‘Serious Environmental Damage’: The government is finally taking notice of the detrimental side effects coming out of the nation’s burgeoning mining sector
By David Fogarty on 09:30 pm Oct 23, 2014
Category Editor's Choice, Environment, Featured, News, Politics
Tags: coal, coal mining
A large coal pit stands abandoned near the East Kalimantan village of Makroman, where residents accuse mining company CV Arjuna of refusing to rehabilitate and reclaim mining site. (Photo courtesy of David Fogarty)
Out of the jungles of East Borneo in Indonesia comes the fire that fuels Asia’s burgeoning economies: coal.
Miners dig deep, open pits, clearing forests and farmlands to extract coal from thick, black seams, which is then crushed and loaded onto trucks and barges for shipment to China, India, Japan and other destinations in Asia.
Indonesia, itself a large and growing customer, produced 421 million metric tons last year, according to official government figures, with about 350 million tons exported to feed the region’s growing demand for energy. India and China are the top two buyers.
Output has tripled within a decade and Indonesia is now the world’s top exporter of thermal coal used in power stations, earning the government billions of dollars in royalties. Coal taxes are a vital source of revenue for the country, helping plug a budget deficit running at about 3 percent of gross domestic product.
But with this success has come a multitude of ills, including large-scale deforestation, water pollution, conflict with local and indigenous communities and health costs from coal dust. Add to this corruption, tax evasion, illegal mining and illegal exports, which are costing the government millions of dollars in revenue. The industry is becoming a threat to itself, the economy and the national and global environment. Burning coal is the single largest source of carbon dioxide emissions blamed for climate change.
In response, the central government has launched a major drive to clean up the sector and weed out the worst players, mostly small mining companies, but it remains to be seen if the authorities can claw back greater control. The aim is to limit the sector’s rapid growth and to impose tougher enforcement of regulations — crucial if the government is going to able to manage growing demand for Indonesia’s coal.
About half the coal comes from the resource-rich province of East Kalimantan. To get a sense of the scale of the industry, you only need to stand on the main bridge across the Mahakam river, which flows through the provincial capital Samarinda. Barges the size of an Olympic swimming pool flow past every few minutes, pulled by tugboats to bulk carriers waiting along the coast nearby.
Each barge carries about 8,000 tons of coal, most loaded up river from myriad coal terminals that jut out into the river. Samarinda is ringed by coal mines and vast coal stockpiles that constantly feed the barges via conveyer belts.
Energy security
As Indonesia’s oil reserves dwindle, coal’s importance grows.
“The idea is that we have to consider our energy security. We consider that coal is our prospective energy in the near future,” said Bambang Tjahjono, the director of coal business supervision at the Ministry of Energy and Mineral Resources’ Directorate-General of Mineral and Coal.
About 60 million Indonesians are not connected to the grid and the government is pushing rapid investment in coal-fired power stations to fix power shortages. Like the resource booms of oil and gas, logging and oil palm before it, coal is regarded as a quick and easy fix and a cash cow, with environmental concerns often secondary.
NGOs say Indonesia needs to focus more on renewable energy investment and curbing conflict between mines and local communities, whose land is increasingly under threat. To clean up the sector, the government has called in the Corruption Eradication Commission (KPK), which is leading a sweeping review of mining permits.
“The focus for KPK is to increase government revenue and avoid revenue leakage,” Tjahjono said in a recent interview.
In another major initiative, new trade rules that took effect Oct. 1 target illegal coal exports. Combined, Tjahjono hopes both initiatives will lead to a leaner, more tightly regulated sector.
For NGOs, the crackdown is essential but some fear it won’t head off looming environmental and social problems because of the large number of mines and permits. And, depending on where global coal prices go, more mines could come on line.
“I think there will be more problems because half the mining permits will be finishing up in the next 10 or 15 years. Our prediction for 2020, we will have very serious environmental damage. That’s only one problem. It will also be with other problems, such as health and land conflict,” said Merah Johansyah, who leads the East Kalimantan branch of Indonesian mining NGO Mining Advocacy Network, or Jatam.
According to the Ministry of Energy and Mineral Resources, there are 3,922 permits for coal exploration, operations and production across the country. Most are in Kalimantan and Sumatra, which contain the majority of Indonesia’s coal reserves.
