Indonesia’s state electricity company PLN is betting big on natural gas as a “bridging fuel” ahead of a big buildup of renewables.
PLTU Indramayu in Indonesia. (Photo: Wikimedia Commons)
In May, Indonesia’s state-owned electricity monopoly, PLN, vowed to increase its complement of natural gas power plants as part of a gambit, it said, to make its power supply cleaner and more reliable.
The plan was part of a 10-year supply blueprint that also expanded use of all other sources of energy that it had previously used, as well as some new ones, including nuclear energy, to meet rising demand while transitioning away from dirtier coal plants and scaling up renewables.
But gas was by far the energy source that would see the biggest gain initially: 9.3 gigawatts. If all the new gas generators ran at full capacity — albeit a rarity — that sort of juice would theoretically be enough to power half of Indonesia’s more than 70 million households.
Cleaner-burning than coal and quicker to power up when needed, gas will lead PLN’s effort, at least in the short term, to address a rapid deterioration in the utility’s ability to meet spikes in demand from parts of its network, according to the 10-year plan, known as the RUPTL.
But natural gas is still a fossil fuel, and by emphasizing it over renewables, PLN risks locking itself into an expensive source of energy at a time when most of the country’s gas-powered generating capacity is going unused. PLN may need to count on subsidies to keep electricity affordable.
Coal would also see a large gain during the first year of the 10-year plan — 3.2 gigawatts — before tailing off after that.
“PLN’s strategy is riddled with fossil fuel lock-in risks,” Katherine Hasan, Jakarta-based analyst for the Centre for Research on Energy and Clean Air (CREA), told Mongabay.
“Opting for fossil fuel power plants will expose PLN and ultimately, tax-paying Indonesian citizens to volatile fuel prices which will end up requiring billions in government subsidies.”
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A coal mine on the island of Borneo in Indonesia. Image by Rhett A. Butler/Mongabay.
Campaign promise
Expanding domestic gas production to generate electricity was among Prabowo Subianto’s campaign promises during his successful bid for the presidency last year as part of a broader vision of energy security.
PLN says it’s beefing up its grid with baseload power — generators that feed electricity into the grid independent of sunshine or even rain. Periods of drought can, for example, mean less running water to drive turbines at hydroelectric stations.
The utility needs to do something quickly to address a mysterious uptick in electricity demand on the islands of Java, Madura and Bali, home to nearly 60% of Indonesia’s 280 million people.
PLN’s reserve generating margin — the amount of spare capacity during periods of peak demand — has shrunk from just over 50% in 2019 to 18% last year on its Java-Madura-Bali grid. By comparison, PLN aims to have a minimum of 30% of spare generating capacity during peak demand.
PLN has been mum on what’s behind the surge in demand. Earlier this month, Rakhmad Dewanto, chief executive of the PLN unit that buys energy for the state-owned company, PLN Energi Primer Indonesia, told attendees of a DETalk webinar that gas can quickly fill in when intermittent sources lag.
“Gas power plants can operate quickly as backup when renewable energy is unavailable,” Dewanto said.
“Moreover, they have shorter construction timelines of just two or three years.”
‘Bridge fuel’ to nowhere?
Not everyone agrees.
Gas is already PLN’s most expensive energy source per kilowatt-hour and more prone to spikes in market prices.
Last year, PLN data showed that electricity generated from gas was more than half again as expensive as coal-generated power. Much of the gas-fired generating capacity that Indonesia already has is idle.
Indonesia’s gas-fired power plants operated at 30% capacity in 2024, according to a June report from the Institute for Energy Economics and Financial Analysis (IEEFA).
Investing in gas — which still emits methane, a potent greenhouse gas — means diverting resources from cleaner sources of energy at a time when the country has said it is moving away from fossil fuels, IEEFA’s Mutya Yustika told Mongabay.
“Relying on gas as a bridge fuel risks locking into yet more fossil fuel infrastructure,” Mutya said.
“Indonesia has already built many gas power plants that are underutilized right now.”
Indonesia’s government spent 75.8 trillion rupiah ($4.8 billion) on subsidies aimed at keeping electricity tariffs more affordable for poorer and middle-income households.
On the other hand, thanks in part to its ample sunshine and sea breezes, Indonesia’s solar and wind installations work more efficiently on average compared with overseas markets, Mutya said.
Last year, neighbors Malaysia and Vietnam unveiled regulations that allow renewable energy providers to sell directly to customers using existing transmission lines — an arrangement known as power wheeling. Vietnam expects to get nearly half of its electricity from renewable sources by the end of the decade.
“Both Vietnam and Malaysia have actively structured policies to unlock private sector investment and support grid decarbonization — through power wheeling,” Mutya said.
It’s a gas, gas, gas
In total, PLN hopes to expand the generating capacity from renewables, including from hydroelectric power, roughly fourfold over the next 10 years, with the bulk of the expansion slated for the first half of the next decade, according to the RUPTL.
PLN wants to install some 47,000 kilometers (29,000 miles) of transmission cables during the period, in part to connect urban centers to renewable projects in far-flung locations, including the Batang Toru hydropower plant in North Sumatra province and the 9 GW Kayan River hydro project in North Kalimantan province.
For now, Indonesia’s gas production more than satisfies domestic demand. In 2024 it produced (or “lifted”) 6.635 million standard cubic feet per day (MMSCFD), according to data from the Ministry of Energy and Mineral Resources, and a portion of that is exported. But supplies are dwindling as wells age and consumption from industry and power generators grow.
While new gas fields are under development, Indonesia’s gas surplus risks turning into a deficit of more than 500 MMSCFD by the middle of the next decade, Arief Setiawan Handoko, the president director of Indonesia’s state-owned gas distributor, PGN, told parliament in May.
“The PGN gas balance profile for the period 2025 to 2035 shows a downward trend,” Arief was quoted as saying.
“This is mainly influenced or caused by the natural decline from suppliers, which has not been offset by new reserve discoveries and production from new gas fields.”
Already Indonesia is occasionally keeping cargos that were intended for export and directing them to domestic customers, owing in part to production shortfalls. That risks putting off foreign investment into bringing more gas resources into production.
Indonesia’s Abadi gas field, located about 400 km (250 mi) north of the Australian city of Darwin, has faced multiple delays. Japan’s Inpex, which is leading the project, has said it expects Abadi to go into production in 2030.
“Declining domestic gas supply due to the depletion of existing fields remains a major concern,” Joshua Ngu, vice chairman for Asia Pacific at research and consulting firm Wood Mackenzie, said in a statement.
“Attractive investment policies that can support the discovery and rapid development of new resources, are required to prevent a domestic gas crisis and maintain the country’s position as an international gas provider.”
Author: Jeff Hutton
This article was originally published on Mongabay under the Creative Commons BY NC ND licence. Read the original article.
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