Power sector decarbonisation in developing and coal-producing countries: A case study of Indonesia

Abstract

Global efforts to transition away from coal within a decade encounter significant challenges, particularly in developing and coal-producing countries, e.g. Indonesia. Most current studies do not discuss the impact of coal phase-out on the upstream sector, which is important for coal-producing countries. This study aims to analyse Indonesia's power sector decarbonisation impact on the power and fossil upstream sectors. This analysis used VEDA-TIMES energy system optimisation using three scenarios: least-cost system (BAU), decarbonisation without coal phase-out (PA 1.5), and decarbonisation with coal phase-out (PA 1.5 PO). In all cases, decarbonisation will reduce the amount of coal used in energy systems. However, in a technology-agnostic transition, coal still constitutes 16% of total capacity in 2060. By this time, the coal-fired power generating assets have also transitioned to high efficiency, low emissions (HELE) technologies. CCS plays an important role in Indonesia's decarbonisation. A key implication of the coal phase-out scenario is the stranding of $9 bn worth of existing assets and an increased role for renewable energy and imported natural gas in 2035–2050, posing a notable threat to gas security within the industrial sector. In addition, the potential loss due to untapped coal reserves is estimated at $63 bn, while the cumulative net loss in the coal upstream sector amounts to $799 bn (0.26% of Indonesia's GDP and 3.7% of the coal-producing GDRP). Nevertheless, the total investment and electricity production costs exhibit negligible differences in the rapid VRE expansion, but it will reduce total investment by 24% in the low VRE buildrate.