% over the same period. By 2022, 30% of the country’s total electricity supply will come from renewable energy. This figure reflects the Australian Government’s commitment after signing the Paris Agreement in 2015 to double their renewable energy mix. 

If you are reluctant to compare Indonesia with Australia because of the difference in population size, let’s compare it with India or China. Although both are the world’s largest coal users, their renewable energy trends continue to outpace Indonesia. 

In the first quarter of 2024, renewable energy development in India accounted for 71% of its energy generation growth with 13 GW of total new power generation capacity. Meanwhile, coal’s share of electricity use declined to below 50% — a first since the 1960s. This is significantly sooner than the Government of India’s target of 50% renewable energy power generation by 2030.

China reflects a similar trend. In the first half of 2024, they restricted coal power plant construction permits by 83% compared to the previous year. In the same year, China built more than 400 GW of solar and wind power, reducing the use of coal power by 7%. This decline in coal use is in line with global trends, with coal demand from a number of G7 countries — such as the UK, France, Canada and Italy — reaching record lows since 1900.

On the other hand, Indonesia’s renewable energy achievements, as of September 2024, have only reached 13.93% of the national energy mix. This figure is still far from its target of 23% renewable energy by 2025.

The slow development of renewable energy also stems from Indonesia’s dependence on coal energy, which makes it difficult for renewable energy to penetrate into the national grid. Subsequently, studies have shown how Indonesia also still has policy issues and regulatory inconsistencies that do not support clean energy investment.

President Prabowo’s commitment to phase out CFPPs in the next 15 years provides a ray of hope — especially if it includes captive CFPPs. Ember’s analysis has shown that Prabowo’s commitment is still possible to implement. By slowly reducing CFPP capacity by 3 GW per year, Indonesia has the opportunity to end its coal power era by 2040 and transition to renewable energy. 

The crucial point now lies in technical policies. In order for Prabowo’s promise to be realized, the government needs to develop a more ambitious road map for the end of CFPPs (including captive CFPPs), while cutting policy barriers and even boosting the development of renewable energy in Indonesia.

This article was first published in www.TransisiEnergiBerkeadilan.id

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Cintya Faliana

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