Impacts of Coal Price on Indonesian Electricity Planning: The Oil Price Perspective and CO2 Emissions

Abstract

Indonesia has an abundance of coal resources. The total resources are estimated to be about 90.5×109 tons. In 2006, Indonesia as the second largest coal exporter in the world launched its own coal price list. It is called the Indonesian Coal Index (ICI), which is ready to be used by the domestic market as well as abroad. The ICI consists of four coal grades based on their calorific values namely: ICI-1 (6,500 kcal/kg), ICI-2 (5,800 kcal/kg), ICI-3 (5,000 kcal/kg), and ICI-4 (4,200 kcal/kg). Currently, Indonesian government policy aims at promotion of coal utilization for power generation. This effort is to reduce oil utilization as well as to accelerate energy diversification. This paper analyzes effects of coal price changes on electricity price in Indonesian long term power planning. We investigated the impact of oil prices on Indonesian coal price, which is then applied to forecast Indonesian coal prices in the future. Results are presented as specific recommendations on electricity expansion planning with suitable ICI. Fuels for electricity generation are considered on the basis of economic values of coals as well as the CO2 emissions.

Keywords: oil price, coal price, electricity cost, LEAP model, electricity expansion.