The changing of the electric and nonelectric energy production and technology options for emission abatement on Indonesia

Armi Susandi Max Planck Institute for Meteorology, Hamburg, Germany Bundesstrasse 55, D-20146 Hamburg Email: susandi@dkrz.de

Abstract This paper studies the changing of electric and nonelectric energy production on Indonesia as impacts of greenhouse gas emission targets. We use of a Model for Evaluating the Regional and Global Effects of greenhouse gas reduction policies (MERGE) to estimate the production on electric and nonelectric energy on Indonesia for a business as usual and various Indonesian mitigation scenarios to 2100. Indonesia will be reduce of their absolute emissions stars after 2050 with target is its 2040 emissions. Concerning to its emissions reduction target and sustainable development Indonesia produces energy with low/free emission. In electric energy sector Indonesia using hydropower to the half of the century and then stars falling gradually, in the second of the century the low-cost advance carbon-free technologies generation (ADV-LC) is lead to the Indonesian energy production. With international trade in emission permits, Indonesia would be produces more energy from hydropower and ADV-LC than other scenarios. Production of nonelectric energy primarily is renewables energy (RNEW), to increase substantially to the end of century. With emission reduction targets are set relative to reference scenario, Indonesia renewables energy production highest. Nevertheless, MERGE has only exogenous technology in economic models related to climate change. New version of MERGE needs to introducing of endogenous technology. In this paper we analyze some potential technical change options for emission abatement of Indonesia, especially on Improved-Technology (IT) to reducing emission in the energy, transport and industry sectors. Keywords: Indonesia climate policy; MERGE; electric and nonelectric energy; hydro; ADV-LC; renewables energy; technology options; Improved-Technology (IT)

1. Introduction The Kyoto Protocol commits the Annex I countries to reducing their greenhouse gas (GHG) emissions to approximately 5% below 1990 levels during the commitment period between 2008 and 2012. The industrialized countries that made the limitation and reduction commitments are listed under Annex I of the Climate Convention and their commit and their commitments are listed under Annex B of Kyoto Protocol. Indonesias greenhouse gas emissions are projected to increase rapidly after the economic crisis has been overcome. The energy sector in Indonesia has been a dominant factor in the economic development sector of Indonesia. In the last three decades the growth of energy utilization in Indonesia was relatively high, that is 8.7% per annum (ADB, 1997), but oil and gas exports gave significantly contribution to foreign exchange revenue of the country. As oil, gas and coal, Indonesia has a wide spectrum of natural energy resources, such as hydropower, geothermal, biomass, solar energy and wind. This studies focuses on production of electric and nonelectric energy on Indonesia as implications of emission reduction in both Annex B countries and non-Annex B countries (i.e., developing countries). This paper aims to investigating the implications of tradable permits from no emission trading to full global trading. We stars the Annex B countries with no emission trading case. Next, we concern where trading of emission permits is limited to Annex B countries only, and then when trading is enlarged to all countries. To investigate the role Indonesia plays in emission reduction, we further included Indonesia with and without full global trading. In order to analyze the impacts that different climate policy scenarios on electric and nonelectric energy production on Indonesia, we have extend the MERGE model by 10 region with separate out Indonesia. MERGE developed by Manne and Richels (Manne et al., 1995). Section 2 gives a brief overview of MERGE, and specifies of electric energy technologies and nonelectric energy supplies available. Section 3 presents the business as usual scenario, and section 4 the cases with emission reduction commits for the Annex B countries and the Non Annex B countries. Section 5 gives a short overview of technologies options for emission abatement in Indonesia. Section 6 is conclusion. 2. MERGE 4.3I model In this section, we provide a brief overview of MERGE (a Model for Evaluating the Regional and Global Effects of greenhouse gas reduction policies). MERGE is an intertemporal general equilibrium model of the global economy. It combines a bottomup representation of energy supply sector with a top-down perspective on the remainder of the economy. See Manne and Richels (1992) and Manne et al. (1995) for a detailed description. We used the version 4.3 for this studies (Manne and Richels, 2001). It consists of four sub model: (1) the economic model; (2) the energy model; (3) the climate model; and (4) the climate change impact model.

