CCS Technologies and Its Deployment Opportunity in Indonesian Power Sector  

Indonesia has made significant strides in Carbon Capture and Storage (CCS) project development and legal framework implementation in recent years. With 19 ongoing CCS/CCUS projects and two national-level CCS regulations, Indonesia is leading the ASEAN region. However, the efforts have primarily focused on the oil and gas sector, where the technology complements enhanced oil recovery (EOR) operations. Despite this focus, CCS technology offers promising solutions across various industrial sectors. 

In the power sector specifically, CCS presents a viable pathway for decarbonising coal-fired power plants, which currently form the backbone of Indonesia’s electricity generation. By capturing up to 90% of CO2 emissions from power generation, CCS allows these essential facilities to continue operating while significantly reducing their carbon footprint. This is especially crucial for Indonesia’s younger coal plants that have decades of operational life remaining, where premature retirement would result in significant stranded assets. 

However, adopting CCS technology in the power industry, particularly for retrofitting coal-fired power plants owned by PLN, Indonesia’s state-owned electricity company, poses significant challenges. PLN has committed to achieving carbon neutrality by 2060, but as highlighted during the Focus Group Discussion with their representatives at the PLN COLONY CCUS Workshop and Forum in November 2024, several hurdles remain. These include high capital costs, technical complexities, and significant uncertainties due to the limited number of pilot CCS projects in the power sector. This contrasts with the comparatively well-established application of CCS technology in the oil and gas industries. 

High Capital Cost of the CCS Deployment in the Power Sector  

The cost of CCS projects arises from three main phases: capture, transport, and storage. Among these, the capture phase often constitutes the largest cost component, accounting for up to 70% of the capital expenditure (CAPEX) of a capture plant. For CCS in oil and gas projects, the capture process is already integrated into the business process, resulting in lower costs compared to other sectors, such as power plants. This cost advantage is further amplified by the relatively higher CO₂ content in oil and gas streams (>95% in natural gas processing), compared to the flue gases of coal-fired power plants, which have lower CO₂ concentrations (12–15 mol-%). Lower CO₂ concentrations necessitate the use of stronger solvents, which increases the capture plant’s cost. Additionally, post-combustion capture technologies in the power sector must address high levels of SOx and NOx contaminants, further driving up expenses. 

The storage phase adds another layer of complexity and cost to CCS implementation. Unlike the oil and gas sector, where suitable storage assets are often located near emission sources, such as natural gas processing plants, the power sector faces greater logistical challenges. Power plants are typically situated farther from viable storage sites, leading to increased transportation costs. In comparison, studies on CCS costs in oil and gas projects estimate ranges of USD 19-34/tCO2 for processes with concentrated CO₂ streams and USD 35-105/tCO2 for diluted gas streams. In contrast, CCS in the power sector is significantly costlier, with costs estimated at USD 86-130/tCO2 for gas-fired power plants and USD 50-65/tCO2 for coal-fired power plants. 

Adding to the financial burden, a study shows that installing CCS technology in a 600 MW coal-fired power plant in Indonesia requires a capital investment of up to USD 743 million and an operational expenditure of approximately USD 65 million annually. This deployment also introduces an “efficiency penalty” of up to 30% at 90% capture rate. Both factors could potentially double electricity prices, creating significant tension with Indonesia’s regulated electricity tariff system, which aims to maintain affordable power for the public and PLN’s responsibility to balance public service obligations with financial sustainability. 

To further complicate matters, current financing mechanisms are insufficient to bridge the economic gap for CCS deployment. Indonesia’s existing carbon price, with its low rates (USD 2.13/tCO2e) provides minimal incentives for CCS adoption. Additional financing mechanisms, such as shared-cost allocation, while appealing for risk distribution, introduce complex bureaucratic challenges in managing and auditing public funds. These challenges make such approaches less attractive to business operators, further limiting the viability of CCS in the power sector. 

What Can be Prepared and Improved?  

To implement CCS as a viable decarbonisation strategy in Indonesia’s power sector, several preparatory and improvement measures are essential. Tackling the capital cost barrier requires innovative financial instruments. These could include tax rebates for imported CCS components with low domestic content and concessional financing through low-interest loans to address substantial capital requirements. Establishing a dedicated CCS technology adoption fund could provide sustained support for implementation, while risk-sharing mechanisms between the public and private sectors would help distribute financial burdens equitably. Furthermore, international financing must play a pivotal role in this transition, offering additional resources and expertise. 

Cost reductions can also be achieved through industrial clustering for CO₂ capture. Instead of relying on a single source, such as an individual power plant, multiple industrial facilities within a region could connect to a shared CCS infrastructure. This would allow economies of scale to significantly reduce overall capture, transport, and storage costs. The role of international finance cannot be overlooked in this transition. Foreign investment signals, particularly those targeting high-level investors, could play a crucial role in accelerating CCS deployment. However, these investments need to be supported by clear performance metrics and risk-sharing mechanisms that minimise the potential risks that could occur on both sides during the implementation of the CCS project.   

Pushing for CCS Regulation across the Entire Value Chain 

The regulation for CCS in Indonesia must comprehensively address the entire value chain: capture, transport, and storage. Currently, the regulatory framework (such as the Presidential Regulation No. 14/2024 and the Ministry of Energy and Mineral Resource’s Regulation No. 2/2023) focuses primarily on storage, leaving critical gaps in the capture and transportation stages. For instance, in the capture phase, it is essential to establish clear guidelines on whether industrial sectors are permitted to vent CO2 or if mandatory capture requirements will be imposed. Similarly, for the transportation phase, while natural gas pipelines are regulated by BPH Migas, there is an urgent need to introduce specific regulations for CO2 pipelines. 

By bridging regulatory and operational gaps, Indonesia can unlock the full potential of CCS in its power sector, contributing to a sustainable and low-carbon energy future. It is vital to design CCS requirements that not only advance decarbonisation goals but also safeguard the reliability of the nation’s electricity supply. Equally important is fostering collaborative action across sectors to ensure effective knowledge exchange and capacity building. The ASEAN CCS-CCUS Working Group, as highlighted in the Joint Ministerial Statement of the 42nd ASEAN Ministers on Energy Meeting, represents a promising platform for such cooperation. By embracing these initiatives, Indonesia can position itself as a regional leader in deploying CCS, setting a benchmark for integrating innovative climate solutions in the power sector.