Indonesia and Coal

Over the last decade the Indonesian government, faced with at least a short to medium-term decline in domestic oil and gas production, has adopted a policy of attempting to diversify its domestic energy sources. In January 2004 the Indonesian government announced its National Coal Policy which aims to boost the development of coal-fired power stations and dramatically increase coal exports. This policy co-incided with Indonesia becoming a net oil importer.

While approximately 8% of Indonesia’s electricity is generated from hydropower, further developments are likely to be limited due to the high capital costs, limited infrastructure and environmental and social concerns. While the country currently has no operating nuclear power stations, in March 2008 the State Minister for Research and Technology, Kusmayanto Kadiman, optimistically proclaimed that the government would build four 1,2000 megawatt nuclear power stations in the next 17 years. It is proposed that the first of the plants would be operational by 2016/2017. However, with the presidential election due in 2009 and strong local opposition to nuclear power, it is uncertain how far the proposals will progress.

Since the early 1990′s Indonesian coal mining has grown dramatically. The World Coal Institute states that in 2005 Indonesia mined 152.2 million tonnes of which 27% was used domestically with the remainder exported. It is now the world’s second largest coal exporter behind Australia and is a major supplier to Asian countries. ABARE reports that between “1988 and 2005, thermal coal exports from Indonesia increased by an average of around 23 per cent a year.”

Coal Exports

ABARE, the Australian government’s resources agency, reports that 2006 Indonesia exported 170 million tonnes of thermal coal and estimated that this would grow to 186 million tonnes in 2007 and 201 million tonnes in 2008.

In an earlier review on the global coal trade, ABARE analyst Alan Copeland noted that thermal coal exports from Indonesia were estimated to have grown by approximately 33% in each of 2004, 2005 and 2006. “The growth in Indonesia’s exports reflects the ability of its coal industry to respond to the rapid growth in Asian demand for thermal coal, supported by unconstrained transport and port capacity. A significant proportion of coal transport in Indonesia is water based, which allows for coal to be transported along rivers via barges to the open sea for loading on to larger vessels,” he wrote.

However, a spin off to the dramatic rise in coal demand is the rise of illegal mining. In September 2005 the Washington Post reported on the staggering scale of coal-laden trucks — which are notionally banned from public roads — going all-night from “from scores of often-illegal mines” on their way to a local port. An anonymous senior official in Indonesia’s Ministry of Energy and Mineral Resources raised doubt about the accuracy of the Indonesian government’s official export figures. “I bet no one has current and accurate data about what is happening out there,” he said.

The World Coal Institute estimates that of the 107.3 million tonnes exported in 2005, 89 million tonnes was steam coal with the remainder being coking coal.

ABARE lists the main destinations for Indonesian thermal coal as being.

- Japan (approximately 25%);
- Chinese Taipei (17%)
- India (15%); and
- the Republic of Korea (13%).
Copeland also notes that India imports Indonesian low-ash coal for blending with its higher-ash content domestic coals.

In 2008, 997,370 tons of Indonesian coal was burned at the Bridgeport Harbor power plant in Bridgeport, Connecticut.

Domestic Consumption and Coal-Fired Power Stations

Between 1993 and 2003 there has been a 78% growth in domestic power generation capacity. (See Indonesia and coal/Installed electrical generating capacity). According to the WCI just over 48% of the capacity is from coal-fired power stations. In 2004 31 million tonnes of coal was used in power generation with a further 10 million tonnes for direct use by industry.

The rapid increase in coal-fired generating capacity is set to continue. PT Perusahaan Listrik Negara (PLN), the state-owned electricity utility, has proposed plans to add an additional 10,000 megawatts of coal-fired capacity by 2011.[10] However, the U.S. government’s Energy Information Administration is sceptical that the proposals, which seek private sector involvement, will come to much. “However,” the EIA wrote in a review of Indonesia’s energy generation sector, “foreign investors have largely avoided the Indonesian power sector in recent years due to the poor financial condition of PT PLN and the uncertain regulatory climate in the electricity sector.”[11] However, one driver of increased domestic coal consumption will be plans by PLN to convert a number of oil-fired power stations to coal-fired.

The most recent power stations that have come online are:

- the first 300 megawatt unit of the Cilacap plant; and
- the 1.3 gigawatt Tanjung Jati B plant.
Other coal-fired power stations in operation are:

- Paiton power station in eastern Java.