The energy model distinguishes between electric and nonelectric energy. There are 10 alternative sources of electricity generation plus two backstop technologies: high and low-cost advanced carbon-free electricity generation, as given in Table 1. Table 1. Electricity generation technologies Available to Indonesia
Technology Hydro Nuclear Gas-r Oil-r Coal-r Gas-n Gas-a Coal-n Coal-a IGCC Identification Hydroelectric, geothermal and other renewables Remaining initial nuclear Remaining initial gas fired Remaining initial oil fired Remaining initial coal fired Advanced combined cycle Fuel cells with captured and sequestration gas fuel Pulverized coal without CO2 recovery Fuel cells with capture and sequestration coal fuel Integrated gasification and combined cycle with capture and sequestration coal fuel High cost advanced carbon-free technologies Low cost advanced carbon-free technologies Earliest possible introduction date Existing 2010 Existing Existing Existing 2010 2030 2010 2030 2030 Carbon emission coefficients (Billion tons per TKWH) 0.0000 0.0000 0.1443 0.2094 0.2533 0.0935 0.0000 0.1955 0.0068 0.0240

ADV-HC ADV-LC

2020 2060

0.0000 0.0000

Source : MERGE4.3

There are four alternative sources of nonelectric energy in the model (oil, gas, cldu, renewables) plus a backstop technology, as given in Table 2. Table 2. Nonelectric energy supplies
Technology CLDU Oil Gas RNEW NEB Source : MERGE4.3 Identification Coal direct uses Oil Gas Renewables energy Nonelectric backstop Carbon emission coefficients (tons of carbon per GJ) 0.0241 0.0199 0.0137 0.0000 0.0000

The original MERGE model has 9 regions. Indonesia is part of Rest of the World. For our purposes, we split this region into two. In the current version of the model 3

(MERGE4.3I), it has been extended to ten regions. Obviously, there is no conceptual changes were needed only required changes in the databases and the scenarios. In this section, we will examine the economic effects on Indonesian electric and nonelectric energy of the market from no emissions trading to full global trading both on Annex B countries and non Annex B countries, using MERGE by 10 regions. The ten regions considered are given in Table 1. Note that the countries belonging to the Organization for Economic Co-operation and Development (OECD) (Region 1 through 4) together with the economies in transition (Region 5) constitute Annex B of the Kyoto Protocol Table 3 Regions in MERGE 4.3I
Annex B countries 1. Unite States 2. OECD (Western Europe) 3. Japan 4. CANZ (Canada, Australia, and New Zealand) 5. EEFSU (Eastern Europe and the Former Soviet Union) Non-Annex B countries 6. China 7. India 8. MOPEC (Mexico and OPEC) 9. Indonesia 10. ROW (the rest of the world)

Numerous proposals have been put regarding to controlling greenhouse gas emissions. To analyses the how impact the international climate policy on changing of the electric and nonelectric energy production on Indonesian, we have produce some different scenarios to controlling greenhouse gas emissions. The MERGE4.3I has seven different scenarios are analysed, viz.: Table 4. The scenarios
Scenario REF KAB KBG KAA Emission reduction No Annex B countries Annex B countries Annex B countries China, India and MOPEC Indonesia ROW Annex B countries China, India and MOPEC Indonesia ROW Annex B countries China, India and MOPEC, relative to reference scenario. Indonesia, relative to reference scenario ROW, relative to reference scenario Annex B countries China, India and MOPEC, relative to reference scenario. Indonesia, relative to reference scenario. ROW, relative to reference scenario. Start date 2010 2010 2010 2030 2050 2070 2010 2030 2050 2070 2010 2030 2050 2070 2010 2030 2050 2070 Emissions trade No No All countries No

KAT

All participating countries

KRA

No

KRT

All participating countries

We assumed that all Annex B countries adopt the Kyoto Protocol to reducing of their emission. We assume that Kyoto will be followed by subsequent protocols in all Annex B countries agree to reduce emission by an additional 5% per decade starting in 2020. Then, we assume the all countries but non Annex B countries adopt binding 4

