Fri, 02 May 2008
Sylvia Darmaji, Analyst

Indonesia, the world's biggest thermal coal exporter, should adopt new technologies to overcome the threat of global warming.

In the wake of emerging economies, the demand for energy sources has increased over the last few years. Oil prices have grown 194 percent since early January 2007, reaching a record high of US$119.4 per barrel in April 2008.

Consequently, the price of oil substitutes have matched pace, with the price of Newcastle coal rising 248 percent over the same period amid supply strains.

Despite these numbers, coal producers and exporters are seeking even higher prices, especially for higher grade coals, valued around $300 per ton.

Coal consumers, including steel corporations and power companies, have shown little concern for the more than doubling of their 2008 coal supply costs.

Recently, Australia agreed to supply thermal coal to Japan at a premium price of $125 per ton, while China demanded a minimum $135 per ton.

In response to the threat to the environment, many countries signed the Kyoto Protocol with the objective to reduce greenhouse gas emissions.

The participating countries agreed to either reduce their carbon dioxide emissions along with five other greenhouse gases or, if their output levels remained the same or increased, to engage in emissions trading.

In accordance, China has closed 83 small coal-fired generators with an aggregate capacity of 4.7 million kilowatts, 36 percent of what is needed to achieve their target to reduce emissions by 13 million kilowatts during the first three-and-a-half months of 2008.

Eventually, the generators will be replaced by larger and more efficient plants.

National coal production has almost doubled since 2003 to more than 210 million tons last year, 75 percent of which was exported.

Around 85 percent of Indonesia's coal, including 7 billion tons in reserves and an estimated 61 billion tons unmined, is considered to low grade, requiring greater volume per unit of power produced.

Clean coal, one of many alternative fuels under development, is created by gasifying, washing or burning standard coal to remove sulfur dioxide, minerals and impurities. The coal is then re-burned to recover the carbon dioxide. The technology has been seen to enhance efficiency and reduce emissions, and many believe it is the solution to global warming.

Although there are no coal-based power plants in commercial production able to capture all carbon-dioxide, some collection prototype systems are already being tested in plants around the world, while pilot projects are underway to add further improvements.

A study conducted by the International Energy Agency on greenhouse gases found building a coal power plant that could capture carbon dioxide would cost 36 percent more than standard variants.

While Indonesia is building quite a number of coal power plants to meet electricity demands, it should bare in mind the consequences of over usage.

Analyses on cost-benefits must be performed before building more standard coal stations, because the reduction of emissions should be our main priority.

The writer is an analyst at Bahana Securities




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