Page 5 - AsiaElec Week 05

AsiaElec COMMENTARY AsiaElec
is cap on coal output in 2020 aims to prop up falling coal prices and government revenues by reducing production.
At the start of January, falling global coal prices meant that the Indonesian Ministry of Energy and Mineral Resources set its January thermal coal reference price (the Harga Batubara Acuan, HBA) at $65.93 per tonne, down 0.6% on December 2019 and 28.7% lower than January 2019, when it was $92.41 per tonne.
New coal plants
However, alongside the government’s new policy of closing elderly plants, it is continuing to invest in new coal plants, contrary to the regional trend across Asia, which see a slowdown in new coal construction projects.
A recent report from a Global Energy Moni- tor (GEM) said that construction of coal plants in Southeast Asia had stalled considerably, with only Indonesia breaking ground on new stations in the rst half of 2019.
e regional coal pipeline in Southeast Asia has declined sharply from 12,920 MW in 2016 to 6,355 MW in 2017 and 2,744 MW in 2018. In the rst half of 2019, 1,500 MW entered con- struction, all of it in Indonesia.
Indeed, the report found that Indonesia accounted for 15,625MW of the 28,469MW of coal-0 red capacity entering construction between 2015 and H1-2019,
Indeed, Carbon Tracker put the LCOE of new coal plants at $39 per MWh, well below the cost of onshore wind ($48 per MWh). is suggests that Indonesian developers, both PLN and IPPs, are taking advantage of cheap coal to built new plants to meet rising demand.
ey are helped by the government’s domes- tic market obligation (DMO), which forces min- ers to sell 25% of coal output on the domestic
market at a maximum of $70 per tonne, which meant that in 2018 and 2019 power plants paid less than average domestic coal prices, which were over $100 per tonne.
With current domestic coal prices, the HBA,at $65.93, coal prices are at rock bottom levels, making coal still viable for generators.
Prevailing trends
Nevertheless, the Indonesian government’s decision shows that it is following the prevailing trend of reducing its exposure to coal. Japan, Tai- wan and ailand are just some SE Asian nations to be reining in their enthusiasm for coal.
In the corporate world, BlackRock’s recent decision to regard climate risk as an investment risk, reduce its exposure to coal and to lobby company boards to commit to climate change targets is now being followed by more and more investment houses and banks.
With power demand growing at an estimated 7% per year until 2027, and access-to-power rates at just 50-60% in some eastern areas such as Papua, more investment in renewables is needed. Meeting a 23% renewables target by 2025 would require $154bn of investment, according to the Australian-based Lowy Institute.
The country has considerable geothermal and solar potential, and the government must put in place an investment-friendly regulatory regime to attract private investors and foreign technology.
Crucially, power prices are tightly controlled by the government, meaning that private inves- tors cannot rely a good return on investment.
Although the government now wants to close outdated coal power plants, vested interests at state-owned PLN and in the mining companies mean that coal will maintain its dominant status in the power sector in the medium-term.™
The coal- red Paiton 2 power plant
Credit: Paiton Energy
Week 05 05•February•2020 w w w. N E W S B A S E . c o m P5