targets and timetables by 2030/2050/2070. The other scenarios non Annex B regions do not have an incentive to increase their emissions before stars reducing their emissions as KRA and KRT scenarios. 3. Business as usual Electrical generating capacity has installed in Indonesia estimated 21.4 gigawatts, it has coming from thermal (oil, gas and coal) sources, 14% from hydropower, and less from geothermal. Beside of government electricity production by Perusahaan Listrik Negara, so called PLN, Indonesia had plans for expansion of power generation by Independent Power Producers (IPP), even it progress no satisfied. Indonesia currently produces electric energy from hydro power generation, remaining initial oil and gas fired and some coal fired. Hydro power production is to decrease till the end of century, but advance combined gas cycle will be change this condition and also will be dominant on electric energy production after 2010 to the second half of century. As of 2010, carbon free technologies start in Indonesian market, nuclear starts 2010 but decrease up to 2100, furtherly high cost and low cost advanced carbon-free technologies produce increase after 2020 and 2060. Carbon free technologies will be dominant to producing electric energy in Indonesian energy market after 2050, in 2060 it will changing from high cost advanced technologies to low cost technology. In this scenario electric energy is no produce from pulverized coal without CO2 recovery and IGCC. Generally, the first of half century electric energy production of Indonesia market dominated by hydro and advanced combined gas cycle and next second of half century carbon free technologies will be in Indonesian market position. On the other word, Indonesian electric energy production is dominated by energy with low emission. In the nonelectric energy, Indonesia produces primarily by oil, gas and some coaldirect uses. Currently Indonesia produces more energy with high emission (oil) and then is to decrease substantially to the end of century; gas stars increasing to the middle of the century but then starts falling gradually before the end of century, obviously gas export vary little over the century (Susandi, 2002). Renewable energy produces after 2030 stars dominated on producing nonelectric energy while oil production decreases dramatically. Some backstop high cost and low cost technologies stars in Indonesian energy market in the middle of century to 2100, even it have less. Carbon emission from nonelectric energy is higher than carbon emission from electric energy sector as indicated by using of oil, coal and gas in Indonesian energy sector for nonelectric energy. 4.1. Emission reduction in Annex B countries If the countries of Annex B commits to reduce their emissions of six greenhouse gases (GHG) average by 5.0% below 1990 levels in the commitment period 2010 and also when trading of emission permits is allowed among Annex B countries freely, Indonesia expands the production of advanced combined gas cycle (gas-n) in electric energy sector, it has be dominated in Indonesian production electric energy during the half of century. In the second half of century, coal of advance combined cycle starts production as continuation of remaining initial coal fired production. High cost advanced carbon-free technologies are negligible in Indonesian energy market. Total production of electric energy in this scenario is more than business as usual.

In the nonelectric energy, oil is primarily produces in Indonesian to the middle of century and some to export even more gas export (Susandi, 2002), and then renewable energy production increases dramatically. Coal will always produces even decrease gradually. Nonelectric backstop technologies are negligible over the century as Indonesia dont participated on international emission reduction yet. Indonesian carbon emission from energy sector higher than business as usual. When trading is enlarged to included non Annex B countries, high cost advanced carbon-free technologies return to producing as the last scenario even smaller than reference scenario while gas-n produces lesser than last scenario. Nonelectric energy production almost the same with the last scenario but renewable energy production earlier in 2020. Indonesia reduces their emissions by reducing coal consumption (Susandi, 2002). Total nonelectric energy productions is more than last scenario but almost the same with the business as usual. 4.2. Emission reduction in Indonesia In the fourth scenario, not only Annex B countries but also all other countries reduce their emission with variation of date as scenarios above. Emission reduction targets are set relative to the emission reduction scenario. Under this scenario, Indonesia electric energy production of coal especially pulverized coal without CO2 recovery; earlier than other scenarios to the middle of century and gas production is lesser than the last scenarios. Total electric energy production is the highest from the last scenarios. Production of nonelectric energy in this scenario, gas production is decrease gradually to the end of century while oil productions longer with more production. Renewable energy production is increasing sharply after 2060. As Susandi (2002), this results indicates coal production shifted forward in time, and gas production is postponed. Oil is imported, as oil demand falls sharply in the rest of the world. When trading is enlarged to all participating countries, pulverized coal without CO2 recovery produces highest to electric energy starts 2010, and then decrease gradually after 2050. Oil production is the lest in this scenario. High cost advanced carbon free technologies produces in electric energy sector as business as usual but later 2050. Gas of advanced combined cycle is lesser than other scenarios and decrease slightly. In this scenario, nonelectric backstop produces earlier than business as usual start 2060, others nonelectric energy production almost the same with the last scenario. If emission reduction targets are set relative to the business as usual scenario, Indonesia produce more advanced combined gas cycle to the end century but less pulverized coal without CO2 recover start 2060 and some carbon free technologies. Both gas and carbon free technologies are dominated of electric energy market of Indonesia. Production of nonelectric energy produces primarily oil and renewable energy, but the others are les. Oil production increase to 2040 and then fall sharply after 2050 while renewable energy starts 2060 increases significantly to the end of century. In this scenario gas export increases slightly, and oil import lesser than the previous scenario (Susandi, 2002).