Central and local governments do not have the resources to monitor these permits, analysts, NGOs and the ministry say.
“There are a lot of mining companies in this place and the administration is not nearly as strong as, say, Australia or the United States,” said a senior mining executive on condition of anonymity.
Of the total permits, 1,461 are listed as non-clean and clear because of irregularities, such as mines overlapping with other mining or agricultural concessions, the ministry says.
A province-by-province analysis of all coal permits shows they totaled just over 21 million hectares in 2013, roughly the size of the US state of Kansas or three times the size of the Republic of Ireland. While many of these will never become mines, the scale highlights the risk of social conflict and environmental damage in a country with 250 million people, many of whom rely on farmland, forests and rivers for their livelihoods and customs.
A large coal pit stands abandoned near the East Kalimantan village of Makroman, where residents accuse mining company CV Arjuna of refusing to rehabilitate and reclaim mining site. (Photo courtesy of David Fogarty)
Top challenge
Most of the problems are at the district level. Regional autonomy laws gave districts much greater powers, and this triggered the explosion of mining permits.
In East Kalimantan, district heads have issued about 70 percent of all mining permits, with the money boosting district revenues, funding re-election campaigns and, at times, for personal enrichment.
“One of the top challenges for the industry is the coordination between government departments and between the central and regional governments, because this is one of the keys to sustainable development that meets the needs of investors,” said Sacha Winzenried, a senior adviser in energy, utilities and mining for PricewaterhouseCoopers, the multinational business services firm.
“Whether it’s managing the level of production, because the district head has different interests to the central government, or whether it’s environmental, health and safety, that level of coordination doesn’t work as it should,” he said.
Regional government mining offices often lack the resources, the budget or the will to up-skill themselves, he added.
The lack of oversight means the central and local governments do not know the exact number of mines that are producing coal in Indonesia — roughly estimated at 400. And no one knows how much coal is illegally produced and exported. While 421 million tons is the official production figure for 2013, the ministry says it is closer to 500 million because of 50 million to 60 million tons of what it calls “missing exports.” However, others say illegal production is much higher.
Not all coal mines are the same and most of the problems stem from the multitude of smaller, loosely regulated mining outfits. These operate for relatively short periods, have little regard for local communities and often abandon their mining pits once they cease operation, government officials and NGOs say.
Most of Indonesia’s coal is produced by a handful of large companies that have direct contracts with the government. These also pay higher royalties than companies granted mining permits called IUPs.
“Within Indonesia, you can see a marked difference between what may be called the formal sector and the other less formal end of the markets. And where there are clearly environmental issues is with the less regulated sector, either illegal miners or the very small players,” said PwC’s Winzenried.
Working with the KPK and the Supreme Audit Agency, the Ministry of Energy and Mineral Resources and other agencies are focusing on the 12 provinces with the highest number of mining permits. The aim is to review the legality of the permits, check if mining companies have valid tax identity numbers, are paying their taxes fully and whether the permits overlap palm oil and other mining concessions and protected forest areas — a common problem in Indonesia.
To date, the program has led to the suspension of more than 300 mining permits by local officials, with more expected.
The new trade rules state that only coal mining companies that have business permits assessed as clean and clear can export coal. Exports will also have to go through designated ports.
“This should stop or decrease poor mining practices, those that are unsafe and non-compliant with environmental rules,” said Tjahjono. “That means we can close those companies.”
Good regulations, lax enforcement
Indonesia has another tool at its disposal: stringent environmental regulations governing mining practices. But they need much stronger enforcement, government officials, analysts and NGOs say.
Companies must submit detailed environmental impact assessments and prepare detailed rehabilitation and post-mining reclamation plans. Companies have to place large deposits into a bank account to ensure they carry out mandatory rehabilitation and reclamation of affected areas.
However, lack of qualified mining inspectors, lack of expertise at the district and provincial level and, most likely, graft, mean many smaller mines are not inspected as often as they should be, laws are not enforced and permits are rarely terminated for bad practices.
Tjahjono said the ministry was trying to train up more mining inspectors.
“The problem is not many engineers are interested in this training,” he said.
In total, the mining ministry says there are 10,992 permits for mining of all types across the country, raising questions about how to effectively monitor all of them. According to a source involved with the KPK-led investigation, these 10,922 permits are owned by 7,834 companies. Of these, 17 percent do not have a tax number.
