The latest report by RMI, an energy think tank, discussed the bottlenecks in the long-term coal power Power Purchase Agreements (PPAs) and the challenges toward energy transition in Indonesia.
The report titled ‘Coal to Clean PPA Replacement’ sheds light on the clean energy transition in the Southeast Asian country.
The report highlighted the importance of building a clean energy regime with a minimum local procurement of fossil fuels. It talked about the importance of including storage in the grid. It included storage of about 0.17 MW per MW for solar PV.
The report made three broad suggestions to achieve the targets. These included terminating the coal PPA before the end of its life (i.e., removing its generation), replacing the coal PPA with an equivalent clean PPA (solar plus storage), transferring it to another entity (i.e., replacing generation) and restructuring the PPA to reduce the coal plant’s generation and emissions, before eventually retiring it (i.e., reducing generation).
The report cited Indonesia as an example. In the past few years, it seemed to have significant political and diplomatic momentum to accelerate its coal transition. The report shared information on the transition made in the Indonesian market from coal to renewable. It elaborated that market transitions from coal to renewable emissions broke records at an unprecedented rate of $45 billion.
It is reported that this amount is committed to financing the transitions in Indonesia, South Africa, and Vietnam, and over 95% of global coal consumption is now in markets and is being used to meet the commitment to phase out coal or meet the net-zero emissions reduction.
The report shared information on Indonesia’s plan to improve the grid structure without any available grid-balancing resources. It further elaborated on the more flexible role necessitated for the coal plant (versus a baseload generation role).
Elaborating on the issue of coal transition using PPA, the report highlighted the difficulties the customers, investors, and workers faced in realizing a clean energy transition through the agreement.
The report suggested creating a framework around the coal transition and the associated difficulty in using the PPA structure. The report highlighted the importance of bringing clean energy transition to the consumer through savings and creating an opportunity for investors.
Moreover, the report focused on identifying barriers to and providing solutions for the coal PPA transition. The report specified that these PPAs were commonly used in markets around the world and, given how they were embedded in the power systems.