Power Plant Energy in Indonesia and the Role of the Financial Industry

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In the global pursuit of environmental sustainability and the reduction of carbon emissions, coal-fired power plants have emerged as a focal point of contention due to their contribution to environmental degradation, health concerns, and climate change. Across the world, there has been a growing demand for a shift towards cleaner sources of energy, prompting widespread protests against fossil fuels. However, despite these global trends, the awareness and communal consensus about this issue have yet to fully materialize in Indonesia.


Coal holds the dominant position of the country’s total electricity production

The Ministry of Energy and Mineral Resources (ESDM) reports that Indonesia continues to heavily rely on fossil fuels as its primary energy source for electricity generation. A staggering 85.31 percent of the total installed capacity, amounting to 60,485 MW, is attributed to fossil fuels. Among these, coal holds the dominant position, accounting for a substantial 61 percent of the country’s total electricity production.

Curiously diverging from the global shift away from coal, the Indonesian government has taken a different path by embarking on an ambitious plan to develop additional coal-fired power plants (CFPP) in various provinces. The government’s drive to meet the demand for an additional 35,000 MW of electricity in the Java, Madura, and Bali regions has led to the establishment of new CFPP projects. However, this ambition has not come without its costs, resulting in environmental sacrifices that impact both nature and humanity.

List of coal-fired power plants (CFPP) in Indonesia

The ramifications of these endeavors are most acutely felt by communities living near coal mining areas. Such locales suffer from the hastened degradation of air, water, and soil quality due to the ongoing pollution caused by mining activities. Presently, there are nine CFPP projects in various stages of development and approval. These projects have become subjects of contention, with civil society organizations actively advocating for their cancellation to protect the environment and local communities. Among the projects under scrutiny are:

1. Jawa 5, Suralaya, Banten

2. Jawa 6, Cikarang, West Java

3. Jawa 8, Cilacap, Central Java

4. Jawa 9 and 10, Cilegon Banten

5. Cirebon 2, West Java

6. Tanjung Jati A, West Java

7. Tanjung Jati B, Central Java

8. Indramayu, West Java

9. Celukan Bawang 2, Bali


The Role of Banking Sector

Interestingly, the banking and investment sectors, known as the primary financiers of such projects, continue to lend their support. A glaring example is the financial support of Unit 2 Cirebon CFPP by several syndicated banks, thereby sharing accountability for the potential destruction of both the environment and local communities.

The financial arrangements for these projects have been facilitated by institutions from Japan and China, which stand as the major financiers of coal-fired power projects in Indonesia from 2014 to 2019. The Japan Bank for International Cooperation (JBIC) has contributed approximately USD 4.7 billion, while China Development Bank and China Eximbank have provided around USD 2 billion and USD 1.3 billion respectively. Other financial institutions from Indonesia, Malaysia, Singapore, South Korea, Europe, and North America have also contributed, albeit in smaller proportions.

Remarkably, even Indonesian state-owned Bank Mandiri has participated in financing three deals for coal-fired power projects in Indonesia, amounting to around USD 500 million. This highlights the complex interplay between economic interests and environmental concerns within the banking sector.


Behind The Power Station of Suralaya Banten as a contributor to recent pollution issues affecting Jakarta

Regarding the CFPP Banten Suralaya Power Station, which was previously discussed in the earlier article as a contributor to recent pollution issues affecting Jakarta, the facility is situated in Cilegon within the Banten Province of Java, Indonesia. This power station comprises two units currently in the pre-permit stage, designated as Units 9 and 10. Each of these units employs cutting-edge coal-fired ultra-supercritical technology, enabling them to generate a substantial 1,000 MW of electricity. The project is a collaborative effort involving Indonesia’s state-owned power enterprise, PT Perusahaan Listrik Negara (PLN), and the private Indonesian conglomerate, Barito Pacific.


Conclusion

In conclusion, the paradoxical situation in Indonesia’s energy landscape underscores the global challenge of balancing economic growth with environmental sustainability. The role of the banking sector as a pivotal player in financing these projects calls for a nuanced consideration of the long-term impacts of such investments on the environment, public health, and local communities. As the world continues to grapple with transitioning to cleaner energy sources, it remains to be seen how Indonesia’s energy policies and banking sector practices will evolve to align with these global imperatives.

Dealing with the intricate issues presented by coal-fired power plants and the environmental consequences they entail necessitates a comprehensive strategy. Shifting towards solar energy systems could be explored as a potential remedy, providing a sustainable resolution that resonates with the worldwide movement towards more eco-friendly energy sources. While it may not entirely meet electricity demands, it has the potential to alleviate reliance on coal resources and provide environmental support.

By taking these measures, Indonesia can significantly reduce its reliance on coal-fired power plants and move towards a more sustainable energy future powered by solar energy. Such a transition not only addresses environmental concerns but also contributes to energy security, job creation, and economic growth.

Reference:

Responsibank, Financing of Coal-Fired Power Plants in Indonesia: Financial Flows and Assessment of Bank Credit & Investment Policy.

Baca juga: Polusi Di Jakarta: Dari PLTU? Bagaimana Regulasi Pemerintah?

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