The mining concessions covered by these permits include 26 million hectares of the national forest estate. According to the source, the permits cover 1.3 million hectares of conservation forests, which are no-go zones for mining. In addition, the permits cover five million hectares of protection forest, which are prohibited for open-pit mining.
A study published earlier this year found that coal mining was one of the top causes of deforestation after palm oil, logging and clearing for pulp plantations. The study examined forest loss within industrial concessions between 2000 and 2010 and found that coal mining had caused 300,000 hectares of forest loss versus 1.6 million hectares in oil palm concessions. With more coal mining comes an increased threat to remaining forests.
Changing the mindset
Jatam takes a harder line on coal mining than most NGOs. It wants coal mining stopped altogether, an unlikely scenario since the Indonesian government expects domestic coal demand for power generation, currently around 73 million tons per year, to double by 2022.
“We agree that everyone needs energy. But we don’t want the energy to come from threatening the people, coming from land grabbing. We need to change the mindset of people,” said Johansyah’s colleague, Hendrik Siregar.
Jatam works with local communities under threat from coal mines, advising on legal options and encouraging villagers and farmers not to sell. It’s easy to see why. Samarinda is known as the city of coal mines. Roughly 70 percent of the city and surrounding area is under mining permits and the landscape is littered with the scars of mines and abandoned coal pits, many now filled with water.
About a 40-minute drive from the city is the village of Makroman. Farmers earn a living growing rice and fruit, such as rambutans and durians. The village is under threat of being cleared and developed by an adjacent coal mine run by an Indonesian firm called CV Arjuna.
About six years ago, a company official came to the village to take soil samples and measurements. This was the first the villagers heard about the company or the planned mine.
“He was like a thief,” said farmer Niti Utomo, 66, who, like many of the other villagers, has been resisting CV Arjuna’s efforts to buy their land.
The company began developing its mine several years ago and it now surrounds the village and its farmlands on two sides. Huge pits have been dug to extract the coal, leveling hills and forests and disrupting water supplies for the rice fields.
While the mine has built a dam for irrigation, this sometimes runs dry, leaving the rice crops to wither in the dry season. Ultimately, CV Arjuna wants to acquire all of the 365 hectares in the village and has offered large sums of money to owners, some of whom have accepted.
Utomo, who has farmed in the area for over 40 years, has refused the money.
“I will fight till I die to keep the land,” he said as we spoke next to his rice field.
In an e-mailed response to questions, a company official said CV Arjuna’s permit to operate, granted by the city government in 2011, was fully legal. The official provided a list showing the company had met the mining ministry’s clean and clear status and said the company would rehabilitate the large coal pit next to the village.
There are about 200 coal mines in East Kalimantan, according to the provincial environment office, which handles environmental impact assessment reports and helps carry out mining inspections. Of these, about 20 percent were not complying with the government’s environmental regulations, officials said. The situation was not improving.
“ Tidak bagus ,” said Wiwit Guritno, head of water pollution control for the provincial government, meaning “not good.”
“It’s getting worse, I think,” he added after conferring with his colleague Priyo Harsono, the provincial head of environmental impact assessments (EIAs).
A major problem was the quality of oversight at the district level, which issues most of the EIAs. While the quality of the EIAs was generally good, it was the monitoring of mines and enforcement of regulations that was a consistent problem.
Mines are rated according to water quality, how they manage solid and hazardous wastes and particularly whether mines have followed the strict reclamation and re-vegetation of mined-out pits. Companies failing to comply are given warnings and the environmental office can recommend law enforcement action.
“We have given the information to the district head but they haven’t closed the mining,” said Harsono.
Abandoned pits remain a big problem in the province but new rules aim to incentivize companies to rehabilitate their pits before they can expand production. While efforts to improve the sector are laudable, some question the value of coal mining.
Greenpeace wants coal exports wound back and says coal mining acts like a double-whammy for climate change because of toxic emissions caused during production and burning.
“I think coal mining is the silent killer for Indonesia, not only for the environment but also for people,” said Arif Fiyanto, climate and energy campaigner for Greenpeace Indonesia.
“The government is always using the argument of coal is the key contributor to Indonesia’s economic growth. In reality, the coal export contribution to our GDP is three percent.
