Expansion of Indonesia’s coal plants delay 2030 decarbonisation target: IEEFA

Two big-time plants could add 53 mt of carbon emissions if they increase capacity.

A recent report by the Institute for Energy Economics and Financial Analysis (IEEFA) said that the scaling up of coal plants in Indonesia poses a hindrance to achieving decarbonisation goals under the Paris Agreement.

In the report “Indonesia’s coal companies: Some diversify, others expand capacity,” IEEFA analysed seven of the country’s largest coal producers, who collectively account for 27% of total production. 

Of these, Bayan Resources and Geo Energy have plans to expand, which could collectively increase by up to 58 million tonnes (mt), said Ghee Peh, energy finance analyst at IEEFA and author of the report.

“The expansion of 58mt of coal output could support 21 gigawatts (GW) of planned captive coal plants, potentially adding 53mt of CO2 emissions to Indonesia's total,” the report read.

IEEFA said this is equivalent to half of the country’s 2023 coal-fired generating capacity of 40.7 GW. 

They are also receiving support from financial institutions, with Bayan Resources securing a $200m loan each from the Bank Permata and the Bank Mandiri, whilst Geo Energy secured a $220m loan from the Bank Mandiri.

According to the analysis, 13 GW of the current captive power projects comprised 32% of 2023’s coal-fired capacity. When the additional 21 GW, it could add a staggering 52% to 2023 coal power capacity, IEEFA said.

Peh also noted that the companies’ coal expansion and metal smelting investments will contribute to the development of captive coal plants. 

“Due to their carbon intensity, captive coal plants operated by industrial consumers could hinder the climate commitments outlined in the $20 billion Just Energy Transition Partnership (JETP),” the expert said.

Whilst Indonesia has committed to cut carbon emissions by 32% by 2030, current plans to increase coal capacity contradicts this target. 

“For Indonesia to meet its climate commitments, it is imperative that Indonesian banks and coal companies realign their strategies towards clean energy sources. This shift is also crucial for maintaining economic competitiveness and securing a resilient future for Indonesia’s energy sector,” Peh said.