Coal-powered industrial parks test Indonesia’s climate pledges— and China’s too | News | Eco-Business

Coal-powered industrial parks test Indonesia’s climate pledges— and China’s too | News | Eco-Business post thumbnail image

“The financing process of these captive coal power plants [those run by industrial producers for their own consumption] has very little transparency, making it almost impossible to trace the financial responsibilities,” says Global Energy Monitor’s Yu.

Before GEM accessed Chinese industry sources, it was unaware of roughly 5,000 MW of planned capacity, exclusively at captive plants for industrial parks that focus on turning ore into metal products. Public awareness about these projects suffers in the absence of information, often because their electricity generation remains off-grid.

While captive power for industrial parks currently accounts for 15 per cent of the country’s coal power output, this figure will grow to 24 per cent if all the recorded projects are completed, according to GEM data. Coal-power generation is set to increase by 9,510 MW to feed a minerals industry increasingly dominated by nickel and aluminium centres.

Climate-saving minerals, powered by coal?

Industrial parks at three of Indonesia’s nickel hotspots – Obi Island, Morowali and Weda Bay – aim to have 14 coal power plants with 71 turbines, totalling 12,579 MW, according to GEM data. That’s more than double the 6,109 MW of captive power the nation’s nickel industry already has in operation.

The Morowali Industrial Park, or IMIP, grew over the last 15 years in response to high demand for Sulawesi Island’s nickel ore for the production of stainless steel and, more recently, battery-grade nickel. The entire industrial area, which stretches across the border between the provinces of Central Sulawesi and Southeast Sulawesi and into neighbouring Konawe, plans on adding 3,470 MW of coal-fired power. Nearby, residents often speak of the “dust season”, when the wind shifts and coal dust settles in homes. 

Tsingshan, which runs the park, pledged a year ago to develop 2 GW of wind and solar power for its smelting operations, and said it would follow Xi Jinping’s policy not to build coal power abroad. But it has several projects in the pipeline that were sealed before the announcement.

Just Finance International, a research body in the Netherlands, noted that one month before the pledge, Tsingshan secured a contract for the construction of 1,140 MW at Morowali’s Labota coal plant. Tsingshan has also begun developing a similar park, Indonesia Weda Bay Industrial Park (IWIP), where there are plans to install 3,400 MW of coal power. 

Bantaeng district in South Sulawesi is another area that was set to become a nickel-processing hotspot. Huadi Nickel-Alloy Indonesia, a Chinese–Indonesian company, announced plans in 2015 to develop a smelter, and the state electricity company, PLN, supported the construction of a coal plant.

But after hundreds of people from local communities protested against potential air and water pollution, the project stalled in 2018. PLN returned last year to tell the company that it would provide an additional 90 megavolt ampere (MVA) to the project to increase smelting capacity, without specifying the type of energy source.

“PLN is ready to service investors’ electricity needs, especially for smelter industries,” a regional director of PLN told media at the announcement.

At total planned capacity, captive power for aluminium – an essential material for constructing many things from EVs to wind turbines – would number 31 units across two locations with 3,180 MW of installed capacity. The majority is dominated by Shandong Nanshan Aluminium, which is investing in 2,860 MW, roughly as much coal capacity as is operating in France.

This park is found on Bintan Island, a resort island just an hour’s ferry ride from Singapore. In January, President Joko Widodo visited Nanshan’s fast-developing industrial park. “I would like to extend my appreciation to companies that have the courage to build with investment, with the amount of risks involved. Hopefully, we can process all of our raw materials in the country,” Jokowi said. Like the nickel projects in Morowali and Konawe, he added, industrial parks like this can provide tens of thousands of jobs. 

The European Commission has an ongoing complaint with Indonesia at the World Trade Organization because of the Southeast Asian nation’s ban on nickel ore exports. But the Indonesian president remains defiant, and has suggested they may not stop at nickel. “Then if we ban bauxite exports and someone has to sue, it’s okay. We can face it,” Jokowi said in January.

Greener electricity 

Coal power is often believed to be the most reliable form of energy for industrial projects, says Arinaldo. Smelter and refineries need to run 24 hours a day, while energy from the sun and wind is intermittent. 

However, research from think tank the Institute for Essential Services Reform (IESR) suggests there is a great opportunity for both energy generation and energy storage in areas with industrial parks. For example, in Southeast Sulawesi, there is high potential for solar generation, as much as 200 GW, while in West Kalimantan, there’s almost five times that.

Meanwhile, Central Sulawesi holds the most potential capacity for pumped hydro energy storage, whereby water is pushed uphill using excess energy and released when needed. However, it should be noted that each of IESR’s scenarios explores technical potential, and these massive capacities would require significant land use trade-offs to realise. 

Although these high-end scenarios may be unlikely, the report highlights the widespread possibilities for renewables in the country. “There’s enough potential in the area [Sulawesi] such that renewable energy could be used to supply a renewable-based industrial development,” Arinaldo says. 

President Joko Widodo has also pushed what he has called “the world’s largest green industrial region”, planned for a river system in North Kalimantan. The project plans to build five hydropower dams on the Kayan River, which could generate 9 GW for several industrial centres, including nickel and aluminium-processing factories. A similar hydropower project in Sulawesi, which has been slated to feed energy to Morowali, has experienced strong opposition for displacing and harming communities and wildlife.

Indonesia has also announced a partnership with the Asian Development Bank’s Energy Transition Mechanism, a tool that uses financial and policy instruments to accelerate the retirement of operating coal power. Such tools, however, struggle to address captive power plants, because data is less accessible in privately owned industrial parks.

“Most [captive power plants] are quite old, and it will be beneficial to re-invest in something more green, especially the ones for these industrial parks,” Arinaldo says.

This article was originally published on China Dialogue under a Creative Commons licence.

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