Coal Export Ban

Coal export ban must be executed in order to meet the required domestic market obligation (DMO). Currently almost 70% of coal production is exported abroad, often causing short supply on domestic demands. Whereas, coal is basically is more than just a commodity because its energy substance is fundamental to national defence, and also exporting raw material such as coal is subsidiary for the industries at destined export country.

This page will monitor export data issued by official institutions such as the BPS, Ministry of ESDM, Ministry of Trading, with production data and data from importing countries. Data discrepancy will result in a comprehensive analysis on the country’s probable lost.

Employing Coal Export Ban towards National Energy Security

Every year, Indonesia’s coal export sits in a stagnant place, which always exceeds domestic consumption. While in 2014 and 2015 coal industry had decreased performance in production and export, due to a drastic price decline (down to US$40 per ton), the circumstance remains the same. In terms of amount, Indonesia’s coal is shipped abroad more than it is consumed back home. Of total 461 million tons coal produced in 2017, only 121 million tons marketed domestically. The rest, or most of it, went to international market.

This year will likely see the same scene, with current prices breaking into US$100 per ton. In-ternational market price and Indonesia’s coal reference price (Harga Batubara Acuan or HBA) in the early 2018 will allow coal producers to eye mainly on foreign markets (export) rather than selling domestically (DMO). Moreover, the demand from the State-owned electricity com-pany (PLN) for lower coal prices also has just been granted by the government through the Governmental Regulation 8/2018. This new regulation will put coal producers into a difficult position, especially when their company subjected to DMO obligations.

Recently the government has increased coal production target to 485 million tons by 2018, up around 24 million tons from the 2017 total production. The businessmen in coal industry will not miss this opportunity, in which they will meet the target, without increasing the amount of their DMO. As a matter of fact, domestic needs has always been far from consumption target. In 2017, DMO absorption was around 97 million tons of 121 million tons, including the con-sumptions of metallurgy, cement, ceramics, paper, briquettes, and others.

 

So even if there is an increase, domestic consumption will not have a significant jump, con-sidering the main consumers of coal in Indonesia is coal-fired power plants (PLTU). In con-trast, a drastic spike will begin to occur in 2019 where most of the PLTUs commercial operat-ing date start, as planned in the government’s 35 GW ambitious program. Later, this program was revised to 19 GW.

 

Apart from the revision, the program will still make the total amount of PLTU in Indonesia to 43.7 GW. More coal will be needed if all these power plants are to operate. Assuming that 1 MW needs at most 4.0000 tons of coal—with standard quality and technology used by PLTU—it will take around 175 million tons of coal to produce 43.7 GW of electricity every year. With addition of other industries’ utility, at least that will make annual coal utilization in Indone-sia to be 180 – 200 million tons.

 

If referring to general design of electricity supply (RUPTL) 2017-2026, Indonesia will need 155 million tons of coal by 2026 for PLTU alone. The number is not even a half of 2018 coal pro-duction. Such condition will motivate the government to sell the excessive remaining of coal.

 

However, it will be wiser for the government to limit coal export, thought the domestic absorp-tion does not meet the target. Coal potential in the country is getting thinner, currently at 18.500 million tons. Some parties, such as APBI-ICMA and PriceWaterhouse Cooper (PWc) had warned Indonesia through a survey they jointly published in 2016, saying that Indonesia’s coal will expire in the next 20 years. This is the main problem of Indonesia’s coal manage-ment.

 

Currently, 56 percent of national electricity is supported by coal, albeit government’s target to increase the amount of renewable energy, but without reducing the coal volume for PLTU. Coal needs will frequently get higher as the PLTUs start and fully operating for 25 – 30 years. With this condition, coal reserves for 20 years will soon be exhausted and will not meet the need for PLTU.

 

As one of primary non-renewable energy resources, coal should not be exploited massively just to meet export target. Indonesia is only under Australia as one of the biggest exporter in the world, while its reserves only 3 percent of total world’s reserve. However, the govern-ment’s excitement for the status as the largest coal exporting countries only proves that this position will likely maintained by the government in the coming years.

 

It is not that we do not have lesson learned from the past. Once one of the biggest oil produc-er and exporter in the world, led Indonesia to the euphoria of oil exploitation and export in the past. After the party ended, Indonesia was then faced with oil deficiency and got into the trap of BBM subsidy dilemma, since Reformation until now. Similar thing could happen with coal, for the government still sees coal merely as business commodity, instead of as a primary en-ergy resource. Such obsolete paradigm must change. Coal must be seen as an asset or en-ergy resources for Indonesian productivity interest. Especially in the context of country’s man-agement, any primary energy resources must be the fundamental of energy security.

 

Favoring in coal export is not a wise option for the government especially if it’s based on de-mand and pressure from other countries, while the main priority of national electricity suppliers remains at PLTUs. With average lifetime operation of 25-30 years, it will be likely for the gov-ernment to import coal, with the prediction of coal expiration in the next 20 years. On the other hand, the diversification effort of renewable energy is also going nowhere and is even ham-pered, such as with tariff regulation.

 

Coal is a dirty energy resource that contributes negatively to global warming, environmental damage, health, and even human rights violation. Many countries have committed to shut down their coal-fired power plants in the coming years such as Portugal, England, and France. Indonesia should follow this step for its own good. Indonesia should not stop at lower-ing the amount of coal-fired power plants.

 

Surely, the government cannot just let go all of the coal-fired power plants. More than half of national electricity is currently supported by PLTU, which most of them located in Sumatera and Java islands, the center of government and economic activities. But this should not be a reason for government to hold back from considering a transition to renewable energy, without having to wait our coal reserves runs out.

 

The transition to renewable energy should be considered carefully by the government. The government must have a transitional policy that guarantees and secures national electricity supply, jobs and labor transfer, as well as regulations on healthy investment. The acceleration of renewable energy development must be carried out immediately, with various conveniences yet still reflecting on people’s rights and interests. There will also be an improvement on in-vestment and regulations to sustain renewable energy program.

 

Putting an ease to coal export is not impossible, especially if it wants to prioritize national en-ergy security. With full operation of existing coal-fired power plant coming, coal supply guaran-tees are required. Coal export ban will certainly reduce land demolition when dredging the coal. Meanwhile, if the transition process went smoothly and quickly, the coal could be re-served until it is needed.