“The benefit doesn’t justify the damage coal mining causes.”
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Indonesia’s Choice: Coal vs. Environment
By David Fogarty | October 19, 2014
Last Updated: October 19, 2014 10:48 am
Rice and rambutan farmers Komari, 70, and his wife Nur Bety, 60, say an adjacent coal mine has disrupted water supplies, leading to water pollution and reduced yields. Loss of local forests for new coal pits has increased insect and monkey attacks on their crops at Makroman village, near Samarinda, East Kalimantan. Photo by David Fogarty (August 2014).
Excavators dig out coal at a mine adjacent to Makroman village, near Samarinda, East Kalimantan. Villagers say the mine has disrupted water supplies and cut yields for rice and fruit crops. The mining company wants to acquire the village area but most villagers refuse to sell their land. Photo by David Fogarty (August 2014).
Chart made from data published in the Handbook of Energy and Economic Statistics of Indonesia, 2013. Background photo by David Fogarty.
Reclamation work at the PT Kitadin mine, majority owned by Thai firm Banpu, near Samarinda, East Kalimantan. Photo by David Fogarty (August 2014).
Coal barge on the Mahakam River, Samarinda, East Kalimantan. Photo by David Fogarty (August 2014).
Data from the Indonesian Ministry of Energy and Mineral Resources (2013), and the Indonesian Central Statistics Agency. Background photo by David Fogarty. Click
A coal conveyer belt system rises above the village of Bakungan, near Samarinda, East Kalimantan. The coal is loaded on the conveyer belt from an adjacent coal stockpile and then loaded on to river barges nearby. About half the houses in the village are empty, bought by a local coal company. For the residents who remain, they have to live with the constant smell of coal dust. Photo by David Fogarty (August 2014).
According to data from Global Forest Watch, Indonesia lost more than 15.5 million hectares of tree cover from 2001 through 2012, representing more than a tenth of the country's forest cover. Nearly all forest loss--15.1 million hectares--occurred on Sumatra, Kalimantan, and Sulawesi (shown). However, some of this detected forest loss is likely due to the harvesting of plantations. Still, large swaths of once-intact forest landscapes have been degraded since 2000. Map courtesy of Global Forest Watch.
Areas allotted under coal mining permits (not pictured) add to islands' landscapes that are already dominated by timber, palm oil, and wood fiber concessions. Map courtesy of Global Forest Watch.
Farmland is cleared as work starts on new coal pit at PT Kitadin mine, majority owned by Thai firm Banpu, near Samarinda, East Kalimantan. Photo by David Fogarty (August 2014).
Indonesia cannot build power stations fast enough. And neither can most of its Asian neighbors. Rapid economic and population growth are driving equally rapid demands for electricity as the region builds out power grids to connect up millions of people to fuel prosperity.
Electricity generation is forecast to nearly triple in Southeast Asia between 2011 and 2035, the International Energy Agency says, with fossil fuels providing most of the energy.
With a population of 600 million, nearly twice that of the United States, and about 130 million people without electricity, Southeast Asia faces an immense challenge to meet that demand in a cost-efficient manner that doesn’t cause serious air and water pollution and drive up health costs.
For Indonesia, the Asia energy story is a blessing worth untold riches in terms of royalties, money it needs to develop its economy and provide jobs. The IEA says demand for coal in Southeast Asia will rise 4.8 percent per year, with Indonesia in the geographic sweet spot to be the region’s main supplier.
In the wider Asia-Pacific, demand for coal will increase by 52.8 percent from 2010 to 2035, according to the Asian Development Bank.
With about 30 billion metric tons of coal reserves, according to the Ministry of Energy and Mineral Resources, Indonesia has decades’ worth of supply to fuel its economic expansion and that of its neighbors – provided it limits production growth.
“Coal is still going to be the most significant fuel in the energy mix for the foreseeable future,” said Sacha Winzenried, a senior adviser on mining for PwC, the global business services firm, referring to Indonesia. While Indonesia has large amounts of gas, it doesn’t have a national pipeline network, he said, and it will be hard for renewables, such as geothermal, to dramatically ramp up capacity fast enough because of high capital costs.
