- Despite commitments to transition away from coal, Indonesia faces major hurdles in closing coal-fired power plants due to economic concerns, legal risks, and political resistance.
- Indonesia’s climate envoy has cast doubt on the country’s commitment to the Paris Agreement, calling coal plant closures “economic suicide,” threatening the $20 billion Just Energy Transition Partnership (JETP).
- High-ranking government officials and investors with coal assets, along with concerns over legal repercussions for state losses, hinder efforts to retire coal plants early.
- While some renewable projects are progressing, restrictive policies and funding shortfalls limit expansion, though debt swaps for clean energy investment offer a potential solution.
As a summit of Southeast Asian leaders in Jakarta fast approached in September 2023, Indonesia’s state-run electricity provider, PLN, partially shut down one of its oldest and biggest coal-fired power plants in the hopes of cleaning up the capital’s filthy air.
Jakarta’s air quality — or lack of it — was among the worst in the world. The president at the time, Joko Widodo, even developed a cough attributed to the haze.
In response, the state monopoly took offline some of the boilers at the colossal Suralaya-Banten power station complex — an ultimately meaningless move as the remaining 15 other power stations that ring Jakarta continued to churn out smog.
Nevertheless, the incident may have marked the first and last time any of Indonesia’s 135 coal-fired power stations are closed before their time.
Days after the U.S. signaled it was leaving the Paris climate agreement, again, Indonesia’s special envoy for climate change and energy, Hashim Djojohadikusumo, said his country may follow suit.
Last week, Hashim, who is also the brother of the country’s new president, Prabowo Subianto, walked back the government’s November commitment to close most of the country’s coal-fired power plants over the next 15 years, calling it “economic suicide.”
While that deadline was probably unrealistic, the trend is clear, analysts say. Big multibillion-dollar initiatives to close the country’s coal-fired plants, including the Just Energy Transition Partnership (JETP), are probably doomed.
“We need to firmly say ‘goodbye’ to JETP,” Bhima Yudhistira Adhinegara, director and founder of research outfit the Centre for Economic and Law Studies (CELIOS), told Mongabay.
“The JETP is dead. It’s no longer a platform to support energy transition in Indonesia.”
A low-energy start
Still, the platform had never been in good shape.
Agreed at the G20 summit in Bali in 2022, the JETP’s goal was to rope rich countries that industrialized thanks to fossil fuels into helping big emerging economies of the Global South from doing the same thing.
Instead, the pact earmarked funds for recipient countries to close down their coal plants before the end of their operating lives.
The G7 rich democracies, including the U.S. and Japan, the EU, Denmark and Norway, agreed to contribute $20 billion to Indonesia to shutter its power stations in the coming decades.
Earlier this month, Germany’s Federal Ministry of Economic Cooperation and Development said it would co-lead the JETP along with Japan, taking the place of the U.S.
But Germans go to the polls in a federal election on Feb. 23 with the far-right Alternative for Germany party, which wants to leave the Paris Agreement, in second place, which may put the commitment in doubt.
For its part, Indonesia hopes to derive two-thirds of its electricity from renewable sources — roughly 220 gigawatts — by 2040, according to a JETP study published in November 2023.
South Africa and Vietnam have similar agreements with the G7 and the EU valued at total of $25 billion.
So far, of the $20 billion promised to Indonesia, only $500 million has materialized. No plant has even started the process of closing down under the JETP.
In early February, Bahlil Lahadalia, the minister of energy and mineral resources, reiterated government plans to retire the 660-megawatt Cirebon 1 plant by 2035, seven years earlier than planned, with help from the Asian Development Bank.
The ADB and the members of the consortium that owns the power plant, including Japan’s Marubeni, Indonesia’s Indika Energy and Korea Midland Power, signed a nonbinding agreement in December 2023 to shutter the plant and invest nearly $200 million in solar, wind and battery storage in its place.
