Conceptually, co-firing involves the combustion of solid biomass as a partial substitute in coal-fired power plants (CFPPs) to help lower capital costs, improve economies of scale, and achieve higher efficiencies when compared to smaller pure-biomass power plants. This solid biomass can be based on forestry or wood industry residues, agricultural residues, municipal solid wastes, and dedicated energy crops. One of the key drivers behind using solid biomass for co-firing in CFPPs is to reduce greenhouse gas emissions along with traditional pollutants like SOx and NOx. However, the environmental benefits largely depend on the biomass type and the supply chain.

Co-firing was initially adopted in Europe in the late 1990s and early 2000s when focus on low-carbon energy started gaining traction. The technology has since matured, especially when co-firing is carried out at a lower biomass ratio. Further, biomass feedstock availability and supply and cost economics have largely determined its uptake rather than the technology. Thus, it has not witnessed sizeable uptake in many countries especially owing to the absence of policy interventions and incentives in these markets. Even the US and China have not been able to develop a large-scale co-firing capacity despite significant biomass potential, existing CFPPs and strong technology expertise. Similarly, it has witnessed a decline in certain European markets as well especially with other renewable energy technologies becoming more competitive. However, Asian countries like Japan and South Korea have been promoting co-firing through policy support so as to achieve their renewable energy targets.

Against this backdrop, Indonesia’s energy policy teams have developed an extensive plan over the past year of converting PT Perusahaan Listrik Negara’s (PLN)114 existing CFPP to co-firing by 2024. The policymakers aim to extend the life of these older and underutilised coal plants and also increase renewable energy uptake in the country. This co-firing plan will involve 18 GW of PLN’s existing CFPP capacity and will lead to “feedstock increases” between 2021 and 2023. The co-firing plan has been advanced by the Ministry of Energy and Mineral Resources (MEMR). It is estimated that this will require stable co-firing fuel supplies ranging between 4 and 9 million tonnes annually.

A recent report authored by the Institute for Energy Economics and Financial Analysis (IEEFA) discusses the various opportunities, challenges and outlook for biomass co-firing in Indonesia. The analysis carried out by IEEFA shows that the country’s co-firing plan should take technical and economic viability into consideration and readjust the framework accordingly. Southeast Asia Infrastructure summarises the key findings from the report…

Indonesia’s co-firing plan

With aims to increase renewable energy penetration, the Indonesian National Energy Plan (RUEN) projected a prominent role for bioenergy in the power sector with a target of 5.5 GW by 2025 while the 2019-28 Electricity Supply Business Plan (RUPTL) outlined a lower target of 2.6 GW. Thus, a biomass co-firing plan was announced by the MEMR and PLN in early 2020 so as to leverage PLN’s existing CFPP capacity by firing solid biomass as fuel along with coal.

Indonesia has 31 GW of operational CFPP capacity, which comprises roughly 50 per cent of the country’s installed power capacity. Meanwhile, the country has less than 1.9 GW of installed bioenergy-based power capacity which is largely made up of captive power facilities that are not connected to the grid. Further, Indonesia has a sizeable agricultural and forestry industry that generates significant residues and the utilisation of these residues in co-firing could not only address the mounting issue of waste management but could provide economic value as well. Thus, Indonesia has a significant potential for biomass co-firing to meet this gap between the actual installed bioenergy capacity and the set target. The co-firing plan targets 900 MW of bioenergy mix to be achieved through 5 per cent co-firing across all of PLN’s CFPPs and excludes private IPPs.

To promote the co-firing programme, PLN itself carried out a number of co-firing runs. It further announced in September 2020 that it had been successful in these projects in its subsidiary power plants under PT Pembangkitan Jawa Bali (PJB) and PT Indonesia Power (IP) where it had used biomass feedstock from palm kernel shells, RDF waste pellets, wood pellets, wood chips and sawdust.

The country’s current plan is based on direct co-firing which involves combustion of biomass and coal within the same boiler. It is the most common and least costly co-firing method. Meanwhile, indirect co-firing which involves gasification of biomass is definitely costlier but provides greater control of the biomass. With the biomass sector laden with both feedstock supply as well as economic challenges, a detailed analysis is required to fully realise the potential and aims of the co-firing program.

Key considerations

The viability of the biomass co-firing plan will rest on various market-level considerations. The low ratio co-firing technology has been in use since the late 1990s. Despite the maturity of the low ratio co-firing technology, its global uptake remains low when compared to others owing to concerns regarding its economic feasibility. The keys barriers include the premium price of biomass, lack of stable feedstock supply chains, as well as various technical challenges. Till these issues are addressed by the developers, PLN and MEMR, scaling up of low ratio biomass co-firing will be challenging in Indonesia. Various countries that have co-firing capacities installed also have supportive policy interventions and incentives like feed-in tariffs and renewable portfolio standards. However, no such policy measures have been announced in Indonesia till now. Thus, this raises an important question of whether it will be possible to overcome the technical and financial barriers and realise its co-firing targets without an enabling policy environment.