It is here that Indonesia faces its trickiest energy balancing act: how to ensure enough coal supplies to meet soaring domestic energy demands, while also meeting the growing needs of its neighbors and facilitating growth expectations of domestic coal producers.
Environmentalists and climate scientists also point to damage from coal mining and growing carbon dioxide (CO2) emissions that will undermine the drive to limit global warming. As a result of efforts to do so, major developing countries are under increasing pressure to limit emissions growth.
More coal mining will mean more deforestation, since most Indonesian coal extraction is done through open pit mining. This involves clearing forest or farmland, removing the top soil and then progressively digging out the coal seams, which can be a few metres to tens of metres from the surface. once the coal is extracted, the top soil is backfilled into the hole and a new pit is dug.
Increased mining will also result in more water pollution and health risks for local communities, NGOs say. They point to myriad environmental and health problems caused by the industry to date because of poor oversight and corruption. Common examples of graft involve district chiefs offering mining permits in return for bribes and police and mining department officials ignoring threats and intimidation of villagers by mining firms seeking to acquire land.
POWER TO THE PEOPLE
For Indonesia, though, there is little choice, the government says. In the world’s fourth most populous nation with 250 million people, 60 million of whom do not have access to electricity. The nation has 54.5 gigawatts (GW) of installed capacity, about the same as neighboring Australia, a country with a tenth of Indonesia’s population.
Electricity demand growth in Indonesia is increasing 9.4 percent a year, according to state utility Perusahaan Listrik Negara (PLN). Abundant coal is the quickest way to connect millions of people to electricity and drive economic growth, the government says.
The central government is trying to address environmental issues, with mixed results. For now, its primary focus is energy security, particularly as production at its existing oil fields declines, leading to more oil and fuel imports.
It is also trying to clamp down on illegal mining and halt illegal exports estimated by the government at a minimum of 50 million to 60 million metric tons per year—an embarrassing loss that is costing hundreds of millions of dollars in royalties.
The Ministry of Energy and Mineral Resources wants to cap coal production at around 450 million metric tons year, said Bambang Tjahjono, the director of coal business supervision at the ministry’s Directorate-General of Mineral and Coal.
Indonesia officially produced 421 million metric tons of coal last year, about 350 million of which was exported. Over the past decade, total output tripled, data from the ministry shows. That level of growth has to stop, said Tjahjono in an interview at his office in Jakarta.
“For Indonesia, we expect coal production, for the next five to 10 years, is still the same. We assume in 2015 we will have flat production, so zero growth. We plan to have 449 million tonnes for the next five years and the next 10 years,” he said.
“Coal utilization in Indonesia will increase. Maybe four percent [per year]. So the exports will be the same or decreasing, but the domestic consumption will increase. That’s the prediction,” he said. He added the ministry was working on a regulation that would enshrine the cap and he hoped it would be approved later this year.
Tjahjono said the cap would be enforced. The government already approves the annual production plans for all major coal miners in Indonesia and can cap or even trim these if the mines exceed approved production plans.
“Very clearly in the approval for the production plans for 2014, the government has been quite strict on maintaining a very minimal increase on 2013,” said Winzenried. “And in 2013, some large coal companies that had exceeded their targets, did get some reduction on the 2014 target.”
Winzenried said the current low global coal prices also discouraged allowing higher production, because coal royalties were based on total sales. “It’s no longer production at all costs,” he said.
Tjahjono expects production this year to be 407 million metric tons, in part because of low prices, but also because of new trade rules aimed at stopping illegal exports. Lower demand from China is also curbing some sales.
TEST OF RESOLVE
Already there are signs the global coal market is picking up and this will likely challenge the government’s resolve to cap production, given coal royalties are worth billions of dollars every year.
State utility PLN says Indonesia must ensure domestic coal supplies and also supports curbs on export growth. It forecasts Indonesia’s coal demand for power generation will grow from 73 million metric tons in 2014 to 151 million in 2022, as coal’s share in the total fuel mix rises from 53 percent to 66 percent. The IEA forecasts Indonesia’s electricity demand will triple between 2011 and 2035 and will need to add 100 GW.
The government has also recently changed its mining laws that require value-added processing to minerals before export. This will mean mining firms will have to build energy-hungry smelters, another source of coal demand.
Capping coal production will also upset coal miners, some of which have ambitious production and investment plans.
