Decarbonisation of Thermal Power Plants and CCS Business Feasibility Study in Indonesia

Edited byShigeru KimuraSoichirou Kunihiro Decarbonisation of Thermal Power Plants and CCS Business Feasibility Study inIndonesia Economic Research Institute for ASEAN and East Asia (ERIA)Sentral Senayan II 6thFloorJalan Asia Afrika No. 8, Gelora Bung KarnoSenayan, Jakarta Pusat 12710Indonesia © Economic Research Institute for ASEAN and East Asia, 2025ERIA Research Project Report FY2024 No. 33Published in February 2025 All rights reserved. No part of this publication may be reproduced, stored in a retrievalsystem, or transmitted in any form by any means electronic or mechanical without priorwritten notice to and permission from ERIA. The findings, interpretations, conclusions, and views expressed in their respectivechapters are entirely those of the author/s and do not reflect the views and policies of theEconomic Research Institute for ASEAN and East Asia, its Governing Board, AcademicAdvisory Council or the institutions and governments they represent. Any error in contentor citation in the respective chapters is the sole responsibility of the authors. Materialin this publication may be freely quoted or reprinted with properacknowledgement. This report is prepared for the Economic Research Institute for ASEAN and East Asia(ERIA) by Sumitomo Corporation. Preface After COP26, the world has shifted to carbon neutral by half of this century includingIndonesia. Indonesia has announced its carbon neutrality until 2060. The dominantsectors of carbon dioxide (CO2) emissions in Indonesia are the power sector, followed bythe road transport sector. This is because Indonesia’s power sectorfully depends onthermal power generation such as coal and gas as well as most ICE vehicles in the roadtransport sector. In addition, most thermal power plants in Indonesia are relatively young(less than 10 years) and the rapid shutdown of thermal power plants does not make sensefrom an economic viewpoint. Then, how do we achieve carbon neutrality by keepingthermal power plants? One way is applying carbon capture and storage (CCS) technologyin thermal power plants. However, the economics of CCS is an issue. This report thenchallenges the estimation of the CCS cost of existing facilities. For thermal plants, we selected Units 5 and 6 of Tanjung Jati B (TJB 5&6) coal-fired powerplant in Central Java as a source of CO2emissions, and Corridor gas field in SouthSumatra as CO2storage site . We assumed two CO2transport ways between the TJB plantand the Corridor: one is a pipeline and the other requires ocean transport using a liquidCO2ship. Thisstudy aims to estimate the cost of the whole CCS system,including CO2transportation ($ per CO2tonne) and the impact of the CCS system (LCOE: Levelized Costof Electricity) to electricity price ($ cent/kWh). In this regard, the Economic Research forASEAN and East Asia (ERIA) contracted the Sumitomo Corporation to conduct this studyas an ERIA energy project in 2023–2024. To supervise Sumitomo’s Indonesian CCS study, ERIA requested Sumitomo corporation toformulate a working group which consists of Indonesian CCS stakeholders; Badan Risetdan Inovasi Nasional, Balai Besar Pengujian Minyak dan Gas Bumi LEMIGAS, the Ministryof Energy and Mineral Resources (MEMR), and Institut Teknologi Bandung. On behalf of ERIA, I would like to express my thanks to the working group members fortheiruseful and insightful comments and suggestions to this study in terms ofmethodologies and results. This report includes an estimation of the cost of the Indonesian CCS project and thenecessary regulations for the CCS business in Indonesia, after a review of the existingregulations on CCS and carbon capture, utilisation, and storage approved by the MEMRand the President of Indonesia. I hope this report contributes to initiating the CCS business in Indonesia under appropriateregulations, government support, and regional collaboration frameworks. Shigeru Kimura Senior Policy Fellow for Energy AffairsEconomic Research Institute for ASEAN and East Asia Acknowledgements This project received tremendous support from Japan’s Ministry of Economy, Trade andIndustry and the Economic Research Institute for ASEAN and East Asia as well as theIndonesian Working Group – Ministry of Energy and Mineral Resources (MEMR), BadanRiset dan Inovasi Nasional, Institut Teknologi Bandung, and Balai Beasar PengujianMinyak dan Gas Bumi LEMIGAS throughout the research project period. Invaluable adviceand guidance from the Working Group members, especially at the kick-off meeting on 31October 2023, encouraged the project members, enabled the smooth implementation ofthe project and the visualisation of the way forward in the near future. The projectmembers would like also to extend the appreciation to the supporting members at ERIAfor administrative and legal works. Soichiro Kunihiro Business Development ManagerCCUS Team, Energy Innovation InitiativeSumitomo Corporation List of Project Members Sumitomo Corporation [as of March 2024] Junya