SOUTH Sumatra has enormous potential to help ease Indonesia’s power shortages now and into the future by using its vast low calorific value lignite resources for mine mouth power generation, according to coal producer PT Pendopo Energi Batubara (PEB), however government assistance at local and national level is needed.

During a presentation at the Sumatra Miner Preview, PEB’s general manager business development Bambang Triharyono said to help realize this potential, the government must guarantee to cover the payment risk of the national power generator and thereby help attract foreign investment and financial institutions to participate in mine mouth power generation.

He said it should also make comprehensive policies to encourage development of mine mouth power stations, including land acquisition, water requirements, standards that apply specifically to the unique requirements of mine mouth power generation, a specific tender process, coal prices, etc.

“The national government should ensure there is regulation consistency between the central government and local governments while local government should also acknowledge that mine mouth power stations need their support in terms of land acquisition, permitting, local regulations relating to government income, etc.”

His presentation showed that South Sumatra has abundant coal resources with low calorific value (CV) and the Ministry of Energy and Mineral Resources in 2010 estimated lignite resources of 17 billion tonnes and reserves of 5 billion. However, owing to the low CV and high moisture, high cost of transportation, and lack of infrastructure, it has proven costly and uneconomical.

“The national government has decided that the province is an ‘energy centre’ but there has been no significant development for this to eventuate with the large coal resources regarded as being ‘sleeping assets’. Despite this there is potential to exploit the province’s lignite.”

He said around the world lignite was utilized for mine-mouth power generation but this had just commenced in Indonesia. The country had major, and increasing, power needs and lignite had a big role to play.

“The application of clean coal technologies to upgrade lignite for use in mine mouth power projects will provide long-term coal supply and energy security, improve thermal efficiency and reduce emissions. These technologies are available to convert Indonesian lignite into export grade coal, liquid fuel, SNG, fertilizer and chemical products. A number of clean coal technology projects have been undertaken and some of these are heading towards commercial-scale production.”

Bambang Triharyono said as well as making use of lignite, development of mine mouth power stations in the province would help it live up to the ‘energy centre’ tag. “With the nation’s high CV coal resources depleting, the government supports utilization of lignite for mine mouth power generation and several mine mouth projects are planned in the province.

“This would mean that more high CV coal could be exported, resulting in higher revenue for the government, while still also being used for Indonesia’s conventional power plants. With the higher cost of this coal, the demand for low CV coal for use in mine mouth power plants would increase and this would be more economical for the country considering that transporting low CV coal with high moisture is costly and uneconomical.”

He said power transmission from Sumatra to Java and Sumatra to the ASEAN grid was already part of the Indonesian government’s plan, which proposed US$8 billion be allocated to transmission development in the next five years. “This will make possible connections from remote areas to the load centres where demand is increasing every year.

“Despite the good intentions there are a number of challenges to be overcome in development of mine mouth power projects in South Sumatra, not the least of which is lack of infrastructure. Most coal mines in the province are in remote areas creating more expense for construction and transmission as well as longer construction time. The projects would rely on provision of water with plant developers required to build reservoirs to cover the risk of minimum water flows in the rivers.

“Due to the nature of lignite, technology and specialized equipment are required to enable it to be used for power generation. There are not too many companies in Indonesia that have the expensive lignite boiler technology required for this purpose.”