Indonesia's Coal Mining Sector: Policy For Sustainable Development

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Indonesia’s Coal Mining Sector: Policy For Sustainable Development

This paper proposed to analyze whether the existing policy could be the correct way to develop sustainable development in the case of Indonesia. The current policy may or may not able driving Indonesia into sustainable development country as part of Kebijakan Ekonomi Nasional (KEN) and Rencana Umum Energi Nasional (RUEN). By looking at the fact that the increasing demand of coal production both for domestic consumption and as export commodity indirectly initiate both private firms and state owned firm to increase coal mining in order to fulfill the demand. We want to analyze whether the existing policy may protect the natural environment, as per if environmental aspects are ignored, may caused damage both for social living and environmental issues and will only create a burden for government, apart from the income for the country that are created from coal production.

Abstract

Coal is currently one of the most important sources of energy that able to generate electricity and can be used for another purpose such as producing steel and cement. As coal considered the cheapest way to generate electricity, it is labelled as the most polluting source of energy due to high proportion of carbon. The substitutes for coal might be natural gas, which actually more less pollutant but on the other hand has more fluctuate price in the global market. Hence, countries around the world are shifting their production and focusing on coal

Indonesia itself has taken place as the world’s largest producers and exporters of coal, overtaking the previous largest coal exporter, Australia since 2005. Indonesia produces significant amount of medium quality (between 5100 and 6100 cal/gram) and the low-quality type (below 5100 cal/gram) in which the demand are most likely coming from India and China. The current world reserve for coal may last for another 112 years (Investment, 2016). In addition to that, according to information presented by Indonesia’s Ministry of Energy and Mineral Resources, Indonesian coal reserves are estimated to last around another 83 years with current rate of production. However, the lifespan might fasten as Indonesia currently established the program of increasing another 35.000 MW in order to fulfill all the electricity that all households across Indonesia needs

Regarding global coal reserves, Indonesia currently ranks 9th, containing roughly 2.2 percent of total proven global coal reserves according to the most recent BP Statistical Review of World Energy. Around 60 percent of Indonesia’s total coal reserves consists of the cheaper lower quality (sub-bituminous) coal that contains less than 6100 cal/gram.

There are numerous smaller pockets of coal reserves on the islands of Sumatra, Java, Kalimantan, Sulawesi and Papua but the three largest regions of Indonesian coal resources are:

South Sumatra
South Kalimantan
East Kalimantan

In the early 1990s, Indonesia had reopened the investment for coal, and in a short period of time, Indonesia has seen a major increase of coal production and its consumption, both in domestic market and overseas market. Despite all of that, the domestic consumption is not as high as the overseas consumption. Therefore, the government are actually committed to initiating to their ambitious energy program which mainly involving the consumption for coal-powered power plant. Apart from that, several big companies such as Adaro Energy, already expanded their production not only focusing on coal production but as well as other commodities due to the cheap price of coal might be unattractive for some firms.

Introduction

GDP Contribution

Compared to another source of power, coal is relatively easy and low-cost extraction, which means less expensive in establishing the infrastructure requirement. Coal is dominating the world’s power generation, taking place at 27 percent and more than 39 percent of all power plants worldwide are using coal-generated power plant due to the large amount of reserve worldwide

Indonesia contains abundant reserves in medium and low-quality coal. Also by the fact that Indonesia’s low labor wages, making coal have competitive price in international market

Indonesia’s strategic geographical position towards the giant emerging markets of China and India. Demand for low quality coal from these two countries has skyrocketed as many new coal-fired power plants have been built to supply electricity for these countries.

Main export destinations for Indonesia’s coal exports are China, India, Japan, and South Korea, and at some point, Indonesia able to export 85 percent of the production to those countries.

Despite the awareness of renewable energy has been improved from year to year, it hasn’t reduced the Indonesia’s dependency for coal production. In fact, the increasing awareness for renewable energy hasn’t made major impact worldwide, not only in Indonesia. Current government only made the change for coal production to be able to use clean coal technologies in mining operation and expected in the future the damage will not be as harmful, and Indonesia is expected to become heavily involved in that process being a major player in the coal mining sector. These clean coal technologies focus on the reduction of emissions produced by coal-fired power generation but lack sustained progress yet. Upstream activities connected to coal mining, such as the development of coalbed methane (CBM) reservoirs of which Indonesia contains great potential, has begun to receive attention recently.

In order to secure domestic supplies, Indonesia’s Ministry of Energy and Mineral Resources are restricting coal producers so that there will be a certain amount of reserve that able used as domestic consumption. In addition, government impose more tax for export market. The government aims for more domestic consumption of coal as it wants coal to supply around 30 percent of the country’s energy mix by 2025:

Ambitious Plan to Expand the Power Sector

Indonesia’s demand for power has always increased from year to year that affects the consumption of resource and soon will aware that renewable energy is also important. Indonesia government has agreed upon the 35.000 MW project, which initiated in the presidency of Joko Widodo by early 2015 as a commitment to established energy dependence with renewable sources. The project are done by PT. PLN (Perusahaan Listrik Negara) which is state owned enterprise, with helps of private firms.

PLN Roadmap on 2019-2024 has agreed to establishing another 35.000 MW power plant in order to fulfill all parts of Indonesia electricity needs. While on 2019 the current production of electricity generated by Indonesia’s Power plant counted at 80,4 GW. Coal generated power plant still dominating in Indonesia on producing electricity, about 48%. The 35,000 MW programme requires $73 billion of investment in generation, transmission and distribution. Most of the projects are to be developed by IPPs, while PLN will be responsible for the construction of transmission and distribution lines (Oxford Institute for Energy Studies, 2017).

