by: Hartatik
Nusa Dua, Bali – I Ketut Mangku Wijana has to endure days of dust and noise pollution from a nearby coal-fired power plant that operates around the clock. As other residents in Celukan Bawang Village, Gerokgak, Buleleng, Bali, throughout their life they never saw a coconut tree wither and dried up as what happened in the last few years after the power plant was built.
“The impact of this project is clearly bad, both now and in the long term,” said Wijana.
Living around a coal-fired power plant, such as in Celukan Bawang, is not easy. Apart from the air and noise pollution, health quality and agricultural productivity of nearby residents has decreased. There are even reports of people dying after being exposed to dust every day from coal generator operations. Surayah, who also lives in the vicinity of the PLTU, is no longer farming because her rice plants died. So, she decides to only raise cattle now.
The power plants also impact fishermen. It is more difficult to catch fish for them now. They have to go far out to sea to find fish, which implies higher operating costs. Dolphins and whales, indicators of the existence of smaller fish around, are rarely seen. Along with fishing, tourism has also been affected.
Supriyadi, Bakti Kasgoro Fishermen’s Group in Celukan Bawang, said fishermen are especially affected by the coal power plant because they have to sail farther with more fuel costs. He said that fuel costs up to IDR 300,000 per trip. Previously, he only needed to catch fish along the coast, which incurred no fuel costs. Residents of Celukan Bawang see no way out of the problem caused by the big investors behind the coal power plant operation.
For Indonesia, coal-fired power plants support the national electricity system by up to 64 percent. The rest is supported by gas (18%), hydro and geothermal power plants (14%), oil (3%) and solar energy (1%). As of 2021, the total capacity of national power plants will reach 74 gigawatts (GW), 37 GW of which will come from coal-fired plants. It takes around 113 million tons of coal to power the 126 power plants. As a result, Indonesia will become the ninth largest country in the world to emit carbon dioxide in 2021.
Energy transition
The use of coal has been the biggest challenge in the energy transition process in Indonesia. The Ministry of Energy and Mineral Resources (ESDM) said there are six phases of the energy transition to renewable energy. One of them is early retirement of coal-fired power plants in the third and fourth phases, namely 2031-2035 and 2036-2040.
Implementing coal-fired power plants early retirement programs is not easy and expensive. Referring to a study by the Institute for Essential Services Reform (IESR) and the University of Maryland entitled “Assessing the Retirement Plan and Financial Need for Accelerated and Just Coal Power Phase Out in Indonesia”, the estimated funding for early retirement for coal-fired power plants reaches USD 27.5 billion or IDR 422 trillion by 2050. The report also notes that there are 12 coal-fired power plants with a total capacity of 4.5 gigawatts (GW) which are eligible for early retirement targets in the period 2022 to 2023.
Coal-fired power plants early retirement
According to IESR’s analysis, there are several coal-fired power plants that deserve to be retired, including the Asam-Asam power plant in South Kalimantan, the Paiton power plant in East Java, and the Banten Suralaya power plant in Banten. However, the government instead decided to euthanize Cirebon 1 power plant in Kanci, Cirebon Regency, which was not included in IESR’s recommendation for the early retirement of 12 power plants. The policy was announced after the launch of the Country Platform’s Energy Transition Mechanism (ETM) on the sidelines of the G20 Summit in Bali, Monday (14/11).
The early retirement of the Cirebon 1 power plant with a capacity of 660 Megawatts (MW) will use the ETM scheme, with the support of the Asian Development Bank (ADB), at the amount of USD 250 million-300 million or equivalent to IDR 3.8 trillion – IDR 4.6 trillion. This agreement was signed jointly between ADB, PT Cirebon Electric Power (CEP) and PT PLN (Persero), and the Indonesian Investment Authority (INA).
ADB President Masatsugu Asakawa revealed that Cirebon 1 power plant was chosen for several reasons, including its ownership structure that is a combined government, private and international investment. The Cirebon plant is also of moderate age and has a healthy financial structure, making it easier to implement refinancing.
“This coal-fired power plant is suitable for immediate retirement with strong transition considerations,” Asakawa said in a press conference, adding that the structure of the final transaction will determine exactly when the power plant will be retired.
