‘Coal-by-wire’
from Sumatra to Java
Montty Girianna ; Deputy for energy and mineral resources
at the office of Coordinating
Economic Minister
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JAKARTA
POST, 06 Oktober 2014
Coal
from the island of Sumatra accounts for most of Indonesia’s low-grade
lignite, a low-quality coal that receives a poor price in international
markets.
Given
this low pricing combined with high transportation costs and the fact that
most reserves are located in landlocked areas, it is not feasible to export
Sumatra’s coal out of the island.
It is
more efficient to use Sumatra’s coal for a mine-mouth power plant, an
approach in which we develop a power plant very close to where mines are
located, use the low-calorie coal from the mines to feed the plant, and
transmit the electricity, rather than transporting a low-value commodity, out
of the mines.
With
mine-mouth, we no longer require either barges or expensive railway-heavy
infrastructure to transport coal; rather we need to have long-distance
high-voltage transmission lines to bring “coal-by-wire” from mines to
consumer centers, either regions in Sumatra and/or Java-Bali.
Essentially,
with “coal-by-wire” we are transporting a higher-value commodity by wire from
mines to customers. Coal stays in the landlocked areas and feeds mine-mouth,
coal-fired power plants.
“Coal-by-wire”
would definitely boost the development of a domestic market for low-grade
coal. Today, our market for coal is very thin as we are one of the world’s
leading exporters of thermal coal of a high quality in the international
market.
Our
exports have increased very significantly within the past decade on account
of demand from fast-growing Asian economies. More than 80 percent of our coal
currently produced is exported.
Indeed,
coal is currently the most important source of energy for our economy. For
decades coal has accounted for more than half of our power-generation
capacity. And this will continue for a half century to come before
alternative and cleaner energy sources other than coal become affordably
available.
Our
economy is also growing, and of course will require more electricity power
and therefore coal – challenges that have to be met. Electricity generation
now consumes close to 75 million tons per year, and will almost triple in the
next 10 to 15 years.
However,
domestic use of coal today notoriously suffers from infrastructure
bottlenecks. Congested barges and ports, as well as a shortage of railways
limit the transportation of coal from coalmines in two coal-producing
regions, Kalimantan and Sumatra, to demand centers in Java-Bali, where most
of our power plants are located.
The
majority of our coal reserves in the two regions are located in landlocked
areas that require rail transportation infrastructure to reach ports for
export.
Either
truck haul or rail is needed to transport the coal to barge ports and
terminals.
Truck
operating costs are about twice that of rail, but existing rail
transportation infrastructure is severely insufficient.
Indonesia’s
attempts to improve coal-transport infrastructure for the domestic market
have not been very successful. Dedicated coal ports in Kalimantan have been
planned for many years, but implementation has again faced bottleneck issues.
Specialized
railways for coal in Sumatra have also been initiated, but this concept is
still under development and has not yet received a higher-level mandate or
legal authorization.
Delays
in expanding the capacity of barge and transportation infrastructure cause
inefficiencies and high transportation costs in domestic coal utilization.
These high costs and infrastructure bottlenecks have held back the
development of the domestic market for coal.
Our
high-voltage transmission lines are also astonishingly limited. The
state-owned electricity company (PLN) operates approximately 40,000
kilometers of transmission lines, with less than 15 percent of this total
serving the island of Sumatra.
If we
can build more mine-mouth, coal-fired power generation plants we will need to
expand our transmission network across the island, interconnected to other
transmission systems in Java-Bali.
A new
set of lines of a high-voltage of 500 kilovolts and medium-voltage of 275 kV
needs to be developed as a backbone network across the island, i.e. providing
long-distance, reliable and stable transmission.
The
distribution system and transformer capacity also need to be expanded to
service a larger coverage of costumers and demand centers.
We are
required also to develop an interconnected transmission system, as existing
electricity transmission is not compatible across regions due to different
systems and manufacturer standards adopted in the past.
The
current initiative of developing inter-island interconnection lines between
Java and Sumatra with 500kV High Voltage Direct Current (HVDC) lines needs to
be completed in harmony with the mine-mouth development.
These
long-distance transmission and distribution lines, as well as interconnected systems
are required to exist before a system of mine-mouth power plants is
commissioned to ensure that electricity produced can be transmitted in a
timely manner and with minimum cost.
Both the
central and local governments must work hand-in-hand to endorse incentives to
encourage the private sector — independent power producers (IPPs) — to
develop mine-mouth power plants.
Incentives
need to be designed to enhance the financial viability of IPPs’ mine-mouth
power plant projects.
PLN as
an off-taker of IPP plays a fundamental role as the “coal-by-wire” agent, and
has to be ready to absorb all of the risks associated with the development
and operation of the system, including the difficulties in land acquisition
and intra-regional compatibility of transmission systems.
Sumatra with its huge resources of low-grade coal can secure its own
electricity supply and, eventually, can be the source of low-cost electricity
with its energy radiating not only to Java, but also to every corner of the
country. ●
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