<article><p class="lead">Coal consumption by Indonesia's power sector this year is expected to edge lower from a year earlier and also fall short of earlier projections, as the country's Covid-19 lockdown weighs on electricity demand and generation.</p><p>Domestic coal consumption by power utilities this year is expected to be 95.6mn t, down from 97mn t in 2019, said Indonesian state-owned power generation and transmission firm PLN. The latest guidance is also down 12.2pc from its initial forecast of 108.87mn t for 2020. The power sector's coal consumption was 68.17mn t during January-August this year, up from 50.16mn t in the first half of the year.</p><p>The earlier projection for coal consumption was based on an expected increase in power demand this year. But this has remained almost flat with the Covid-19 lockdown. Electricity consumption during January-July edged 0.51pc higher from the same period last year, PLN said.</p><p>But coal consumption has edged up in the past two months with an easing of lockdown restrictions. Average coal demand rose to 9mn t/month in July and August from 8.36mn t/month during January-June.</p><p>PLN expects the country's coal consumption to remain relatively steady for the rest of the year.</p><h2>DMO obligation</h2><p class="lead">Indonesia's overall sluggish coal demand will make it more difficult for coal mining companies to fulfil their domestic market obligation (DMO) for the year, said the country's energy ministry (ESDM). </p><p>Domestic coal consumption is expected to reach 125mn t this year, short of the original 155mn t because of the weaker demand from the power sector, the ESDM said. This included coal consumption by utilities, as well as industries including cement mills.</p><p>Electricity demand is expected to recover in the coming months, PLN said, although it is unlikely to reach pre-Covid-19 levels.</p><p>PLN forecasts that even in 2021 power sector total coal demand will only reach 98.01mn t versus an original prediction of 120.53mn t. It may reach 103.72mn t in 2022 but significantly lower than the projected 128.54mn t.</p><p>The country's mining association APBI in August asked the government to <a href="https://direct.argusmedia.com/newsandanalysis/article/2132903">relax the country's DMO</a> because of weaker domestic coal demand. The DMO system requires coal producers to make a percentage of their annual output, currently set at 25pc, available to the domestic market. The ministry did not immediately clarify if it planned to relax the DMO requirements this year. </p><p class="bylines">By Antonio Delos Reyes</p></article>
