Indonesian coal output to fall as renewables rise

Indonesian coal output could decline by as much as 47pc from 610mn t in 2019 to 322mn t by 2050 under a low carbon scenario compatible with the Paris Agreement (LCCP) target, according to a long term projection by the United Nations Framework Convention on Climate Change (UNFCCC).

While the projection sees a steep decline in coal production under the LCCP scenario, output could fall by a smaller 13.9pc from 2019 to 2050, to 525mn t under a current policy scenario (CPOS), according to the UNFCCC forecast. Under this scenario, it forecasts that around 80pc of Indonesia's coal output will meet domestic demand by 2050, with the remainder exported.

Indonesian coal production increased by around 8pc/year from 275mn t in 2008 to 610mn t in 2019. Based on current development trends, Indonesian output is likely to remain high and experience a slow decline, the UNFCCC report said.

Under the LCCP scenario, the UNFCCC sees 290mn t of Indonesia's annual coal output of 322mn t consumed by the domestic market by 2050, as more countries that currently import Indonesian coal for power generation use move away from fossil fuels to more renewable energy sources, denting demand. The decline could be much bigger if Indonesia's mitigation strategy were in the form of extreme coal elimination, the report said.

Coal accounted for 59pc of Indonesia's electricity generation mix in 2019, followed by gas at 21pc and renewables at 16pc, with oil making up 4pc. Under the LCCP scenario, coal will account for 38pc of the overall energy mix by 2050, with renewables making up 43pc, the UNFCCC projects.

Indonesia produced 292.87mn t of coal in January-June, according to Indonesian energy ministry (ESDM) data, equating to 47pc of the 2021 government-set output target of 625mn t, as weather-related disruptions earlier this year slowed output.

The ESDM in May raised the national coal production target for this year by 75mn t from 550mn t on expectations of continued strong demand. The additional output will be sold in the export market and will be exempt from producers' domestic market obligation (DMO) allocations, under which mining companies must sell a percentage of their coal to the domestic market.

The DMO for 2021 was fixed at the start of the year at 137mn t on the original output target of 550mn t. Of the 137mn t, 113mn t is likely to be used for power generation.

By Andrew Jones