Transitioning from coal to solar: A cost-benefit analysis for sustainable power generation in Indonesia

Abstract

The greenhouse gas (GHG) emissions contribution from power generation in Indonesia reaches 40% of the total GHG emissions in the energy sector because of the use of fossil fuels. The government aims to minimize GHG emissions in the power generation sector, one of which is the phase-out of coal power plants and replacing them with integrated photovoltaic (PV) power plants with battery energy storage systems (BESS). A cost-benefit analysis compared two development scenarios for 2023-2060. The base scenario continues developing coal power plants, and the phase-out scenario replaces coal power plants with integrated PV power plants and BESS. The analysis is solely focused on the financial costs and benefits for power plant investors. The results indicate that the present value of costs for the base scenario from 2023-2036 is initially lower compared to the phase-out scenario. However, in the long term, the costs of the phase-out scenario will gradually decrease and become more affordable. The benefit-cost ratio for the phase-out scenario is 2.36, while the base scenario is 2.12, indicating that the phase-out scenario is more prospective for future development. Additionally, the phase-out scenario has the advantage of achieving the net-zero emissions target by 2056 compared to the base scenario.