Coal news and updates

Increased use of coal in power generation cuts oil imports

Increasing the share of domestic coal for power generation could reduce the trade deficit, minimize dependence on imported fuel, accelerate rural electrification and bridge the transition toward the use of renewable biofuel.

Concerns about fuel security continue to dominate the national news media. Most of these concerns are related to the use of subsidized fuel in the transportation sector.

While the transportation sector is undoubtedly the biggest consumer of fuel, a significant amount of fuel oil is also used in the power sector. In 2013, more than 8,745 million liters of diesel fuel (14 percent of total fuel consumption) were used to generate 2,6000 GWh of electricity (12.5 percent of total electricity generation).

With diesel price at around
Rp 12,500 (US$1.02)/liter (US$1) diesel oil-generated electricity costs around Rp 4,047/ kWh. At the current average price of electricity — Rp 1,050/kWh — diesel oil consumption for electricity generation resulted in a net loss of Rp 77.8 trillion in 2013. The government subsidy for the power sector alone amounted to almost Rp 100 trillion in 2013, of which more than 77 percent was used to subsidize diesel-powered electricity.

Taking into account the fact that more than 53 percent of total fuel consumed in 2013 was imported, electricity generation using diesel fuel undoubtedly results in a large outflow of cash from Indonesia.

In addition to a significant financial loss, continued use of imported petroleum exposes Indonesia to global uncertainty in fuel prices and supply.

Given the high cost of diesel oil-generated electricity, the government has been aggressively promoting the use of coal for power generation.

Based on data from The National Energy Council, the share of coal in the energy mix for electricity generation has increased from 39 percent in 2009 to 51.6 percent in 2013. In 2013, around 46.5 million metric tons of coal was consumed to generate 107,023 GWh of electricity.

With the price of coal at around Rp 1,050/kilogram, the cost of using coal for electricity generation is estimated at around Rp 480/kWh.

In other words, by using coal for electricity generation, state electricity firm PT PLN can make around Rp 570 in profit for every kWh of electricity sold.

Thus, in 2013, coal-powered electricity generation saved Rp 61 trillion for PLN. Moreover, in contrast to Indonesia’s increasing dependence on imported petroleum, Indonesia is a major exporter of coal where close to 80 percent of domestic coal production in 2013 was exported.

Therefore, in order to rebalance the trade deficit and reduce dependence on expensive fuel imports, Indonesia needs to accelerate the development of coal-fired generation facilities.

Although there are significant economic and energy-security benefits that could potentially be realized by promoting the use of coal for power generation, environmental concerns over the use of coal have hampered efforts to promote the development of coal-based power facilities. Coal has been traditionally viewed as a dirty fuel, and it is rightly so.

In addition to carbon dioxide (CO2), coal burning emits particulates and gaseous compounds such as sulphur oxides (SOx), nitrogen oxides (NOx), and other pollutants.

However, using domestic coal resources to replace imported diesel for electricity generation may in fact result in global environmental and social benefits.

First, by redirecting the flow of coal trade from export toward domestic use and reducing the inflow of imported diesel, a significant reduction in greenhouse gas emission could be achieved through the reduction in emission associated with the use of fossil fuels to transport these fuels.

Moreover, the impact of CO2 emission from burning coal goes beyond country boundaries. Therefore, burning Indonesian coal for electricity generation in China will have the same greenhouse gas impact to the global climate as burning the coal in Indonesia.

Nonetheless, these negative environmental impacts can be mitigated by using and developing clean coal technologies, which include gasification, technologies to remove pollutants from the flue gas, carbon capture and storage technologies, and technologies to improve coal quality prior to burning.

Developing coal-fired power plants can also accelerate the national effort to bring electricity to rural areas.

Based on the data from the Energy and Mineral Resources Ministry, Indonesia’s electrification ratio stands at 80 percent, which means that more than 20 percent of the population currently does not have access to electricity.

Indonesia’s electrification ratio is among the lowest in ASEAN countries. Singapore enjoys 100 percent electrification ratio, Malaysia and Thailand 99 percent, Vietnam 98 percent and the Philippines 90 percent.

Many areas with a low electrification ratio are currently using diesel for electricity generation, indicating that diesel power generation cannot meet the electricity demand in those regions.

 Based on the data from PLN, the electrification ratio in Kalimantan and Sulawesi stand at 80 percent and 72 percent and diesel usage still accounts for 66 percent and 50 percent of total electricity generation.

Similarly, the electrification ratios in Maluku, Papua, West Nusa Tenggara (NTB) and East Nusa Tenggara (NTT) are among the lowest in the country, and diesel accounts for almost 100 percent of total electricity generation.

Ironically, some of the areas that have low electrification ratios and high diesel usage include areas with the largest coal resources in the country.

For example, Central Kalimantan has huge amounts of proven coal reserves, but close to 40 percent of the population still lack access to electricity. As coal-based power facilities typically have a higher generating capacity than diesel-based facilities, developing coal-based power facilities in these areas using domestic coal resources will be able to increase the power generation capacity to close the gap between demand and supply and ultimately increase people’s access to electricity while reducing diesel usage.

In addition to the potential economic, environmental and social benefits of using domestic coal resources, developing facilities for coal power generation and transmission may also pave the way toward transitioning to a green and renewable energy source: bioenergy. Solid bioenergy from biomass is the only form of renewable energy that can be used directly as a substitute for coal in existing thermal power facilities.

As an agrarian country and as a country with the third-largest tropical rain forest in the world, Indonesia has significant bioenergy potential.

As the world’s number one producer of palm oil, for example, Indonesia produces more than 6 million tons of palm kernel shells (PKS) and about 3,5000 GWh of electricity can potentially be produced using these residues.

Thus, PKS alone could have replaced the total diesel consumption for power generation in 2013.

Ironically, most of the PKS has been exported to other countries where it is used to reduce coal consumption for power generation.

In addition to the palm oil industry, biomass residues from agriculture and forest operations in the country, such as timber and pulp and paper industries, rice, coconut, and rubber plantations, can be utilized to produce biomass pellets that can also be used for co-firing with coal.

Wood pellet is the most common form of biomass pellet and has now become a global commodity that is used as an economically competitive method of increasing renewable energy production and reducing greenhouse gas emissions without large investments in infrastructure.

In fact, countries like South Korea and Japan are increasingly looking toward Indonesia as a potential supplier for wood pellet.

Thus, by utilizing its large biomass resources, Indonesia has the potential to develop a sustainable bioenergy industry that can not only meet its domestic demand but also serve the export market.

Source: Jakarta Post