After waiting 12 years of a long-winded journey for the coal gasification project to substitute LPG (liquefied petroleum gas) to become DME (dimethyl ether) in Indonesia, PT Bukit Asam Tbk (PTBA) officially took over PLTU Pelabuhan Ratu from state-owned electricity monopoly PT PLN (Persero) with a capacity of 3 x 350 MW. The agreement and cooperation were signed at the SOE International Conference, Nusa Dua, Bali on October 18, 2022. The investment for the construction of this project is entirely carried out by Air Products, PTBA will contribute coal, and Pertamina will eventually be the project’s buyer of DME products. The Tanjung Enim DME project is expected to operate for 20 years. President Jokowi officially started work on this coal gasification project in January 2022 in the Tanjung Enim Industrial Estate of the Muara Enim Regency of South Sumatra.
This takeover can also be considered a step towards the energy transition between the government and private sector operations involved in coal downstream projects in Indonesia. By converting raw or unprocessed mineral and coal materials into finished or semi-finished commodities, downstream seeks to boost added value. This is also one of the efforts to prematurely retire the state-owned coal-fired power plant. With this collaboration, the retirement period was accelerated from the previous 24 years to 15 years.
This is aligned with the President’s statements that he wants to boost Indonesia’s economic growth, which typically only sells raw materials or economies based on commodities to those based on innovation and technology. It is expected that products made in Indonesia will have high added value due to the domestic utilization and production of those raw materials.
Hartanto Wibowo, PLN’s Director of Corporate Planning and Business Development, outlined three options for early retirement schemes of coal-fired power plants: a write-off from PLN’s books, a spin-off with blended financing, and refinancing the independent power producer (IPP). Other than those included in the 2021–2030 Electric Power Supply Business Plan, President Joko Widodo (Jokowi) has directed that coal-fired power facilities be retired soon and that no new coal-fired power plants be constructed (RUPTL). Minister of State-Owned Enterprises (BUMN) Erick Thohir also emphasized that this momentum is not just a transfer of assets, but also an opportunity to develop renewable energy.
According to Ridwan Djamaluddin, Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources, Law No. 3 of 2020 Concerning Amendments to Law No. 4 of 2009 Concerning Mineral and Coal Mining mandates enhancing the added value of minerals and coal. Presidential Regulation No. 112 of 2022 on the Acceleration of Renewable Energy Development for Electricity Supply outlines this policy. According to Article 3 (1), “In the context of the energy transition in the electricity sector, the Minister is compiling a roadmap for accelerating the termination of the PLTU operational period as outlined in the sectoral planning document.”
Previously, only 1.8 million MT of LPG were produced domestically each year by PT Pertamina and SKK Migas Cooperation Contract Contractors (KKKS). The remaining 77% to 80% are still imported. According to PT Pertamina Patra Niaga Hasto Wibowo, the marketing and commercial director, the situation of household energy dependence on LPG imports was intended to be reduced. 95% of the eight million MT of LPG consumed annually is consumed by households. The reduction in operational life will be accompanied by the potential for cutting carbon dioxide (CO2) emissions equivalent to 51 million tons or equivalent to Rp 220 billion. The project is expected to be completed in 30 months and generate at least 12,000 new employees, according to President Jokowi.
The DME has characteristics with the propane and butane that encompass LPG, so DME can be handled in the same way as LPG. DME is derived from a variety of sources, including fossil and renewable energy. DME has a blue flame, a specific gravity of 0.74 at 60/60oF, does not emit particulate matter (PM) or nitrogen oxides (NOx), does not contain sulfur, is clear, colourless, environmentally beneficial, and non-toxic. DME was usually used as a refrigerant, solvent, and aerosol propellant. However, DME is now frequently utilized as fuel for households, generators, and vehicles. Although DME is created from biomass, methanol, and fossil fuels like natural gas, according to the Alternative Fuels Data Center website of the United States Ministry of Energy (USA), DME can also be produced directly from synthetic gas (syngas) produced from natural gas, rock coal, or biomass. It can also be produced from methanol indirectly using a dehydration reaction.
The public has generally accepted the application test of using 100% DME, which was conducted in the cities of Palembang and Muara Enim between December 2019 and January 2020 to 155 families. Additionally, in 2017 100 families in Jakarta’s Marunda District had the 20%, 50%, and 100% DME applied tests. Dadan Kusdiana, the head of Balitbang, spoke about the test results on the Balitbang website of the Ministry of Energy and Mineral Resources, explaining that the blue flame colour, normal flame stability, ease of control, and longer cooking time than LPG were all results of the applied test. Technically, employing a customized DME burner to replace LPG in homes using DME is 100% viable. Compared to utilizing LPG, cooking takes 1.1 to 1.2 times longer. The distribution is also in the form of tubes as LPG.
The coal to DME project is expected to have a number of advantages, including an investment of US$ 2.1 billion, the use of 180 million low-calorie coal, and direct advantages for the government of Rp 800 billion annually or Rp 24 trillion over a 30-year period. Additionally, this project will preserve the trade balance and save annual LPG imports by 1 million tons, therefore saving the nation’s foreign exchange reserves by Rp 9.71 trillion per year or Rp 290 trillion over a 30-year period. According to the ESDM Ministerial Regulation, downstream coal business actors will likewise be paid a 0% royalty.
Even if it’s been prolonged, this coal downstream project will provide Indonesia’s energy transformation with the momentum it needs to move forward while all parties support it and work to make it past any potential obstacles. The decommissioning of the coal power generation sector and a thorough transition to cleaner, more eco-sustainable energy are the ultimate goals of all these dynamics. The government must ensure that all parties, including those involved in the coal industry, support the implementation of this initiative and protect the national interest by encouraging innovation and technological advancement. Indonesia has the chance to fight for energy sovereignty and take control of its own land due to the government’s strategy of supporting domestic manufacturing of goods or raw materials into finished products.