With international emission-permit trade, production of electric energy almost the same with the sixth scenario but more produces carbon free technologies, starts 2040. Gas production in nonelectric energy increasing again after 2040 while coal direct uses decrease gradually. 5. Technology options for emission abatement Nevertheless, MERGE has simulated on Indonesia energy sector only as exogenous technology in economic models related to climate change. We need new version of MERGE with introducing of endogenous technology. Concerning this paths, in this paper we analyze some potential technical change options for emission abatement of Indonesia. There are two classifications of technologies for reducing GHG emission in the energy, transport, and industry sector. It has end of Pipe Technology (EPT) or Improved-Technology (IT). An EPT is proposed to reduce the GHG in the flue/waste gas by treating this gas prior to its venting to the atmosphere. An IT technology is based on a concept and design that it either reduces the GHG emission in the flue/waste gas or will not produce any flue/waste gas. Otherwise an EPT can be incorporated into IT could be the flue gas much cleaner. In this section, we focused a brief overview of Improved Technology could be developed in Indonesia as the technology option. The economic attractiveness of the technology options are shown in Table 5. The yardstick of economic attractiveness used here is the marginal costs of GHG reduction resulting from the adoption of a proposed or suggested technology option in place of a reference technology. The lower the marginal cost the more economically promising technology in reducing the GHG emissions. Furthermore, negative value of the marginal cost means that the total annual (investment plus operating) cost of the technology is lower than that of the reference technology. The table ranks the technologies in each category according to economic attractiveness. Note that, among the improved technology for power generation, solar photo voltaic power plant presently ranks next to last (marginal cost per reduced GHG of 0.15 US$/kg), but it will presumably ranks third in the future (2005 2015; marginal cost per reduced GHG -0.025 US$/kg) because predictions indicate that technological advancements will reduced its installed cost down to one-seventh of the present value. Though economically attractive, LWR nuclear power plant has a critical prohibitive factor inherent to it, i.e. the high human life risk resulting from operational accidents. Considering this, the application of nuclear technology to power generation in Indonesia seems has be wait until the LMFR technology, which is advocated as safe and efficient but presently still in demonstration stage, become mature and reach commercialization. All the improved technologies for road transportation shown in Table 5. are based on alternative fuels and have positive marginal (incremental) costs. This may lead one to think that improving the efficiency of conventional (fossil fueled) vehicle might be more economically attractive and, thus, a better alternative. However, the quality and quantity of roads in Indonesia, though continually improved and expanded, are on the average less than adequate to accommodate the rapidly increasing number of cars. 7

Therefore, urban transportation vehicles often are trapped in traffic jams or forced to move at less than optimum velocity. This results in excessive fossil fuel consumption and its consequential GHG emissions. Abatement of such emissions will thus be truly effective through the use of alternative fuels that are less GHG emitting. Among these, Table 5. shows that ethanol fueled vehicles stands out as the most economically attractive option for reducing the GHG emissions resulting from road transportation. Considering that the fuel is derived from renewable sources, i.e. carbohydrate or biomass, Indonesia has a quite large potential to produce it and the production could result in the absorption of a much larger number of workers and the more even spreading of economic welfare, ethanol fueled vehicle technology should be given a high priority. 6. Discussion and Conclusion This paper has investigated the implications of international emission reduction to Indonesian electric and nonelectric energy sector from no emissions trading to all countries trading. Our results show that if Annex B countries reduce their emission without any trading, Indonesia would produce higher gas than business as usual scenario. Much of oil and coal produce to domestic needs and some gas export (Susandi, 2002). While Indonesia starts reduce their emission; it produces more energy with low emission to electric and nonelectric energy sector as switch from coal. By contrast, production of energy with the low emission in Indonesia is highest if scenario set relative to business as usual, start the beginning of century. Some potential energy with low emission technologies produces by different date as balancing of the other source of energy. Generally for all scenarios in electric energy, Indonesia has potential produces gas to the middle of century and switch by low cost advanced carbon free technologies. Oil production will dominated in nonelectric energy market and then decrease sharply after 2040, nonelectric energy production will be changing with the low emission technologies such as renewable energy. We considered to reduce of emission from industry energy as the highest GHG emission in Indonesian energy sector (ADB, 1997). To do this development of hydropower and geothermal for electric generation have large potency with the low marginal cost per unit output.

