Indonesia Bans Coal Export as Widespread Blackout Risk Grows


JANUARY 02, 2022

Jakarta. The government has prohibited coal exports in January, citing worries that insufficient supply at domestic power plants could result in widespread blackouts, a senior energy ministry official said on Saturday.

Indonesia relied on the fossil fuel for its power generation, with around 60 percent of its power plants drawing energy from coal. To ensure domestic supply, the country imposes a domestic market obligation (DMO) policy. It requires coal miners to supply 25 percent of annual production to state-owned utility Perusahaan Listrik Negara (PLN) at a maximum price of $70 per metric ton, around half of the current global market price.

The policy seeks to maintain a 20-day coal supply for local power plants, or around 5.1 metric tons. But, as of Jan 1, local coal miners only meet less than 1 percent of the required supply, Ridwan Jamaluddin, the director-general of minerals and coal at the Ministry of Energy and Mineral resources, said in a statement.

“Why is exporting prohibited for everyone? We can’t help it, and it’s just temporary. If the prohibition is not implemented, over 20 power plants with a combined capacity of 10,850 megawatts will be shut down,” Ridwan said in the statement.

“If no strategic actions are taken, a widespread blackout is possible,” he said, adding that the government planned to revisit the ban after Jan 5.

This was the second ban in less than one year after the government stopped coal exports from 34 coal miners last August for failing to meet their DMO in the previous seven months.

Business reaction

Arsjad Rasjid, the chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said the chamber supported government policy for ensuring national electricity supply. But, he regretted how the sweeping ban was implemented unilaterally and hastily that could put Indonesia’s economic recovery and investment climate in jeopardy.

“The government is not working alone. There is an important role for business in the national economic recovery during the pandemic. So we really hope that government policies that have an impact on the business world and the national economy, such as the ban on coal exports, must be discussed together,” Arsjad said.

Arsjad, who is also a president director at one of Indonesia’s top coal miner groups, Indika Energy, said the coal price boom in the past few months has helped Indonesia’s export to outperform other sectors and helped Indonesia’s economy recover.

The Southeast Asian country is the world’s largest thermal coal exporter, with an estimated 400 million metric exported in 2020, mainly to China, India, Japan, and South Korea.

Kadin also questioned the government’s remark about the domestic coal supply shortage. Arsjad said not all power plants, including those operated by independent power producers, are experiencing critical coal shortages.

“Many Kadin members are coal supplying companies, and they have tried their best to fulfill sales contracts and coal sales regulations for national electricity,” Arsjad said.

Therefore, Kadin hoped the government could implement a fair and consistent reward and punishment system, not a sweeping ban for all coal companies.

Arsjad asked the government to review the coal export ban, especially because many miners companies have contracts with foreign countries. Failing to do so would damage the country’s image related to policy consistency in doing business.

“Indonesia’s reputation as a global coal supplier will be tarnished,” Arsjad said.

“Moreover, our efforts to attract investment, as an investor-friendly country and a business climate that is certain and protected by law will degrade its reputation. Investors’ interest in the mining, mineral, and coal sectors will diminish because the sectors are considered unable to provide certainty for the businesses,” he said.