The Impacts of Emission Reduction Targets in Indonesia Electricity Systems

Abstract

Climate change policy often contradicts the least-cost objective of electricity generation in developing countries. The objective of our study is to propose electricity generation mixes that can meet emission reduction targets in Indonesia. We estimate the optimal generation mix, costs, and emissions from three scenarios, namely existing power plant planning, and 11% and 14% emission reductions in Indonesia’s electricity sector. The estimations are based on linear programming, input-output analysis, and life-cycle analysis, integrated into an agent-based modeling (ABM) platform. The simulation results confirm the existing power plant planning, which is dominated by coal-based power plants, as the lowest-cost scenario in the short-term; however, this scenario also produces the highest emissions. Emission reduction scenarios have lower emissions due to a higher share of renewables and, therefore, the Indonesian electricity system is robust from fossil fuel price increases. In the long-term, costs incurred in the emission reduction scenarios will be lower than electricity generation costs under the existing power plant planning. Our findings should be a basis for re-evaluating energy policies, power plant planning, and the research agenda in Indonesia. Keyword: linear programming, agent-based modelling (ABM), input-output analysis, life-cycle analysis