Indonesia should focus on renewable energy to meet its future electricity needs, argued Mr Putra Adhiguna of the US-based think tank, Institute for Energy Economics and Financial Analysis (IEEFA).
“Our electricity system is currently too reliant on coal-fired power plants, which already creates an oversupply and in turn creates a disincentive for our electricity provider, PLN, to add more capacity,” he said, referring to Indonesia’s state-owned firm, Perusahaan Listrik Negara.
Another factor “hindering Indonesia’s energy transition efforts”, he said, is the price cap on coal.
Depending on its quality, Indonesia’s energy and mineral resources ministry caps the price of coal for electricity production at US$70 per tonne. The PLN estimates that this year, Indonesia would need 161 million tonnes of coal to feed its power plants.
The coal price cap makes it difficult for renewable energy to compete. In some countries, the levelised cost of solar energy over a 25- to 30-year life cycle is cheaper than fossil fuels, but that is not the case yet in Indonesia because of the artificial price ceiling for coal.
According to the Jakarta-based think tank Institute for Essential Services Reform (IESR), the levelised cost of electricity from solar is 5.79 US cents per kilowatt hour, while that from coal is 5.68 US cents, making it the cheapest source of energy in the country.