“ADB will only start negotiating the schedule for this generator if it is completely shut down,” he said.
According to ADB, the Cirebon 1 power plant started operating in 2012 under a 30-year contract. The coal-fired power plant, which is managed by PT CEP as a private power generator or Independent Power Producer (IPP), supplies electricity to PLN until 2042 or when it will reach 30 years of age.
Coal power plants generally have a production period of between 40-50 years, which means that if not retired, Cirebon 1 will extend its contract for another 10-20 years beyond 2042.
On the other hand, if the termination is carried out in 2037, the operation will be reduced by 15 years. This figure is taken from the estimated life span of power plants of 40 years. PLN as a signatory to the MoU of this agreement must agree to shorten the contract on when the plant stops its operations.
In addition to the ETM scheme, power plants early retirement is also included in the energy transition funding known as the Just Energy Transition Partnership (JETP). President Joko Widodo announced that Indonesia will receive energy transition funding through the JETP scheme with a target investment value of USD 20 billion as one of the achievements of the G20 Presidency.
“ETM (Energy Transition Mechanism) (in) Indonesia, received a commitment from JETP of USD 20 billion,” said President Joko Widodo in a press conference closing the G20 Summit, Wednesday (16/11).
Previously, the Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan said that through this international partnership led by the United States and Japan it was hoped that USD 20 billion in financing from the public and private sector would be raised over the next three to five years.
“This partnership will support Indonesia’s ambitious commitment to pursue its climate targets through JETP, through international partner investments including mobilising an initial USD 20 billion funding from public and private financing,” said Pandjaitan.
He said the government will develop an action plan with partner investors to follow up on the partnership agreement over the next six months. The discussion included investment plans and details of which power plant would be retired early through the JETP scheme. Pandjaitan hopes that the government together with his investor partners can immediately formulate a concrete strategy to extinguish coal-fired power plants massively, while incorporating new renewable energy resources into the national electricity system.
Debt and grants
Pandjaitan detailed that the JETP funding scheme consists of USD 10 billion worth of public funding commitments from donor countries and another USD 10 billion from private funding through world financial institutions coordinated by the Glasgow Financial Alliance for Net Zero (GFANZ) Working Group. The GFANZ includes a number of global banks such as Bank of America, Citi, Deutsche Bank, HSBC, Macquarie, MUFG, and Standard Chartered. Meanwhile, the US-Japan-led JETP partnership includes the other G7 member countries, namely Canada, Britain, France, Germany and Italy, and also Norway and Denmark.
Previously, United States President Joe Biden announced that the value of JETP’s commitment did not include an investment of USD 798 million or the equivalent of Rp. 12.4 trillion to build transportation that is resilient to climate change and supports Indonesia’s development goals. Biden added that the JETP funding scheme is the result of the work of GFANZ or a coalition of the world’s largest financial institutions committed to transitioning the global economy to zero emissions.
“Together, we hope to mobilise USD 20 billion to support Indonesia’s efforts to reduce emissions and develop renewable energy,” Biden said during a G20 Summit press conference in Bali, Monday (14/11).
The US and Japan will lead negotiations with the International Partners Group regarding funding for the energy transition in Indonesia, especially to leave coal as an energy source for power plants.
The formation of JETP is modelled after the same initiative worth USD 8.5 billion to assist South Africa in decarbonizing its electricity sector at COP26 in Glasgow, Scotland last year.
Indonesia became the second country to launch JETP. Among the top ten emitters of greenhouse gases in the world, Indonesia is working to accelerate its transition to clean energy through strengthening its JETP commitment. This program was initiated to support Indonesia’s target of achieving zero carbon emissions, or net zero emissions (NZE) ten years faster by 2050. One of the concrete actions is by gradually stopping the operation of coal-fired power plants.
Part 2: JETP, Waiting for transparency
Banner photo: PLTU Cirebon-1 with a capacity of 660 megawatts (MW) will be retired early through an energy transition mechanism (ETM) scheme with funding support from the Asia Development Bank (ADB), worth USD 250 million-300 million or equivalent to IDR 3.8 trillion – IDR 4.6 trillion. (Source: Cirebon Electric Power)
This report is part of the G20 fellowship supported by Climate Tracker Asia.