The Ministry of Environment and Forestry had launched Indonesia’s Long-Term Strategy for Low Carbon and Climate Resilience (LTS-LCCR) in March 2021. The strategy stated the agency’s target of achieving zero emissions in the country by 2070. However, recent advancements imply that, with international cooperation, Indonesia could achieve its net zero goal by 2060, or perhaps sooner. The Ministry of Energy and Mineral Resources, the Ministry of National Development Planning, along with the state-owned electricity supplier PT Perusahaan Listrik Negara (PLN), have released medium-term targets and are aiming to hit net zero closer to 2050.

The years 2021 to 2025 are critical for Indonesia in laying the groundwork for achieving its net-zero ambition. Continued planning in privatisation of the national transmission system, decentralising the power system, increasing the rate of deployment of renewable energy (RE) and circular energy systems are all ways to transform the energy sector’s dependency on fossil fuels to a net zero emissions system.

Institute for Energy Economics and Financial Analysis (IEEFA)’s report titled “Putting PLN’s Net Zero Ambition Into Context” assess Indonesia’s commitment towards attaining zero emissions and the policies introduced to achieve this target. Excerpts …

Recent announcements by Indonesia’s state-owned utility company Perusahaan Listrik Negara (PLN) and the Ministry of Energy and Mineral Resources (MEMR) referencing potential net zero emission (NZE) targets in the power sector have caught public attention both in Indonesia and abroad.

PLN hopes to achieve carbon neutrality by 2060, in addition to Indonesia’s target of 23% renewables by 2025. In its announcement to the Parliament, PLN aims to start retiring its conventional steam power plants by 2030, subcritical coal plants by 2035, supercritical plants by 2040 and ultra-supercritical plants by 2056.

The willingness of high-profile Indonesian government officials to sketch out new commitments to long-term climate change mitigation targets suggest that the issues are getting more attention from senior policymakers and that they are facing more pressure from the public to keep pace with public expectations.

To put the Net Zero and Green Power Sector Business Plan (RUPTL) ambition into a practical policy context, IEEFA has reviewed the announcements and compared the announced numbers with the existing data and planning documents that define actual project and budget commitments for Indonesia’s power sector.

Mapping PLN’s Net Zero and Green RUPTL Plan – What Drives the Numbers?

Out of the many issues announced during the Parliament hearing in May, it was the coal plant retirement plan that drew a lot of media attention, from both local and international media. Until now, the key energy and power policymakers have never acknowledged that there may be a positive case to be made for coal fleet retirement. This is despite a deep body of research from other markets demonstrating the merits of targeting the highest carbon emitting coal power plants for early retirement.

From the outset, numerous announcements on the carbon neutrality targets made by PLN and the MEMR sounded very promising. After a full year of Covid-19 struggle and repeated delays on RUPTL issuance, it appeared that a real breakthrough on power sector strategy had finally emerged with the recent PLN and MEMR announcements. While there have been some positive developments, IEEFA’s review of the statements indicate that they cannot be taken at face value given the scale of outstanding commitments to the existing pipeline of fossil fuel projects.

  1. This is not an early retirement plan for coal. All coal plants are still on track to operate for their forecast economic/contractual life. In a Dewan Perwakilan Rakyat (DPR) parliamentary hearing with Commission VII, PLN deputy director stated that both existing plants and those within the pipeline will retain their ‘natural economic life’ which essentially means that for these plants, it is business-as-usual.1 In other words, there is no foreseeable plan for any early retirement for both PLN’s own fleets and the IPP. PPAs with the IPPs typically last between 25 to 30 years, with some extending to 40 years. The chart below shows that the majority of Indonesia’s coal plants are still young and will continue to run until their economic life ends.
  2. The 35 GW coal power programme has not been touched: The 35 GW pipeline will largely stay on track, despite looming over-capacity in the Java-Bali grid. A recent statement from the MEMR Director General of Electricity conveyed the instruction from President Jokowi that no more coal plants should be considered except those which are under construction or have reached financial close.2 This led some observers to believe that the government was finally re-evaluating the 35 GW program. IEEFA analysis suggests that nearly 16 GW of new coal capacity is still likely to come online between 2021 and 2030, although MEMR disclosed in a parliamentary hearing that 1.7 GW of these are still ‘under further discussions.’3 Out of the 16 GW, we estimate around 4.1 GW of coal plants were still in ‘Financing Stage’ as at FY2020. This means that unless there has been progress in the first six months of 2021, these plants still have not reached financial close.
  3. The first phase of PLN’s 1 GW PLTU retirement planned for 2030 are very old plants, that would have been in service for 50-60 years and running on oil or gas. The first retirement phase involves ‘Muarakarang, Priok, Tambak Lorok, and Gresik’. While details of the exact units to be retired is limited, IEEFA analysis on the likely units indicated that these plants would already be long overdue for retirement by 2030. The typical coal power plant lifetime of 25 to 35 years acknowledges the efficient working life of power generating units before operating efficiencies are known to deteriorate without significant retrofitting. Planning to retire 50- to 60-year-old units is far from being ambitious, even within a purely competitive electricity market. MEMR and PLN data also indicates that these steam plants have been running on oil or gas, using one of the least efficient methods of power generation. Globally, oil’s share in power generation has declined from 11 per cent of the total electricity mix in the 1990s to less than 3 per cent in 2018.5 One plant (Priok) has even been listed as inactive (i.e., generating zero electricity) since RUPTL 2016.

 Given the very old age of the plants, it is also important to ask whether PLN has taken steps to prepare decommissioning plans which could include environmental remediation. PLN has had limited decommissioning experience and it is unclear whether they have the technical or financial resources to decommission their power plants in line with international standards.

Read the full report by Elrika Hamdi, Energy Finance Analyst and Putra Adhiguna, Energy Finance Analyst from IEEFA by clicking here.