Coal plant expansion wipes out green energy progress

24 January 2020

Indonesia has launched the operation of its largest coal-fired power unit to date, which offset all renewable energy power progress in the Southeast Asian country last year.

Java 7 Unit 1, launched in December 2019, is over twice as powerful as all renewable energy plants launched the same year. The Banten-based plant has a capacity of 1,000 megawatts (MW), 2.7 times greater than the 376 MW worth of green energy plants introduced in Indonesia last year.

The plant’s majority owner, Beijing-based coal miner China Energy Investment Corporation, described it as “the largest individual installed capacity of any overseas thermal generation unit invested in and built by a Chinese enterprise”.

China Energy cooperated with Surabaya-based power producer Pembangkitan Jawa Bali (PJB), a subsidiary of state electricity firm PLN, to develop the US$1.71 billion power plant. China Energy and PJB own 70 and 30 percent of the facility, respectively.

The expansion of coal plants such as Java 7 continues to outstrip renewable energy growth, thus setting Indonesia back from achieving its green energy ambitions. Southeast Asia’s largest economy ended 2019 with a 12.36 percent renewables power production mix, far from the 17.5 percent target stipulated in the General National Energy Planning road map.

Ten coal plants began operations last year alone, according to the Energy and Mineral Resources Ministry. The plants — including Java 7 — have a combined capacity of 3,017 MW. They not only outstripped renewables growth but also contributed almost three-fourths of all newly added power production in 2019.

“It’s rather unfortunate that the government relies on coal as the answer to both economy and energy challenges, when it is actually a golden opportunity to look toward renewable energy as the answer,” said Anissa Suharsono, an energy policy analyst with a Canadian energy think tank, the International Institute for Sustainable Development.

Energy and Mineral Resources Ministry and PLN representatives defended the coal-based investment as a means of quickly fulfilling Indonesia’s growing energy needs. The government aims to have 30,000 MW worth of new power plants operational by 2028.

“This plant can support peak loads in the Java Bali grid, which grows every year. It was 28,000 MW this year, up from 27,000 MW last year,” said ministry spokesman Agung Pribadi.

He added in a statement that the plant’s second 1,000 MW unit was expected to come online in 2021. At 2,000 MW, the Java 7 plant would consume about 7 million tons of coal each year.

Coal is considered ideal to fulfill Indonesia’s energy needs because of its abundance. The government also guarantees the fuel’s competitiveness by capping domestic selling prices through annually reviewed Domestic Market Obligation (DMO) policies. The latest DMO requires coal miners to sell 25 percent of their production domestically at a maximum of US$70 per ton.

PLN spokesman Dwi Suryo Abdullah told The Jakarta Post that the plant was built to “anticipate a spike in energy needs” in the economic centers of Java and Bali while also “maintaining competitive prices, given the scale of the units”.

In comparison, bankability problems were “the main issue” for renewable energy projects last year, according to a Jakarta-based energy think tank the Institute for Essential Services Reform.

“Several power producers managed to secure financing and reach financial close due to their strong project sponsors. For small power producers, however, it is more difficult to get funding as they usually do not have creditworthy sponsors,” writes the think tank in its latest annual report.

At 1,000 MW, Java 7 Unit 1 is the largest operating coal-fired unit in Indonesia, taking over the title from the 815 MW Unit 3 of the Paiton III plant in East Java

For China Energy, Java 7 also represented a strengthening of the two countries’ economic ties. The company said the plant was part of “promoting the alignment of China’s Belt and Road Initiative and Indonesia’s Global Maritime Fulcrum”.

China, which was Indonesia’s second-largest foreign investor last year, is among many major economies including the United States and the Middle East being approached by Indonesia to finance energy projects

Source: The Jakarta Post, 24 January 2020