Jakarta – A study by Yayasan Kesejahteraan Berkelanjutan Indonesia (SUSTAIN) shows that the government does not need to rely on foreign grants to fund the early retirement of coal-fired power plants, the foundation said in a press release on Thursday, February 6.
SUSTAIN’s analysis shows that an increase in coal levies could generate IDR 353.7 trillion in state revenue annually. This is enough to fund the early retirement of coal-fired power plants, grid upgrades, and renewable energy investments without waiting for assistance from donor agencies or other countries.
SUSTAIN Executive Director Tata Mustasya believes that increasing the coal production levy could be a significant funding source for accelerating the energy transition and supporting renewable energy development in Indonesia.
“The government has a more independent funding option. By increasing the coal production levy, Indonesia can obtain additional state revenue of USD 5.63 billion to USD 23.58 billion annually. This is more than enough to close the PLTU (coal-fired power plants) gradually,” he said.
Currently, efforts to retire old power plants in Indonesia face a significant obstacle in the form of funding. However, according to Tata, if the coal levy is raised, the funds can be allocated to closing old and inefficient power plants, building a grid that supports renewable energy, and encouraging investment in solar, wind, and small-scale hydro.
The closure of PLTU Cirebon 1 requires a financing package of around USD 230 million to USD 300 million, equivalent to IDR 3.45 trillion to IDR 4.5 trillion. Meanwhile, PLN needs around USD 1.3 billion (IDR 19.5 trillion) to upgrade the electricity network to accommodate renewable energy.
With a minimum estimate of Rp 84.55 trillion obtained from coal levies, early retirement of PLTU and improvement of renewable energy infrastructure can be done more quickly and effectively.
“This is not just a matter of closing PLTU, but also building a cleaner and more reliable energy system. Increasing the levy on coal production can be a more certain solution than waiting for grants, which are limited in number,” Tata said.
Rejecting biomass as a false solution
In addition to ensuring funding for the early retirement of power plants and investment in renewable energy, the government is encouraged to avoid co-firing power plants with biomass.
According to Ahmad Ashov Birry, Program Director of Trend Asia, co-firing biomass is not a truly green solution. It still produces high carbon emissions and has the potential to cause deforestation and land conversion.
“Replacing coal with biomass does not solve the problem. Instead, it can increase emissions and harm the country in the long run. The government should focus more on clean energy such as solar, wind, and small-scale hydro,” Ahmad said.
With a clear funding source from the increased coal levy, the government no longer needs to wait for foreign grants or loans to fund the energy transition.
This approach not only allows for faster early retirement of coal-fired power plants but also secures investment in the grid and renewable energy development. With the right strategy, Indonesia can build a more sustainable, independent and environmentally friendly energy system without relying on foreign funds. (Hartatik)