This 35,000 Megawatt figure is derived from the assumption of economic growth of 6-7% per year, an increase in electricity consumption from 800 Kw hours per capita to 1200 Kw hours per capita and an increase in electrification ratio from 80% to 96% in 2019. So it can be concluded that Indonesia requires additional electricity capacity of approximately 35,000 Megawatts in the period of 5 years to 2019 (Hidayati, 2015; Sahana, 2015).

The project is expected to be completed in 2026 and is expected to improve the progress of the economic sectors in Indonesia. However, in its implementation, this project also experienced several obstacles. The obstacle faced in the final quarter of 2016 was the provision of land, the difficulty of price negotiations between PT. PLN and IPP, procurement and supply stage constraints due to lack of enthusiasts, fairly complicated licensing, the process undertaken is not as expected, weaknesses in project management, weaknesses in cross-sectoral coordination aspects, and investor distrust. These constraints are expected to be minimized by the government and PT. PLN (Persero) as the executor of the project.

Moreover, how do Indonesians respond to the 35,000 MW project? A survey was conducted by distributing questionnaires online, which were filled by 98 respondents from various walks of life. The results of filling out the questionnaire showed that the majority of the community considered this project important to be run by the government.

Behind this opinion, the respondents realized that this project had both positive and negative impacts. The positive impact that most respondents realize is that the electricity needs of the community will be increasingly met. In addition, respondents also considered that the procurement of this project would affect the increase in community productivity, development of the industrial sector, and increase in electricity reserves in Indonesia.

In addition to the positive impacts, respondents were aware that there were negative impacts behind the project, especially impacts related to pollution and environmental damage, disruption to public health, as well as economic losses. However, respondents argued that the negative impact was not greater than the negative impact so respondents tended to agree with the procurement of the 35,000 MW project.

It can be concluded that the 35,000 MW project had positive and negative impacts and still encountered obstacles in its implementation. it is suggested that the government finalizes this project so that the positive impact to be generated will be far greater than the negative impact caused.

Damage caused by coal mining

Coal mining activity might cause damage in terms of natural environment because by mining an area means that it would change the topography structure, creating massive hole, hydrology issue, reducing in air quality and the vanished of original ecosystem. However, this can be overcome by doing plantation which actually able to generate income. Such as rubber tree. The mining activities are causing negative effect since it would harm the physical environment such as air pollution, water pollution, and sound pollution. So that the mining activities contribute significant impact for the change in environmental quality, and the people who live nearby have to pay the cost that is indirectly caused by mining activities (Pertiwi, 2011)

Environmental damage, water and health in coal mining cause a significant threat, which may be hydrologically connected to other groundwater-dependent ecosystems including farm dams, bores and rivers. Water from coal mines must be disposed and waste material is often held within the surface lease of a mine, introducing a risk of contamination of human food sources (Castleden, 2011). Pollution of the environment may also occur through the wind carrying dust, at the location where where coal is washed and at export ports.

The real case happened in 2010, as coal seam gas operations in Queensland were postponed at two sites because groundwater had become contaminated with a potentially dangerous combination of benzene, toluene, ethylbenzene and xylene (BTEX). Similar contamination occurred after an underground coal gasification trial near Kingaroy.10 The Queensland government has recently banned BTEX chemicals from coal-bed fracturing fluids. Social and mental health impacts coal mining can change the lifestyle and character of a community. Medical practitioners has stated that in coal mining areas, there are significant report in increases of asthma, stress and mental ill health, which are similar in other coal mine worldwide. As more coal mines are opened, the more the chance that many inhabitants of these regions have developed depression, anxiety and ill health.

Policy Evaluation

The implementation of environmentally friendly mining and reclamation activities can be based on the law of the Republic of Indonesia Number 4 of 2009, concerning mineral and coal mining, Government Regulation of the Republic of Indonesia Number 78 of 2010, concerning Reclamation and Post-Mining and Regulation of the Minister of Energy and Mineral Resources of the Republic of Indonesia Number 7 of 2014, concerning the implementation of reclamation and post-mining in mineral and coal mining business activities. Reclamation is an effort to improve the environment and it is the obligation of coal mining companies in Indonesia, in accordance with Republic of Indonesia Law No. 4 of 2009, concerning mineral and coal mining. The implementation of reclamation is regulated in the Regulation of the Minister of Energy and Mineral Resources of the Republic of Indonesia Number 7 of 2014, concerning the implementation of reclamation and post-mining in the mineral and coal mining business activities. Changes in the landscape are the main reason for the reclamation of the former coal mining land. Principles of land reclamation after coal mining include: 1) Improvement of physical, chemical and biological soil conditions through: (a). improvement of aeration conditions and level of soil density by conducting deep soil treatment; (b). providing organic fertilizer such as manure, compost, crop mulch or other organic matter mulch; (c). inorganic fertilizer application to increase the availability of nutrients such as N, P, K, and (d). Provision of ameliorant materials such as lime (CaC03), dolomite, or coal ash. 2) Control surface runoff to prevent erosion and landslides by planting cover crop legumes (LCC) that can fix N from the air, fodder grasses, and / or other terrace reinforcement plants; making water drains (SPA) reinforced with stones or planted with grass (grass water ways), starting from the top terrace to the bottom and equipped with water flowing from stone, bamboo, wood; plant ‘barrier’ plants, such as Vetiver, Phaspalum, BD grass on the lips and sloping terraces / slopes especially those that are steep to control surface runoff and erosion. 3) The first priority is planting pioneer trees for greening such as angsana, acacia mangium, sengon, lamtoro, gamal, bamboo plants, whose function is mainly to increase organic matter and protect the soil from rainwater. 4) Planting trees of economic value as a second priority such as mahogany, bamboo, breadfruit, sungkai, cashew nuts, which are long term because if planted in the short term are likely to fail because the death rate is quite large (Sidik and Irawan, 2014).

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