Consider Coal for Electricity

Coal prices in Indonesia and in the world are dropping slowly. Coal with a price based on calorific value (CV) gross as received (GAR) 6,322 kcal per kilogram was listed at US$69.99 per ton free-on-board (FOB) vessel in September, down to $67.26 per ton FOB vessel in October. Economists predict current conditions will not be better and will even get worse. They said coal prices could be at $50 in 2015.

The downward trend of coal prices happens because China and India have stopped importing coal from Indonesia and Australia. They are diminishing imports of coal from other countries and supplying their power plants with domestic coal.

Indonesia is the second-largest producer of thermal coal and the biggest coal exporter in the world in 2014. Indonesia has one state coal industry and more than 300 coal companies. It’s a little bit rummy, because Indonesia only has 5 percent of the world’s coal reserves.

The coal industry provides a big amount of revenue to Indonesia. In 2013, the coal industry gave Rp 24.4 trillion ($2.01 billion) to the Indonesian government from royalties and tax, which did not include a number of taxes that were paid to local governments. The Energy and Mineral Resources Ministry makes a lot of regulations for the industry, from exploration programs to reclamation programs.

The aim of the regulations is to manage the resource better and gain a lot of profit from natural resources. New policies came out from 2009 until now. Surprise or unplanned policies make the economic balance of the coal industry unstable. Companies are afraid the government will produce a new document without publication and careful consideration. If they fail to predict the new policy, the industry will have the wrong plans, which makes uncertain economic conditions in the business of coal mining.

Although Indonesia is the largest coal exporter, the electricity in Indonesia is wretched. Power plants are not managed well. Usually in rural areas there is no reliable electricity supply; even regions where coal is mined often lack an electricity supply.

The problem has to be solved quickly. Indonesian is like a rooster that dies hungrily in a granary. President Joko “Jokowi” Widodo and Vice President Jusuf Kalla have to act to fix the lack of electricity. If Indonesia wants to develop its economy, energy needs have to be fulfilled.

If we want a 1-percent increase in economic growth, we need a 1.5-percent increase in electricity supplies. If we want to grow by 6 percent, the electricity has to be increased by 9 percent. The Indonesian mining industry’s stakeholders (government, business and academia) have to make a master plan for the country’s coal-mining sector.

The Master Plan for the Acceleration and Expansion of Indonesian Economic Development (MP3EI) and energy blueprint are too general to guide development in the coal-mining industry. There is no specific master plan to develop the coal industry and to forecast what will happen in the Indonesian coal industry. The government has to stop coal-mining permits if the coal industry is to export coal.

The government and businesspeople have to build coal-power plants to support national development. We have to use our coal to support our electricity until we can develop cheaper power plants than coal-power plants. We have to make our national needs a priority and retrench coal utilization.

Coal is a non-renewable resource, so we have to manage it well to make coal a blessing and not a curse for Indonesia. A well-managed and sustainable supply of coal could mean the prosperity of the nation.

Taruna Fadillah
Bandung – See more at:


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