Too much electricity, too little leadership
In any case, Indonesia needs to pare back its fleet of coal stations. The result of a building spree during the presidencies of Joko Widodo and his predecessor, Susilo Bambang Yudhoyono, the glut costs PLN upward of 21 trillion rupiah ($1.3 billion) a year because its contracts with producers require it to pay for the power whether it uses it or not.
Officials worry, though, they risk being hauled up before the courts on corruption charges if shutting down a power plant means realizing some of those losses, CELIOS’s Bhima said.
Last June, Karen Agustiawan, the former head of state oil and gas company Pertamina, was sentenced to nine years in prison and fined 500 million rupiah ($31,000) after a court ruled she was responsible for racking up state losses of some 2.1 trillion rupiah ($130 million) owing in part to a long-term LNG supply agreement dating back to 2012 that locked in higher-than-market prices with a U.S. supplier.
“Directors of state-owned enterprises would need something concrete from the government, like an act of parliament, before they shut down a plant,” Bhima said.
Efforts to begin shuttering some of the country’s coal-fired power stations may also run against the interests of international investors and members of cabinet who own coal assets.
Boy Garibaldi, whose brother Erick is the minister of state-owned enterprises, controls Adaro, one of the world’s largest coal miners. The company is building a 2-GW coal-fired power plant in the so-called Green Industrial Park in North Kalimantan province.
Government records show President Prabowo’s own personal assets include a 40% stake in the company PT Nusantara Energindo Coal, which owns several coal-mining concessions in East Kalimantan.
Up in smoke
Japanese companies, including Mitsubishi Heavy Industries, are pitching technologies to PLN that they say will reduce the carbon emissions that coal-fired plants produce. Work on two new generators at Suralaya-Banten, which will mix ammonia with coal, are nearing completion.
Mixing ammonia, a toxic gas, results in a modest reduction in greenhouse gas emissions but poses serious health risks, environmentalists say. Burning ammonia dramatically increases the amount of fine dust a coal station emits.
The Suralaya-Banten complex contributes to 1,470 premature deaths and is responsible for sickness and lost productivity valued at $1 billion a year, according to a September 2023 report from the Centre for Research on Energy and Clean Air.
“As for Japan, it’s mainly about promoting and ‘selling’ green hydrogen and green ammonia — false solutions,” Leonard Simanjuntak, Greenpeace Indonesia country director, told Mongabay.
Some ‘light of hope’
Investment in renewable energy is making some progress.
Construction on a 120-MW solar installation on the Duriangkan reservoir on Batam Island is slated to start this year as part of a massive renewable energy project that will eventually reach half the current generating capacity of the Suralaya-Banten complex.
That project follows a similar 145-MW development by the UAE’s Masgar and PLN that went into operation in 2023 on the Cirata reservoir in West Java. An additional 500 MW of solar capacity there is in the works.
Still, the government has capped solar generating capacity at 1.5 GW by 2028 — roughly double what’s available now — owing to worries that on-again-off-again sunlight might overwhelm the grid.
While funding from rich donors and multilateral agencies to close coal plants may be harder to come by, some alternative sources of money are emerging.
Swapping coal power debt for securities aimed at shutting down power plants and developing infrastructure such as charging stations is a potential source of funds. The approach is a potential win-win-win solution, CELIOS’s Bhima said. PLN could reduce some of its nearly 400 trillion rupiah ($24.5 billion) debt pile while securing new funds for investment in renewable energy. Swaps could be structured to allow lenders to claim carbon credits.
PLN has some 95 trillion rupiah ($5.8 billion) in debt maturing this year that may be suitable to swap, according to a CELIOS report late last year, Bhima said.
“There is some light of hope in the transition to renewables.”
Banner image: Protestors call for Indonesia to replace coal with renewable energy and to honor the commitment made in the Paris Agreement (May 2016). Image courtesy of Break Free via Flickr (CC BY-NC-SA 2.0)
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Investors wary of Indonesia’s big climate promises amid record of flip-flopping
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