Indonesian energy bill promotes coal-based fuels as 'new energy'

The draft bill classifies liquified and gasified coal as 'new energy', and is part of Indonesia's efforts to replace petroleum imports with domestic coal.

Coal mining in Indonesia
Coal mining in South Kalimantan, Indonesia. Image: Dominik Vanyi / Unsplash.

Indonesia’s parliament approved a draft energy bill this week—one that could deepen the country’s heavy reliance on coal. 

The New and Renewable Energy (NRE) Bill, first proposed in December 2019, aims to provide Indonesia with a regulatory framework to accelerate its development of renewable energy. However, the bill includes both “renewable” and “new” energy sources. According to Article 9 of the draft bill, new energy sources include nuclear and hydrogen power—and crucially, coal-based energy types like coal bed methane, liquified coal and gasified coal.

Eddy Soeparno, vice chair of Indonesia’s parliamentary commission on energy, said in an interview with CNN Indonesia that these downstream coal products will be processed such that the carbon content is “very minimal”. Environmental groups, however, argue that greenhouse gas emissions from coal derivatives are still significantly higher than emissions from renewables. The Institute for Essential Services Reform (IESR), an energy think tank based in Indonesia, is concerned that the bill caters to the interests of the coal industry. 

Indonesia is the world’s biggest coal exporter by tonnage. It is also the eighth largest greenhouse gas emitter and last year pledged to reach net zero emissions by 2060. However, Indonesia’s energy mix has seen an exponential increase in coal in recent years as the country seeks to build its domestic energy market and reduce reliance on liquefied petroleum gas imports. Coal generation grew steadily from 117 Terawatt-hours (TWh) in 2015 to 168 TWh in 2019, taking the fossil fuel’s share of electricity generation from 53 per cent to 62 per cent over in the same period.

Indonesia’s renewable energy generation has also almost doubled, from 25 TWh in 2015 to 48 TWh in 2019. Most of these gains were from hydropower, bioenergy and geothermal energy, but the country is also seeking to expand solar and wind deployment. Indonesia is seeking to increase the share of renewables from 14 per cent currently to 23 per cent of the national energy mix by 2025, and 31 per cent by 2050. 

The NRE bill could play an important role in accelerating the development of renewable energy, as it stipulates that the Indonesian government will subsidise renewable energy if its production costs exceed that of fossil fuels. Renewable energy production should also prioritise local workers and domestically sourced materials, the bill proposes.

Youth climate activist Daffa Praditya said the bill “fills a gap in energy policy in Indonesia” and is key to the country’s energy transition, as legislation on renewables deployment is currently lacking.

However, the inclusion of new energy in the bill leaves room for ambiguity. According to Putra Adhiguna, a Jakarta-based energy analyst at thinktank Institute for Energy Economics and Financial Analysis (IEEFA), the language used in the bill makes it unclear how energy incentives would work for renewables.

“It is quite clear that renewable energy incentives should go towards solar, wind, geothermal energy and so on,” said Adhiguna. “But it is unclear where NRE incentives will go. The worry is that NRE incentives … may lean heavily towards “new energy” and not renewable energy.”

Indonesia’s energy mix is unique in that the expansion of renewable energy so far has not reduced the country’s reliance on fossil fuels, as coal is largely being used to substitute gas and oil. The NRE bill further signals the government’s intention to continue expanding coal infrastructure, going against a global trend to stop burning the dirtiest of fossil fuels. 

Indonesia signed up to the global ‘Coal to Clean Power Transition’ pledge at the COP26 climate talks last year, but specifically excluded Clause 3—to cease the issuance of new permits for coal-fired power generation projects—from its endorsement of the pledge.

Indonesia also previously committed to stop building new coal-fired power plants after 2023. Since 2021, however, Indonesia has started building more than 100 new coal-fired power plants, which will continue to generate emissions for decades to come, even if all new construction is completed by 2023. Construction of the country’s first two coal gasification facilities also began this year. Each is expected to consume at least 6 million tonnes of coal annually once operational.

“The entry of new energy technologies such as coal gasification will trap Indonesia with fossil energy infrastructure,” said Fabby Tumiwa, executive director of the IESR.

No to nuclear

Environmentalists also oppose the inclusion of nuclear in the NRE bill. Tumiwa said that the bill is “heavily influenced” by the interests of the nuclear industries, and stymies the “political encouragement” needed for renewables. Youth-led advocacy group Adidaya Initiative told The Jakarta Post they are concerned about high costs and safety risks. Indonesia currently does not have any commercial nuclear power reactors. 

“We are not against all the articles of this bill,” said youth activist Praditya. “There are many good points on renewable energy but what we want is to cut off all mention of nuclear and coal. Environmental NGOs are demanding a real transition to greener resources.”

The bill has to be approved by President Joko Widodo before it can become law. Lawmaker Sugeng Suparwoto said he hopes the bill can be passed before the G20 summit, which Indonesia will host in Bali in November.

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