New Study Finds Cancelling Coal Plants as Cost-Effective Way to Cut Global CO2 Emissions

The Institute for Essential Services Reform (IESR), a leading energy and environment think tank based in Jakarta, Indonesia, released a first-of-its-kind analysis, commissioned by The Rockefeller Foundation, which examines what it would take to prevent planned coal plants from being built.

Delivering Indonesia’s Power Sector Transition found that nine coal plants in Indonesia could be cancelled with minimal repercussions for supply or grid stability and affordability, while avoiding an estimated 295 million tons of CO2 emissions.

The study recommends cancelling planned, permitted, or pre-permitted plants as one of the most cost-effective and environmentally impactful approaches to accelerating just energy transitions in Indonesia.

“We developed an entirely new approach to undertake this analysis. We looked individually at each planned coal plant in Indonesia. Based on a multi-criteria scoring system, we identified plants that could be cancelled, and then assessed the legal, financial, system resilience, energy security, and carbon emission implications of this intervention. Our team used satellite images to track plants’ development progress over time,” said Fabby Tumiwa, Executive Director of IESR.

“There are some 950 coal plants planned or under construction around the world, which if built, would emit an estimated 78 billion tons of CO2 into the atmosphere over their lifetime,” said Dr. Joseph Curtin, Managing Director for Power and Climate at The Rockefeller Foundation.

“This first-of-its-kind analysis illustrates that, in many cases, there are better options available to policy makers, utilities, regulators, and systems planners that can accelerate the shift from fossil fuels. This analysis could also be replicated in other countries with a large coal pipeline.”

If constructed, the nine coal plants, which are predominantly at the financing state, would account for nearly 3,000 megawatts (MW) of coal capacity, or about 20% of total planned additions in Indonesia.

A power system analysis was undertaken using seven separate models, representing each part of the country’s existing grid, to examine the power system reliability and affordability associated with cancelling. IESR’s analysis found that cancelling the nine plants:

  • Would avert 295 million tons of CO2 emissions. With USD 238 million already invested to date into the nine, the calculated carbon abatement is less than 80 cents per ton of CO2 emissions avoided.
  • Could be achieved without compromising system stability, and that the power would mostly be replaced by existing power plants operating at greater capacity. This route, however, would likely imply additional costs from power system operation of $2.5 billion per annum in the period to 2050. It also should be noted that IESR’s analysis did not include adding more renewables to the energy mix, which would help reduce the average generation costs even further.
  • Requires incorporating the legal risks associated with the unilateral cancellation of any project for the Republic of Indonesia and PLN, Indonesia’s government-owned electricity company, which were identified in the study. Independent power producers (IPPs) enjoy long-term power purchase contracts with PLN on favorable terms, and negotiations will be necessary in each case to ensure that cancellations do not amount to a breach of existing agreements. In some cases, offering the project developer the option to replace the power with renewables could be considered.
  • Will not be sufficient to meet Indonesia’s Just Energy Transition Partnership (JETP) target.

More than two-thirds of Indonesia’s electricity currently comes from burning coal, and with the PLN predicting an additional 13,822 MW of capacity via new coal plants by 2030, Indonesia has the third largest coal pipeline in the world, following China and India.

At the same time, through JETP Indonesia also aims to achieve peak emissions from the power sector at 295 million metric tons of CO2 per annum by 2030 and net-zero emissions in power sector by 2050.

In order to do so, the Republic of Indonesia and International Partnership Group (IPG) signed a JETP agreement in 2022, and in March 2023, the Indonesian Ministry of Energy and Mineral Resources signed a Memorandum of Understanding with the Global Energy Alliance for People and Planet (GEAPP), which is funded by The Rockefeller Foundation, IKEA Foundation, and Bezos Earth Fund.

The report also includes a series of further recommendations that outline a systematic approach to reaching net-zero emissions by 2050 or earlier.