PLN to face three risks amidst continued coal-fired power generation

The state-owned firm can implement specific models to mitigate the effects of the transition away from coal.

Indonesia’s PT Perusahaan Listrik Negara (PLN) may face various risks if it continues to operate coal-fired power plants, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

In a new report, IEEFA identified three risks the state-owned company may face, namely escalating operational, maintenance, and fuel costs, persistent payments for unused electricity under PPAs, and expensive refurbishment costs.

“Ageing plants require frequent repairs and consume fuel less efficiently, driving up operating expenditures. Meanwhile, PLN remains obligated to pay IPPs under long-term take-or-pay agreements, even when electricity from these plants is not dispatched due to oversupply or grid constraints,” IEEFA said.

The agency noted that extending the life of older coal-fired plants needs costly refurbishments, including boiler upgrades, emissions control retrofits, and structural repairs. Such costs may not be economically justified, particularly when compared to the cost of repurposing sites for renewable energy or retiring them altogether.

IEEFA laid out various business models that the company could roll out to address the financial and operational complexity associated with the acceleration of coal-fired plant retirement.

“A divestment model combined with strategic incentives offers the state utility a clean exit from coal by transferring assets to private investors. It can unlock private capital and enable strategic project bundling,” IEEFA said.

“However, low asset values, limited investor interest without incentives, and political sensitivities remain key challenges,” it added.

PLN could also repurpose ageing coal assets through public-private partnerships without transferring ownership or providing any significant upfront investment. The state utility can contribute existing grid assets and share risks with private partners, IEEFA said.