Energy Monitor-In January 2022, Indonesia broke ground on a $2.3bn coal gasification plant on the island of Sumatra, Indonesia, expected to be finished in 2025 or 2026. The plant is part of a $15bn planned investment by Air Products and Chemicals, a Pennsylvania-based company in the US, that is one of the largest ever overseas coal investments by a US company.
Air Products is also a partner in a second coal gasification facility already planned for East Kalimantan, on the Indonesian side of the island of Borneo. Together, the two plants would produce 3.2 million tonnes of coal-derived dimethyl ether (DME) every year, making them among the largest such facilities in the world. DME is a synthetic gas that can be used as an alternative fuel in industrial, chemical or transportation applications.
“It is undoubtedly a massive investment [that] will be helpful [to Indonesia economically],” says Surya Dharma, an energy expert with the Indonesian Renewable Energy Society, a domestic think tank. “But, in terms of reducing [greenhouse gas] emissions, this is a significant challenge.” Indonesia is party to the Paris Agreement and the government has pledged net-zero emissions by 2060.
The problem is that, if built, these plants could entrench the long-term use of coal in a country with vast coal reserves that is already the world’s fourth-largest greenhouse gas emitter.
For Indonesia, coal gasification aims to support domestic coal interests.
“The government wishes to supply [an alternative to] liquefied petroleum gas [LPG] for domestic use [in industry and heating], as a substitute for LPG imports,” says Surya. “[But] coal itself will produce emissions, and I am unsure how Air Products will deal with this.”
Why coal gasification in Indonesia?
Indonesia, the world’s fourth most populous country, has long been a major player in global coal markets. According to the International Energy Agency (IEA), it has been one of the top exporters of thermal coal – the kind most often used for electricity generation – since the early 2010s, primarily to China, Japan, South Korea, Vietnam and India. Although prices are high today, the future of that market is uncertain as there are increasing signs that those countries are shifting away from coal for power generation. South Korea and Japan both announced net zero by 2050 pledges last year, while Vietnam and India are seeing surges in solar power uptake.
Protecting the future of coal has become a core concern for the Indonesian government because the country’s coal interests have considerable political power. Several members of President Joko “Jokowi” Widodo’s cabinet have significant financial assets in coal, including the powerful Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, and Defence Minister Prabowo Subianto. Many members of parliament, too, have investments or stakes in coal.
Their priority has been protecting their own interests, not ensuring a just transition towards cleaner energy sources. which Indonesia has in abundance, says Andri Prasetiyo, a programme manager with Trend Asia, a Jakarta-based foundation focused on accelerating the energy transition. “The government is promoting the coal industry and ensuring that they can survive, even though the rest of the world is leaving coal behind.”
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