Securing Resources in Indonesia: Demand for Coal to Double by 2023

- South Sumatra, Indonesia

The growing need for power generation in Indonesia has PLN, an Indonesian government-owned corporation that has a monopoly on electricity distribution in Indonesia, vying to secure coal mines across the country. The 5 mines being considered will help support 40% of what is needed for the next 4 years, of PLN’s projected supply needs.

PLN (Perusahaan Listrik Negara) generates the majority of the country's electrical power, producing 176.4 TWh in 2015 alone. Last year, Indonesia’s power grid used up approximately 95 million tons of coal.

The projections according to Sofyan Basir, the President Director of PLN, is that the demand for coal will rise to 180 million tons per annum by 2023.

The mines currently being targeted for acquisition are in Southern part of Sumatra and Kalimantan, respectively. PLN is not disclosing how much the mines will cost all together, but that the two of the five mines they are looking to purchase, are being targeted for this year.

Due to controlled prices and abundant resources of coal in the region, PLN plans to increase its use of coal for power generation by over 8% (currently 50%, aiming at around 58.5%).

The buying of mines seems to be coming at a time where PLN is aiming to position themselves firmly as the lead energy providers for Indonesia. Currently, the mines owned by PLN contribute only 10% of the coal used in their coal fired power stations every year.

Basir asserts that the company is not concerned with whether there is a local power station near the coal supplies, as long as there is access, and reserves of minimum 100 million tons, the company is dedicated to building power stations wherever these supplies exist.

Ensuring coal supplies is crucial for the company and by extension the government that overseas operations. Heightened demand for supplies and limited access to resources could spell higher electricity prices for consumers. Current president Joko “Jokowi “ Widodo’s policies are in line with keeping electricity prices low, and keeping local coal local. The policy calls for keeping 25% of coal produced in Indonesia in the local market, with the price being capped at $70 per ton.

Only time will tell what this increase of coal utilisation in the Indonesian market will do for connected industries in coal ash utilisation. Indonesia’s landfilling and utilisation policies will have to adjust to make way for this massive increase in the use of coal.