Table 5. Economic Attractiveness of Technology Options for Greenhouse Gases (GHG) Mitigation/Abatement.
No. 1. 2. Sector and category Home water heating technology Add-on and end-of-pipe technology for fired furnaces Improved technology for power generation Technology Options Solar Water Heater Combustion-Air Preheat Flue gas utilization for microalgae cultivation CO2 Recovery and Disposal to reservoir Geothermal Power Plant Hydropower Plant Biomass Cogeneration Power Plant Nuclear Power Plant (LWRa)) Gas-Fired Combined-Cycle Plant Nuclear Power Plant (LMFRb)) IGCCc) Power Plant Solar PhotoVoltaic Power Plant PFBCd) Power Plant Ethanol Vehicles Electric Cars Fuel Cell Vehicles Compressed Natural Gas Vehicles Reference Technology LPG-fired water heater No air-preheating Disposal to atmosphere ditto Pulv. coal power plant Pulv. coal power plant Pulv. coal power plant Pulv. coal power plant Pulv. coal power plant Pulv. coal power plant Pulv. coal power plant Pulv. coal power plant Pulv. coal power plant Gasoline car Gasoline car Gasoline car Gasoline car GHG reduction potential, kg CO2 eq./MWH 1250 133 1000 1000 946 1000 1000 1000 550.4 1000 61.5 1000 5 1693.6 967.8 2080.7 483.9 Marginal cost per unit output, US$/MWH -22 -1.38 50 50 -27.69 -24.15 -10.12 -5.36 -4.53 13.65 6.73 149.39 (-24.74) 24.05 45 151 450 120 Marginal cost per reduced GHG, US$/kg -0.018 -0.010 0.050 0.050 -0.029 -0.024 -0.010 -0.005 -0.008 0.014 0.11 0.15 (-0.025) 4.81 0.0266 0.156 0.216 0.248

3.

4.

Improved technology for road transportation

a) Light Water Reactor; b)Liquid Metal Fast Reactor; c) Integrated (Coal) Gasification Combined-Cycle; d) Pressurized Fluidized-Bed Combustion. Source : ADB, 1997

References Asian Development Bank, 1997, ALGAS : Indonesia Case, Final Report, Manila. Directorate General of Electricity and Energy Development, 1997, National Energy Planning, Jakarta. Directorate General of Electricity and Energy Development, 1998, Statistic and Information of Electric Power and Energy, Jakarta. DGEED (Directorate General of Electricity and Energy Development). 1998 Statistics and Information of Electric Power and Energy, Jakarta. EUSAI (Embassy of the United States of America in Indonesia) 2001 Petroleum Report Indonesia, Jakarta. Grubler, A., and Y. Fuji, 1991, Inter-generational and Spatial Equity Issues of Carbon Accounts, Pergamon Press, Great Britain. Manne A S and Richels R G. 1992 Buying Greenhouse Insurance - The Economic Costs of CO2 Emission Limits, Cambridge: The MIT Press. Manne A S, Mendelsohn R O and Richels R G. 1995 MERGE - A Model for Evaluating Regional and Global Effects of GHG Reduction Policies. Energy Policy 23(1):17-34. Manne A S and Richels R G. 1998 On Stabilizing CO2 Concentrations -- CostEffective Emission Reduction Strategies. Environmental Modeling and Assessment 2: 251-265. Manne A S and Richels R G. 1995 The Greenhouse Debate: Economic Efficiency, Burden Sharing and Hedging Strategies. Energy Journal 16 (4): 1-37. Manne A S and Richels R G. 1999 The Kyoto Protocol: A Cost-Effective Strategy for Meeting Environmental Objectives? Energy Journal Special Issue on the Costs of the Kyoto Protocol: A Multi-Model Evaluation 1-24. Susandi, Armi., Winarno, Oetomo Tri, 1999, Greenhouse gas Emissions Mitigation Strategy in Indonesian Energy Sector, presented in The Second International Conference on Science and Technology for the Assessment of Global Climate Change and Its Impact on Indonesian Maritime Continent, Jakarta, Indonesia, 29, 30 November - 1 December 1999. Winarno, Oetomo Tri, 1997, Study on Strategies for Greenhouse gas Emissions Mitigation in Energy Sector in Indonesia, Development Studies, ITB, Bandung.