PT Adaro, one of Indonesia’s largest and most profitable coal mining corporations, expects to produce between 54 and 56 million metric tons this year, up from 52.3 million in 2013, and has a medium-term forecast of 80 million metric tons.
The company, in an investor presentation in September this year, said it saw immense opportunities in exporting to the rest of Southeast Asia. It expects coal consumption in the region to rise from 214 million metric tons in 2013 to 600 million in 2030. Nearly half that demand would come from Indonesia.
It also expected demand from China to wane, while Indian demand would grow over the coming decade. China is looking to impose a national cap on coal consumption and ban the import of low-quality coal under a draft pollution law released recently. on October 9, China announced it would impose tariffs on minerals, including coal, from Oct 15, though Indonesian coal is exempt because of a regional trade agreement.
“Coal demand in China might slow at some point in the next decade. However, that is the time when India’s energy requirements will peak, compensating any potential downfall,” the company says in the presentation.
Adaro expects that out of the expected total growth of 250 GW in new power generation capacity by 2030 in India, around 160 GW will come from coal. However, it is unclear how a decision late in September by India’s Supreme Court to cancel 214 coal permit allocations will affect power station investment plans. Rapid investment in solar could also weaken demand for coal in India.
Another Indonesian coal miner, PT Bukit Asam, is even more bullish. In a June 2014 conference presentation, it cited research by market analysts Wood Mackenzie, which forecast Indonesian coal production would reach one billion metric tons by 2035, with domestic coal consumption about 350 million. That level of production, though, would rapidly eat away at Indonesia’s coal reserves, currently estimated at about 3 percent of the world’s total.
For the moment, Indonesia’s largest overseas customers are India, China, South Korea, Japan and Taiwan, but demand from Southeast Asia is expected to pick up quickly.
Adaro and global miner BHP Billiton are investing in what could become one of Indonesia’s largest coal mines. The IndoMet mine complex on Borneo covers about 350,000 hectares across seven coal mining concessions in Central and East Kalimantan provinces. It is estimated to have 1.27 billion metric tons of coal resources, mainly coking coal used to make steel.
The environmental group Indonesian Forum for the Environment (or Walhi) says the mining would occur in a heavily forested area where smaller mining operations have already polluted local rivers.
They fear such a large mine could be the trigger for a $2.3 billion coal railway in the province, which in turn could prompt other mines to be developed. Coal produced in the north of Central Kalimantan is currently shipped hundreds of kilometers down-river by barge, a costly and time-consuming process.
Australian mining company Cokal, in a June announcement to the Australian Stock Exchange, said it had received in-principle approval from the ministry of forestry to proceed with its plan to develop part of its majority-owned Bumi Barito Mineral Coal Project covering nearly 15,000 hectares. The BBM project is next to one of IndoMet mine’s concessions. The company hopes to eventually produce six million metric tons of coking coal per year.
The central government and the Central Kalimantan authorities have accepted a Chinese-led consortium’s bid to build the 425-kilometre (266-mile) rail project, but have yet to grant final approval. The railway would start in the north of the province at Puruk Cahu on the Barito River.
“If you visit Central Kalimantan, you don’t see many forests in the southern, lowland areas,” said Walhi’s head of research, Pius Ginting, pointing to large-scale logging and deforestation for palm oil plantations.
“But this mine is in the northern part. The last areas of forest are there and the communities depend on the forest. We are really concerned about this. I think BHP is the biggest beneficiary, so if BHP goes there, the coal railway will go there. And this will facilitate all the other mining permit holders to open their areas,” he said in an interview.
Data from the Ministry of Energy and Mineral Resources shows that as of last year, there were 543 coal mining permits of all types in Central Kalimantan covering 3 million hectares, or one-fifth of the province, underscoring the risk from coal mining expansion.
TIME TO GO GREEN
Indonesia does have energy alternatives, NGOs and green energy investors say. They want the government to focus more on renewables, such as wind, solar, geothermal and hydro, as a hedge against too much dependence on coal.
Greenpeace Indonesia has calculated that with regulatory support, renewable energy could comprise 50 percent of Indonesia’s energy mix by 2035. At present, hydro comprises 5 percent and geothermal 4 percent, according to PLN. Geothermal is forecast to rise to 11 percent of generation by 2022, PLN says, while hydro stays steady at 5 percent.
