Experts have questioned the government’s “wavering” stance on the benefits of early retirement of coal-fired power plants (PLTU), expressing hope that it would remain consistent with its energy transition commitment for the sake of greener and healthier environment.
Bhima Yudhistira, Executive Director of the Center of Economic and Law Studies (CELIOS), said the concerns raised by the Ministry of Finance, the Ministry of Energy and Mineral Resources, and the State power utility company PT PLN are completely unfounded.
“If grid-transmission upgrades require investment, then it is the government’s responsibility through the state budget and private collaboration to increase the renewable energy mix. This should not be seen as a loss to the state, but rather as a gain from savings in subsidy costs, electricity compensation, and health costs,” Bhima said in a statement on Tuesday, November 5, 2024.
The retirement of coal-fired power plants has lured the attention of a number of parties. With the support from the Asian Development Bank (ADB), the government has earlier planned to retire 13 power plants, including the Cirebon-1 coal-fired power plant, ahead of schedule.
However, Finance Minister Sri Mulyani Indrawati recently raised concerns about potential state losses from the Cirebon-1 PLTU retirement, citing the huge costs to be borne by PLN and the state budget, especially related to grid-transmission upgrades for renewable energy.
Bhima cited that the infrastructure and financial constraints that are considered a burden are actually caused by the oversupply of electricity, especially in Java and Sumatra, resulting in financial losses estimated at Rp18 trillion (US$ 1.14 billion) in 2023 due to unused capacity.
State losses dilemma
Bhima said further that the paradigm in indicating state losses is also problematic.
“Increased government spending on fossil fuel-based projects, such as airports and the Nusantara capital city (IKN) development, has drained financial resources, reducing funds for renewable projects. Is that not a state loss?” he asked.
He suggedted that Indonesia needed to move fast in order not to be left behind as Southeast Asian countries, such as Vietnam, have invested heavily in transmission upgrades to support renewable energy and adopted smart grid technologies to improve efficiency and reliability, subsequently potentially lowering costs for consumers and supporting the integration of renewable energy.
“Overall, the urgency of restructuring financial commitments and developing innovation in grid technology to achieve Indonesia’s renewable energy goals is the responsibility of the state, not categorized as a state loss,” Bhima concluded.
Leonard Simanjuntak, Country Director of Greenpeace Indonesia, emphasized that early retirement of coal-fired power plants is an integral part of a fast and fair energy transition process, allowing Indonesia to address the impacts of the climate crisis.
“The cost of energy transition, including the early retirement of PLTU, cannot be seen as a state loss. Instead, it is the costs incurred due to negligence in the energy transition that have the potential to cause losses in a broader context,” Leonard said.
Profitable investment
Tata Mustasya, Executive Director of Sustainable Welfare Indonesia (Sustain), said that the acceleration of smart grid development due to the early retirement of coal-fired power plants is a profitable investment for Indonesia.
“The Ministry of Finance must play a role as a country that dares to invest heavily for future progress. The acceleration of energy transition and smart grid development is key for Indonesia to transform into a developed country,” Tata said.
He added that large government investments in key sectors, such as information technology, aeronautics, medical, and medicine, have proven to be the key to the success of developed countries.
“Building smart grids and accelerating the energy transition will strengthen energy security, inclusive energy access, and climate crisis mitigation. Reluctance to build transmission will cost Indonesia dearly in the next five to 30 years. A clear government commitment will also provide a positive signal for the public and investors to finance renewable energy in Indonesia,” Tata said.
Adhinda Maharani Rahardjo, Coordinator of the People’s Coalition to Clean Cirebon (Karbon), emphasized that the narrative of potential ‘state losses’ due to the early retirement of the Cirebon-1 PLTU is irrelevant, especially when viewed from the perspective of the people in East Cirebon.
“The surrounding communities have for years felt the adverse effects of the PLTU – air pollution that harms health, environmental damage that affects livelihoods, and a declining quality of life,” she said.
She added that ignoring the voices of the community will only prolong the social and environmental burdens they have been bearing.
“If the government only focuses on financial ‘losses’, we need to ask: what about the losses experienced by the communities around the PLTU? Every day they are exposed to health risks and environmental impacts that undermine the sustainability of local lives. This energy transition is not just about shifting infrastructure, but also about realizing a cleaner, fairer, and more sustainable future,“ Adhinda concluded.
