The Global Energy Transition and The Future Of Coal

Figure 1. Febby Tumiwa was presenting the IESR Report on the future of coal.

On 1 April 2019, Purnomo Yusgiantoro Center (PYC) attended The Global Energy Transition and The Future Of Coal seminar at Ashley Hotel Jakarta. Institute for Essential Services Reform (IESR) organized a mini-seminar which aimed to discuss the global plan on reducing the greenhouse gasses (GHG) emission after 2030 and reaching net-zero emission in 2050  as well as how to adjust the coal business on the current trend.

Fabby Tumiwa, as the director, of IESR opened the seminar by presenting the IESR’s report on the coal study. He criticized the government regulations that although already set the renewable energy utilization target in 2025, the government keep increasing coal production as well as prioritizing the coal utilization. Today, coal exports contribute only about 4-6 percent of Indonesia’s gross domestic product (GDP) and 2 percent of the national revenue. The percentage will be much higher on the regional scale, where certain provinces are received 13-45 percent of their regional revenue from the coal industry. Apart from its fiscal benefits, the coal demand on the international market is still high, and there is a huge pressure for Indonesia to keep exporting its coal. However, with the sharp declining of the renewable energy price, the energy transition is predicted to be achieved ahead of time. Throwback 15 years ago, Indonesia’s government was inviting many Independent Power Producer (IPP) to develop coal power plants to fulfill the fast growth of the electricity demand. Since the lifetime of the coal power plant is around 30-40 years, it is necessary for the government to make sure that there will be no stranded assets on the coal business.

The event was continued by the three-panel discussions. The first panel was brought energy transition based on the energy, climate, and economic view as the discussion topic. Three prominent speakers were invited to discuss on the panel; there were Ir. Bambang Gatot Ariyono, M.M. as the Director General of the Directorate General of Mineral and Coal, Ministry of Energy and Mineral Resources. He mentioned that the government is planning to give more added value to the coal by transforming it to Dimethyl Ether (DME) as the substitution product of the Liquid Petroleum Gases (LPG).

Furthermore, in 2046 all the Indonesia’s coal product will be used for domestic purpose only, and coal export will be prohibited. The second speaker was Hendra Sinadia as the Executive Director of Indonesia Coal Producer Association. He responded the government regulation regarding the added value of coal product by assuring the government that some coal industries are ready to increase their coal’s value as well as shifting their technology to the clean coal technology. Furthermore, some coal industries are also started to diversify their income by involving renewable energy business.  The last speaker was from Directorate General of Climate Change Control of the Ministry of Environment and Forestry, Dr. Ir. Ruandha Agung Sugardiman. Currently, the Ministry of Environment and Forestry is still arranged the emission reduction roadmap for the five priority sectors. However, mineral and coal industry has yet considered as part of the Nationally Determined Contribution (NDC).

The second panel discussion was filled with four different countries, namely, Germany, China, India, and South Africa. Ursula Fuentes, as the Germany representation, argued the significant difference of 0.5°C global temperature rise. The global temperature rise target was changed from 2°C to 1.5°C  during the Intergovernmental Panel on Climate Change (IPCC). She stated that the global trend on reducing the temperature is yet on track with the plan. The greenhouse gases (GHG) keep rising and nowhere to reach a peak in the short run. Coal was always one of the culprits in the GHG issues. However, the coal phase-out the program as applied by Germany now days should be reanalyzed carefully in Indonesia in order to avoid the stranded assets and the negative multiplier effect of the coal industry.

China was represented by Alvin Lin who proudly claimed that China has already reached its coal peak and ready to decrease its coal consumption. There are some aspect which makes China already reached the coal consumption peak, (1) GDP growth decreases; (2) less infrastructure to be built; and (3) high technology that has more energy efficiency. The different condition has occurred in India, as stated by  Thomas Spencer. India is considered an emerging country and still a major development. It means that India has a high energy consumption with low energy efficiency. Furthermore, energy import has been one of India’s liabilities which takes 4-5 percent of its Gross Domestic Product (GDP). However, India’s renewable energy growth target is among the fastest in the world, and it is forecasted that the peak coal demand will be occurred prior to 2030. The last coal producer country, South Africa, was represented by Bryce McCall. Coal has been the third largest foreign earner in South Africa for a long time; however, the current economic and political situation might give a great impact to the business. South Africa has a low growth which leads to the flat demand growth in electricity. The condition was worsened by the political instability which makes the skilled and experienced labors have to be substitute with the inexperienced labors without proper skill transfer. This condition makes the coal power plant cost about USD 1/kWh, or almost third the average of coal power plant cost worldwide. In other hand, the renewable energy price is getting lower and soon overstep the coal price in South Africa. He believed that there would be coal phase-out in South Africa, not because of the certain policy applied but due to the cost competition in the energy market.

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