Scenario Analysis on Fossil Fuel Alternatives for Power Generation in Indonesia: Case of Maluku Region

Abstract

The Government of Indonesia continues to prove its commitment to equitable national development including the electricity sector. Even though, Indonesia's geographical condition is the biggest challenge to realize the goals of national development. Especially eastern region of Indonesia which has a significant disparity compared to other regions in Indonesia in terms of electricity supply. Maluku is one of the areas in eastern Indonesia that has many challenges to realize the goals of national development. Maluku area mainly composed remote islands and has low energy resources. Thus, the energy needs are supplied from the other region. Due to the difficulties of energy supply, fuel oil-fired power generation technology was utilized, because at first this policy was considered most efficient. In fact, the cost of electricity production in Maluku is now double or even greater than the cost of electricity production in Java or Sumatra caused by the abundant use of fuel oil for power generation.

This study method used scenario analysis to compare scenario on fossil fuel power generation technology and carbon emission for power generation project in Maluku region by 2024. Scenario analysis is important to learn how to achieve the standards both on cost efficiency and environmental friendly policies by analyzed the cost of fossil fuel transport, the electricity generation costs and the amount of carbon emission factors. For cost analysis, this study developed the LCOE to include facility cost of possible fuel. The cost of fossil fuel transport, the electricity generation costs, and the amount of carbon emission resulting per MWh of electricity generated were evaluated.

The scenario build in this study is divided into 1) baseline which is current national fossil fuel mix plan by 2025 and against 2) three fossil fuel mix change scenarios under the principle of low cost and emission target. Each scenario alternatives have different combination of fossil fuel and technology.

The objective of this study is comparing scenario on fossil fuel power generation technology and carbon emission of power generation project in Maluku region by 2024 by apply cost efficiency and carbon emission policy targets.

The results obtained, substitution energy from oil to gas for power generation technology policy is recommended. Three fossil fuel mix change scenarios described variation impact on cost and carbon emission. The more advanced carbon mitigation technology, the more expensive it will cost. CO2 emission can be reduced about 16% against baseline without CCS technology deploy, while 47% with CCS technology by 2024.

Some steps that policy-makers can take associated with power generation project in Maluku region are 1) accelerating the development of gas supply infrastructure, especially associated with power generation project for Maluku region. 2) preparing and enabling environmental policy in term of national climate policy to recognize CCS as a means of CO2 emission reduction thus it can be applying in Maluku region.