Indonesia boasts about 40 percent of the world’s geothermal resources, but high construction costs remain an obstacle. Solar and wind are looking increasingly attractive, particularly in remote areas, as costs fall.
Wind and solar investment remains tiny, but that is changing. Asia Green Capital Partners, a company developing renewable energy projects, is seeing positive signs of change from PLN. The government is working on a feed-in tariff for wind power projects and tendered 140 MW of solar power projects for remote islands, triggering a strong investor response.
“We believe in 2020 the potential would be 1 GW of wind energy for Indonesia, growing to 10 GW by 2060, which is due to growing grids and improvement in technology that allows us to build wind farms in lower wind speed areas,” said Asia Green Capital Partners’s project development director, Thijs Sablerolle, in Jakarta.
Singapore-based Asia Green Capital Partners has teamed up with the IFC, part of the World Bank, to develop a 62.5 megawatt wind farm in South Sulawesi. Other projects are in the pipeline.
At present, PLN uses costly diesel generators in many remote areas in Indonesia and is building small coal-fired power stations on some eastern islands. Solar could provide a cost-effective solution, Sablerolle said.
“Eastern Indonesia has up to 2,400 kilowatt/hours per square metre per year, which is very high,” he said, referring to solar energy that could be tapped. “It’s very hard to find something higher in the world.”
PLN, though, has yet to sign power-purchase agreements for solar projects. This cautious approach contrasts with the government’s fossil fuel subsidies that currently consume about one-fifth of its annual budget.
While renewables investment is set to grow in Indonesia, coal-fired generation will remain the main focus for the government. Greenpeace estimates there are 117 coal-fired power stations either planned or currently under construction.
FUELING CLIMATE CHANGE
Not all will get built, either for financial reasons or local protests. But based on projections by the government, IEA and ADB, rapid coal-fired power generation investment will cause a sharp jump in Indonesia’s and Southeast Asia’s carbon-dioxide emissions.
“The region’s energy-related CO2 emissions almost double, reaching 2.3 billion [metric tons] in 2035,” says the IEA in its Southeast Asia Energy Outlook 2013.
Of Indonesia’s 100 GW in new power generation capacity by 2035, half will be coal-fired, says the IEA.
According to the Global Carbon Atlas, Indonesia’s fossil fuel emissions from burning oil, gas and coal and cement production totalled 263 million [metric tons] in 2000, rising to 494 million in 2013. Over the same period, coal emissions rose from 42 million to 171 million metric tons.
The rise in emissions directly challenges the government’s goal of cutting greenhouse gas pollution by 26 percent below projected business-as-usual levels by 2020.
Add to this Indonesia’s increasing deforestation rate, according to recent studies, and annual forest fires. According to the government, about 75 percent of Indonesia’s greenhouse gas emissions come from deforestation, forest fires and clearing and draining of carbon-rich peat swamps.
Given rising fossil fuel emissions, the government would need to dramatically rein in forest loss and curb forest fires if it is to achieve its 2020 climate goal.
Greenpeace says the government has to get its coal production policies right and that NGOs will be turning up the heat on the coal sector to curb production, with campaigns targeting financiers and buyers.
“The story of coal in Indonesia will be similar to the story [of] oil,” said Arif Fiyanto, climate and energy campaigner for Greenpeace Indonesia. “In the past 10 years, Indonesia was a member of OPEC but now it is net importer of oil. Coal will be the same if there are no good policies on coal.”
For ordinary Indonesians, the growth of the coal sector means it is just one of a long line of resource industries that compete for land, placing ever greater demand on the nation’s dwindling forests and farms and customary lands as the population heads towards 300 million by 2035.
Mining concessions of all types already cover about 34 percent of the country. Coal mining concessions alone cover 21.25 million hectares, or about the size of the U.S. state of Kansas, according to government data.
If you include oil and gas, palm oil, timber and logging concessions, it is 68 percent of the country.
“Where do all the people live?” asked Hendrik Siregar of the Indonesian mining NGO Jaringan Advokasi Tambang, or JATAM. “If you overlay all the concessions, where do all the people live?”
This article was originally written and published by David Fogarty, a contributing writer for news.mongabay.com. For the original article and more information, please click HERE.