Co-firing cost should not be calculated based only on fuel prices but should also include costs resulting from changes in the operational profile of CFPPs. These costs could be a result of increased ash deposition and corrosion, and reduced fuel usage efficiency. Further, the type of biomass feedstock used for co-firing also has a huge impact on the costs. Thus, this total impact on PLN’s operational and financial results should be analysed so as to ensure the continued performance efficiency of PLN’s existing coal-fired facilities.

PLN would require low-cost biomass to meet its feedstock requirements and wood-based biomass is mainly found in the regions of Sumatra and Kalimantan, where a small CFPP capacity exists. Moreover, there has been an increase in international demand for biomass based on premium pricing which has driven Indonesia’s wood-based biomass industry. While conventional wood-based biomass like wood pellets and palm kernel shells are likely “priced out” so as to acquire biomass at a price lower than coal, non-conventional biomass such as sawdust could be used. However, its viability and transportability need to be examined. Further, there is a huge concern regarding secure feedstock supply. On the one hand, flexible co-firing, that is, the ability to switch back to coal, reduces operational risks as PLN is free from biomass supply issues. On the other hand, this leads to market risks by discouraging long-term investors. While long-term purchase contracts could provide the required confidence for scaling up the industry, it would lead to PLN getting stuck with supply issues.

Lessons learnt from biomass co-firing programmes in other countries show that financial risks and operational constraints are the key barriers. While financial risks are due to poor fuel economics, operational constraints result from the challenging properties of biomass. Thus, PLN should take into account these lessons and develop its strategy accordingly. Presently, it has adopted an aggressive and ambitious plan to achieve its targets by 2024, which is a short time period. Even countries like China and the US that have strong technical expertise, strong technology base, a large CFPP installed capacity and enormous biomass potential have taken measured actions to achieve their co-firing goals. Thus, a clear co-firing road map with a targeted priority plan is required to address the market challenges. This will improve confidence amongst both public and private sector investors. Further, greater clarity is required on viable supply cost, demand centres and demand forecasts along with the establishment of a biomass specification standard for a viable biomass feedstock market.

The environmental concerns associated with the plan also need to be examined. Indonesia’s NDC targets 29 per cent GHG emission reduction by 2030 and biomass co-firing is expected to play a role in this as well as to meet the RUEN. The current co-firing plan is based on sourcing of a sizeable portion of the biomass feedstock from existing forestry and agricultural residues and municipal solid waste materials. However, there are environmental and land conversion risks associated. Moreover, there are also concerns that biomass co-firing could lead to an increase in the operational life of CFPPs due for retirement as this could increase net emissions.

Outlook

Indonesia’s energy generation mix is currently dependent mainly on thermal generation. Thus, biomass co-firing is a suitable choice to diversify the energy supply and increase bioenergy use. However, there are many challenges in scaling up its uptake which need to be addressed so as to successfully implement the co-firing plan. One of the major challenges is the economic feasibility of large-scale co-firing. The country’s plan is based on sourcing of cheap biomass at prices that are lower than those of coal. Although, an ideal solution to improve cost viability, it has not been successful in other markets, especially as biomass feedstock selection is critical. Utilisation of higher-grade wood chips, pellets and palm kernel shells determines the optimal and efficient operation of CFPPs. Thus, a careful assessment is required of existing biomass projects based on different feedstock types to understand the technical and economic barriers with each along with resolution of these issues so as to achieve commercial viability. Further, regional feedstock supply problems should be addressed before launching a large-scale national programme.

Co-firing is possible, perhaps not at the aggressive scale and pace that MEMR’s and PLN’s programme suggests. All stakeholders need to be realistic and plan according to the present market conditions. The biomass co-firing plan would not only require extensive investments but also enabling policy interventions and incentives to bring confidence in the space. Moreover, the expected rise of IPPs going forward and decline of PLN’s share in the country’s energy mix should also be factored in while evaluating the full impact. Thus, a focused plan prioritising region-wise uptake could be more beneficial than a national target. Further, long-term purchase agreements and a phased deployment plan with clear targets would bring more confidence and attract large-scale investments in the biomass space.

In a nutshell, Indonesia with its large biomass potential and existing CFPP base has a significant opportunity to become a hotspot in the biomass space. While biomass co-firing is a step in the right direction, long-term planning with respect to economic viability and fuel availability, an enabling policy environment and access to finance are prerequisites for the development of a sustainable market.