If the Coal Power Plant ‘Doomsday’, this will happen to RI

Jakarta, CNBC Indonesia – Indonesian President Joko Widodo (Jokowi) has officially banned the construction of new coal-based Steam Power Plants (PLTU) and has also asked the Minister to draw up a roadmap to accelerate the termination or retirement of PLTUs that are still operating at this time.

The policy is officially stated in Presidential Regulation No. 112 of 2022 concerning the Acceleration of Renewable Energy Development for Electricity Supply.

This Presidential Regulation was stipulated by President Joko Widodo on September 13, 2022 and is effective upon promulgation, which is the same as the date of stipulation, September 13, 2022.



The policy is aimed at the energy transition in the electricity sector. This is stated in Article 3. Article 3 (1) reads:
“In the context of the energy transition in the electricity sector, the Minister prepares a roadmap for accelerating the termination of the PLTU operational period as outlined in the sectoral planning document.”

However, on the other hand, paragraph 4 states that the development of new PLTU is prohibited, except for the PLTU which has been stipulated in the Electricity Supply Business Plan (RUPTL) prior to the enactment of this Presidential Regulation.

If the construction of a new PLTU is prohibited and the operation of the current PLTU will accelerate its “retirement” period, it is feared that this could have an impact on the coal mining sector, which is the main energy source of PLTU. Here are some things that might happen to Indonesia if the coal “apocalypse” really occurs:

1. Workforce

In terms of workforce, for example, it is estimated that hundreds of thousands of people will lose their jobs.

It should be noted that coal is Indonesia’s mainstay commodity at this time. In fact, in 2020 Indonesia will be the third largest coal producer in the world after China and India. No doubt if this industry absorbs a lot of labor.

The coal industry has absorbed up to 150,000 workers in Indonesia in 2019. This is stated in the Coal Booklet data of the Ministry of Energy and Mineral Resources (ESDM) 2020.

“The coal industry absorbs up to 150,000 workers in 2019. The composition of foreign workers is 0.1%,” the 2020 Ministry of Energy and Mineral Resources Coal Booklet wrote.

The number of workers does not even include the absorption of workers in the field of PLTU operations. If it is included with workers in PLTU, it means that the number of workers who have to lose their jobs will be even greater.

If the government completely stops the use of PLTU and coal production, it means that it must be prepared to open new job opportunities for hundreds of thousands of Indonesian workers who are currently working in the coal mining industry.

2. Mining Company

In terms of the number of companies, if the coal “apocalypse” does occur, it is also feared that the thousands of coal mines currently operating will die.

Based on data from Minerba One Data Indonesia (MODI) of the Ministry of Energy and Mineral Resources, the number of coal Mining Business Permits (IUP) in 2021 was recorded at 1,162 permits, consisting of 1,157 IUPs for Coal Production Operations and 5 IUPs for Coal Exploration. In addition, there are around 66 Coal Mining Concession Work Agreement holders (PKP2B).

Minister of Energy and Mineral Resources Arifin Tasrif in a Working Meeting with Commission VII DPR RI, Monday (11/15/2021), had said that the government plans to reduce PLTU 5.52 GW until 2030, consisting of reducing PLTU Java – Bali by 3.95 GW and Sumatra of 1.57 GW.

“We plan for the early retirement of coal-fired power plants, Java-Bali phase out 3.95 GW and Sumatra phase out 1.57 GW until 2030,” he said in a Working Meeting with Commission VII DPR RI, Monday (15/11/2021).

Chairman of the Indonesian Mining and Energy Forum (IMEF) Singgih Widagdo said the retirement of this PLTU would also have an impact on all coal mining companies, which are not just dozens, so the mining industry needs to be managed properly.

“Our mining industry is not just ten companies, there are hundreds of companies that hope this industry will grow, mining also needs long-term certainty,” he said in an interview with CNBC Indonesia.

3. Anticipate the World Joins in Abandoning Coal

Meanwhile, according to him, the destination country for Indonesian coal exports is also one of the important factors for the sustainability of Indonesian coal. When the world is also transitioning energy to New and Renewable Energy (EBT), then Indonesia must also anticipate this.

“If we talk about coal, of course the important point is how we anticipate as the world’s largest coal exporter. So it is clear, the direction of the importing country in responding to the importing country’s commitment to EBT or emissions, as well as domestically, how NRE can be enlarged as well as how commitment to phase down coal power plants,” he said.

Singgih said the absorption of coal through the Increase in Value Added (PNT) will not replace the loss of export potential and also the decline due to the phase-down of PLN’s coal-fired power plant. As for the obligation plan in the Special Mining Business Permit (IUPK), in 2030 it will only absorb around 36 million tons for the Dimethyl Ether or DME project and others.

Therefore, with the conditions that will be faced in the future, Singgih is of the view that the government must take various strategic steps forward. Among them are:

First, the Ministry of Energy and Mineral Resources will immediately map the decline in coal use that will occur by China and India in the future, at least until 2025/2026.

Second, immediately map the total national coal production until 2025/2026, even if necessary the Mining Company’s Work Plan and Budget (RKAB) which is currently in 1 year, is pursued in 5 years.

“It’s hard, but it must be tried so that the company’s certainty in production and investment becomes clear. This is not only for business purposes and foreign exchange earnings, but the most important thing is related to avoiding damage to the mining environment which can stop when the production map is not clearly mapped,” he said.

Third, the governance of coal mines must be continuously improved, as well as the size of each mine zoning for export and domestic potential more clearly. Thus, it can become the basis for the Ministry of Energy and Mineral Resources in making the production plan and RKAB for the next 5 years.

4. Coal Downstream

Chairman of the Association of Indonesian Mining Experts (Perhapi) Rizal Kasli also briefly said that national coal consumption is expected to decrease by 175-190 million tons per year or equivalent to a reduction in income of Rp. 25 trillion per year if the power plant is completely stopped.

Therefore, according to him, the government is considered to have to accelerate the downstreaming of coal to replace the lost market.

“Until 2060, it is estimated that coal use will decrease by 175-190 million tons or around Rp. 25 trillion. The government must spur the growth of coal downstreaming,” he told CNBC Indonesia, quoted Thursday (11/11/2021).

He explained that domestic coal consumption globally is still small. Based on BP Statistical Review 2021 data, Indonesia’s coal consumption is only about 2.2% of the total share of world coal consumption, much lower than China which has a share of 54.3%, India 11.6%, and the USA 6. 1%.

“Indonesia is still far lower in its use of coal,” he said.

As a substitute for this loss of revenue from the coal sector, according to him, the government should look for an alternative source of Non-Tax State Revenue (PNBP) from other industries to support national development.

“This will also have an impact on reducing job opportunities, both direct and indirect workers, from coal mining. This must find a way out,” he added.

[Gambas:Video CNBC]

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