Junking New Coal Projects Less Costly than Retirement: Think-Tank

Canceling coal projects in the pipeline not only helps meet emission reduction targets but also presents a less expensive option compared to closing down operational coal plants, a study in Indonesia has shown.

Findings by the Institute for Essential Services Reform (IESR) published Tuesday showed it would be more cost-effective for the world’s top coal exporter to rescind most of its planned additional coal-generated energy capacity than allow more plants to be created, then retired early if Indonesia is to fulfill climate commitments.

Southeast Asia’s biggest economy pledged to go net-zero by 2060 at the 26th meeting of the United Nations’ main climate decision-making body in 2021. Key to the roadmap is when it can wean itself off coal, the biggest emitter of energy-related planet-warming emissions, with coal’s contribution rising in 2022 at a rate above the average growth over the last decade to 15.5 metric gigatons according to a report by the International Energy Agency published March 2023.

But Indonesia did not accede to the UN Conference of the Parties’ pledge of ceasing the construction of unabated coal-fueled power generation facilities. It did however declare openness to accelerate coal phaseout into the 2040s if the country receives international financial aid.

“Meeting the Paris Agreement’s goal requires phasing out the unabated coal-fired power plants by 2040 globally”, the Jakarta-based IESR said. “This poses significant challenges for Indonesia, which has increased its coal-fired power plants development over the last two decades and is currently facing the growing energy demand”.

About 67 percent of Indonesia’s electricity last year was produced by the burning of coal, the IESR said citing data it had requested from the Energy and Mineral Resources Ministry.

From its analysis of the financial and technical information of all coal-fired power plants in Indonesia, the IESR found nine projects with a total capacity of 2,928 megawatts could be discontinued altogether out of 13,822 MW in the pipeline if the government wants more savings in coal intervention policy.

“The total direct cost of canceling these 2,928 MW power plants is USD 238 million, based on the estimated capital spending on the projects so far”, the findings report said.

“The potential avoided emissions from canceled projects is [sic] estimated at 460 MtCO₂ [metric tons of carbon dioxide] based on the conservative assumption that these plants would have run up to 2050. This means that the cost of carbon reduction is less than USD 0.52 for every tonne of CO₂ avoided”.

“In comparison, we calculated the mitigation cost from the announced potential asset sale and early retirement of CFPP Pelabuhan Ratu of PLN and PT Bukit Asam (PT BA), which is around USD 6.57/tonne CO2”, the IESR added.

If Indonesia opts to also retire early 10,894MW of its current capacity, on top of withdrawing projects in the pipeline, it still would see “considerably low mitigation costs in the range of USD 2.52-3.92/tonne CO₂”, the report said.

The IESR advised raising the share of renewables in the grid as a cheaper power generation alternative in the long term.

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