MEMR to review coal price for power plants
Friday, March 11 2016 - 01:02 AM WIB
Minister of Energy and Mineral Resources Sudirman Said stated that the ministry will review the current coal price for power plants as part of efforts to help make the commodity more appealing for miners to continue exploration and production activities.
?Going forward there must be a new price equilibrium, which is deemed economically feasible for miners (to carry out exploration and production), but also economical for power producers,? Sudirman said on Thursday.
He said that the review of the coal price for power plants will involve state-owned electricity firm PT PLN, coal mining association, and the private power producers.
Sudirman?s statement comes following a proposal from the Indonesia Coal Mining Association (ICMA) to increase the selling price of electricity produced by coal-fired power plants to allow for a higher price of the coal by including a 1-3 percent insurance cost on top of the electricity selling price.
ICMA says that the additional insurance cost would not cause heavy burden for the power producers as the selling of electricity from coal-fired power plant is quite low at 5 US cents per kwh, compared to 25 US cents per kwh for electricity from diesel-fired power plant.
A recent joint study conducted by ICMA and PriceWaterhouseCoopers concluded that the country?s coal reserves will not be enough to meet future demand from new coal-fired power plants currently being developed.
A total of 20,000 MW of coal-fired power plants will be developed over the next five years. This is part of the 35,000 MW targeted by the government to be developed until 2019.
According to the study, the country?s coal reserves per end 2015 wre estimated at 7.3 billion-8.3 billion tons, much lower than the 32.3 billion (2014) estimate made by the Ministry of Energy and Mineral Resources.
There?s indication that the country?s coal reserves have been declining at an annual rate of 29-40 percent, which means that the reserves will be depeleted in 2033-2036. Meanwhile, the liftime of the new power plants is between 25-30 years since the start of the commercial operation.
ICMA Chairman Pandju Sjahrir said the current drop in coal price has dicouraged miners to carry out exploration activities to find new reserves. The coal downturn has also prompted the miners to cut down stripping ratio, making future coal production in areas with high stripping no longer economical.
Pandu said that the government needs to provide incentives to encourage new exploration activities such as by changing the current pricing system.
Editing by Reiner Simanjuntak