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Figure 1. Production of electric energy of Indonesia Reference scenario

3,0 2,5 2,0

hydro nuclear oil-r gas-r gas-n coal-r coal-n IGCC ADV-HC

2000 2020 2040 2060 2080 2100

TKWH

1,5 1,0 0,5 0,0

ADV-LC

Year

KAB scenario
3,0 2,5 2,0

KBG scenario
3,0

hydro nuclear oil-r gas-r gas-n coal-r coal-n IGCC ADV-HC

2000 2020 2040 2060 2080 2100

2,5 2,0

hydro nuclear oil-r gas-r gas-n coal-r coal-n IGCC ADV-HC

2000 2020 2040 2060 2080 2100

TKWH

TKWH

1,5 1,0 0,5 0,0

1,5 1,0 0,5 0,0

ADV-LC

ADV-LC

Year

Year

KAA scenario
3,0 2,5

KAT scenario
3,0

hydro nuclear

2,5 hydro 2,0 nuclear oil-r 1,5 1,0 0,5 0,0 2000 2020 2040 2060 2080 2100 gas-r gas-n coal-r coal-n IGCC ADV-HC ADV-LC

TKWH

1,5

gas-r gas-n coal-r coal-n IGCC ADV-HC ADV-LC

1,0

0,5

0,0 2000 2020 2040 2060 2080 2100

TKWH

2,0

oil-r

Year

Year

KRA scenario
3,0 2,5

KRT scenario
3,0

hydro nuclear oil-r gas-r

2,5 2,0

hydro nuclear oil-r gas-r gas-n coal-r coal-n IGCC ADV-HC

2000 2020 2040 2060 2080 2100

2,0

TKWH

TKWH

1,5

gas-n coal-r coal-n IGCC ADV-HC ADV-LC

1,5 1,0 0,5 0,0

1,0

0,5

0,0 2000 2020 2040 2060 2080 2100

ADV-LC

Year

Year

Source: Authors model results

11

Figure 2. Production of nonelectric energy of Indonesia Reference scenario

20 18 16

RNEW CLDU NEB-HC NEB-LC OIL GAS

Exajoules

14 12 10 8 6 4 2 2000 2020 2040 2060 2080 2100

Year

KAB scenario
20 18 16

KBG scenario
20 18

RNEW

16

RNEW CLDU NEB-HC NEB-LC OIL GAS

Exajoules

12 10 8 6 4 2 2000 2020 2040 2060 2080 2100

Exajoules

14

CLDU NEB-HC NEB-LC OIL GAS

14 12 10 8 6 4 2 2000 2020 2040 2060 2080 2100

Year

Year

KAA scenario
20 18 16 RNEW 14 12 10 8 6 4 2 2000 2020 2040 2060 2080 2100

KAT scenario
20 18 16

RNEW CLDU NEB-HC NEB-LC OIL GAS

Exajoules

Exajoules

CLDU NEB- HC NEB- LC OIL GAS

14 12 10 8 6 4 2 2000 2020 2040 2060 2080 2100

Year

Year

KRA scenario
20 18 16

KRT scenario
20 18

RNEW

16

RNEW CLDU NEB-HC NEB-LC OIL GAS

Exajoules

Exajoules

14 12 10 8 6 4 2 2000 2020 2040 2060 2080 2100

CLDU NEB-HC NEB-LC OIL GAS

14 12 10 8 6 4 2 2000 2020 2040 2060 2080 2100

Year

Year

Source: Authors model results

12