Interview: Securing coal supply for PLN

By Tri Subhki R

PT PLN (Persero), a state-owned power utility company, continues efforts to secure coal supply for its coal-fired power plants. PLN requires approximately 97 million tons of coal in 2019.

Given the available coal reserves in Indonesia and annual national coal production rate, PLN projects that the future coal supply for domestic coal-fired power plants will be quite limited. Hence, it is imperative for PLN to secure coal supply for its coal-fired power plants.

Petromindo.com recently talked with Head of Coal Division at PT PLN (Persero) Harlen about the current development of PLN’s coal-fired power plant projects and how the utility company secures its coal supply.

The excerpts are as follow:

Petromindo.com: What are the coal qualities required by PLN?

Harlen: Our existing large capacity coal-fired power plants in Java such as Paiton and Tanjung Jati require around 5,000 kcal/kg of coal. Meanwhile, new coal-fired power plants require 4,200 kcal/kg of coal.

To get the 5,000 kcal/kg coal quality is increasingly difficult. And our coal reserves in Indonesia are typically of the low rank coal. New large capacity coal-fired power plants in Banten, namely Java 7, Java 9 and Java 10 require coal quality ranging from 4,200 to 4,600 kcal/kg.

P: How about coal quality of 3,000 kcal/kg or lower? Is there any regulation on that?

H: There is no coal-fired power plant for lower than 3,000 kcal/kg coal, except mine-mouth power plant, because the moisture content is too high. We can develop mine-mouth power plant if the electricity demand in the area (where the mine and the plant are located) is prospective. More importantly, the coal reserves should (be sufficient to) fuel mine-mouth power plant for 30 years (of the plant’s life).

Because we understand that coal quality of 3,000 kcal/kg is not marketable and it may be utilized for mine-mouth power plant.

P: How is the current development of mine-mouth power plants?

H: Due to slower electricity demand, there are some adjustments of mine-mouth power plant projects. For example in East Kalimantan, there were previously (plans for the development of) Kaltim-3, Kaltim-5 and Kaltim-6 mine-mouth power plant projects. But now we only develop Kaltim-3, while Kaltim-5 and Kaltim-6 are being temporarily put on hold.

Mine-mouth power plant is developed based on the electricity demand of the region where the coal reserves are available, since we implement resources-based development.

P: Regarding the Domestic Market Obligation (DMO), what is the estimated coal consumption volume of PLN this year?

H: We need 97 million tons of coal (this year). As of April 2019, the realized coal supply to PLN was 30.9 million tons. We provide monthly report to Ministry of Energy and Mineral Resources regarding the coal supply realization.

We are optimistic to achieve the 97 million tons (coal consumption) target. In 2018, our target was 92 million tons and the realized (consumption volume) was 91.1 million tons. I think 1 percent shortfall is not bad at all.

PLN absorbs about 85 percent of total (coal supply provided through the) DMO (policy), while the remaining 15 percent is dedicated for other industries such as cement.

P: To help secure coal supply, one of PLN’s initiatives is perhaps through the acquisition of coal mines. Can you elaborate more about this?

H: State-owned utility companies in Thailand and South Korea that develop coal-fired power plants already have coal mines to secure the supply. PLN must also secure coal supply, particularly to support 35,000 MW and planned 70,000 MW (power plant development program).

As our national production volume averages 500 million (tons) per annum, while the available coal reserves is approximately only 20 billion tons, we have very limited coal supply. The coal may deplete in 30 to 40 years.

PLN has to acquire coal mines that are dedicated to provide coal for PLN’s coal-fired power plants. We prefer to acquire non-marketable coal to develop mine-mouth power plants.

P: How many coal mines that PLN has already acquired?

H: We develop coal mine database by inviting IUP (coal mining business license) holders to provide their data. We evaluate all available data before deciding to acquire a mine. Currently, there are more than 100 shortlisted coal mines and we are in the process of negotiation with a number of prospective IUP holders.

But the challenge is many IUPs in Indonesia do not have JORC Report that indicates their proven coal reserves.

P: Regarding coal supply zoning, there is concern among some coal suppliers that it causes disadvantage as they cannot fulfill DMO. How does PLN see this?

H: PLN has obligation to provide affordable electricity. Hence, we try to procure the most cost-efficient coal. The shipment of coal is a significant cost factor. So, we always try to find the most cost-efficient coal sources.

Coal-fired power plants in Java are still the main contributor to domestic coal demand due to their large capacities. On the other hand, power plants in eastern part of Indonesia only generate relatively small power capacity. So, the coal demand is not too high.

The government should find the solution for this situation. We, as a company, only want to secure the cost-efficient coal supply according to our requirements.

Editing by Reiner Simanjuntak