Indonesia cannot build power stations fast enough. And neither can most of its Asian neighbors. Rapid economic and population growth are driving equally rapid demands for electricity as the region builds out power grids to connect up millions of people to fuel prosperity.
Electricity generation is forecast to nearly triple in Southeast Asia between 2011 and 2035, the International Energy Agency says, with fossil fuels providing most of the energy.
With a population of 600 million, nearly twice that of the United States, and about 130 million people without electricity, Southeast Asia faces an immense challenge to meet that demand in a cost-efficient manner that doesn’t cause serious air and water pollution and drive up health costs.
For Indonesia, the Asia energy story is a blessing worth untold riches in terms of royalties, money it needs to develop its economy and provide jobs. The IEA says demand for coal in Southeast Asia will rise 4.8 percent per year, with Indonesia in the geographic sweet spot to be the region’s main supplier.
In the wider Asia-Pacific, demand for coal will increase by 52.8 percent from 2010 to 2035, according to the Asian Development Bank.
With about 30 billion metric tons of coal reserves, according to the Ministry of Energy and Mineral Resources, Indonesia has decades’ worth of supply to fuel its economic expansion and that of its neighbors – provided it limits production growth.
“Coal is still going to be the most significant fuel in the energy mix for the foreseeable future,” said Sacha Winzenried, a senior adviser on mining for PwC, the global business services firm, referring to Indonesia. While Indonesia has large amounts of gas, it doesn’t have a national pipeline network, he said, and it will be hard for renewables, such as geothermal, to dramatically ramp up capacity fast enough because of high capital costs.
It is here that Indonesia faces its trickiest energy balancing act: how to ensure enough coal supplies to meet soaring domestic energy demands, while also meeting the growing needs of its neighbors and facilitating growth expectations of domestic coal producers.
Environmentalists and climate scientists also point to damage from coal mining and growing carbon dioxide (CO2) emissions that will undermine the drive to limit global warming. As a result of efforts to do so, major developing countries are under increasing pressure to limit emissions growth.
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