Jakarta, CNBC Indonesia – Indonesia banned coal exports in January in order to maintain domestic supply for power generation. However, this prohibition is considered to have the potential to cause problems in the world’s coal supply, especially for power plants.
The policy is stated in a letter No. B 1605/MB.05/DJB.B/2021 issued on December 31, 2021. This prohibition is to keep Indonesia away from the threat of complete darkness due to electricity shortages.
Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources, Ridwan Djamaluddin, added that PT PLN (Persero) experienced a new coal deficit because entrepreneurs did not comply with the obligation to fulfill coal for domestic needs (Domestic Market Obligation/ DMO).
“From the 5.1 million metric tons (MT) assigned by the Government, until January 1, 2022, only 35 thousand MT were fulfilled, or less than 1 percent,” said Ridwan, quoted from the Ministry of Energy and Mineral Resources website.
Ridwan said the export ban was temporary. The ban will be lifted when the supply of coal for domestic power plants has returned to normal. Evaluation will also be carried out after January 5, 2022.
“Why are all exports banned? They are forced and this is temporary. If the export ban is not enforced, nearly 20 Steam Power Plants (PLTU) with a power of around 10,850 megawatts (MW) will be extinguished,” he said.
Even though Indonesia is spared from mass blackouts, there are risks from this ban. Especially relations with Indonesia’s trading partners.
“Indonesia’s reputation as a global coal supplier will decline. In addition, our efforts to attract investment, show ourselves as an investor-friendly country and a business climate that is certain and protected by law will reduce its reputation,” said Arsjad Rasjid, Chairman of the Indonesian Chamber of Commerce and Industry, as quoted by Antara, Sunday (2/1/2021).
Indonesia is the world’s main supplier of coal. In 2020, Indonesia’s coal exports will reach 400 million tons. Indonesian customers include the world’s main coal consumers such as China, India, Japan, and countries in Southeast Asia. These countries use coal to generate electricity.
Referring to Statista, in 2020 China’s coal power plants contributed 71% of the national demand. This amounts to 5,170 terawatt hours (TW/h) of total power generation 7.263 TW/h. Meanwhile, coal power plants in India contribute 60% of the total national electricity generation.
Both are countries that operate the world’s largest coal-fired power plants. Statista noted that by 2021 China had 1,082 active power plants. This amount is equivalent to more than 50% of the world total. While India is in second place with 281 power plants.
To meet the need for coal used for power generation, China and India rely on Indonesia. Indonesia’s position as a coal importer in both countries is large.
In China, coal from Indonesia contributes to 70-80% of total imports. Meanwhile, in India it is estimated that 45-50% of coal from Indonesia.
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Source: Reuters- – |
MGiven Indonesia’s role as the world’s main exporter and supplier of coal to the largest consumer countries, this prohibition has the potential to disrupt world supply. This also has the potential to make coal prices strengthen.
The disruption in the supply of coal for power plants has also disrupted China, India and other countries that rely on Indonesia as a supplier. Especially looking at the potential spike in demand due to winter.
So that the disturbance does not enlarge and create an electrical crisis, these countries must look for alternative suppliers. Ahmad Zuhdi Dwi Kusuma, an industry analyst at Bank Mandiri, said Indonesian customers might turn to Russia, Australia or Mongolia,
CNBC INDONESIA RESEARCH TEAM
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