System dynamics approach in determining coal utilization scenario in Indonesia

Abstract Indonesia plays an important role in the global coal market. In 2018, Indonesia ranked as the 5th largest coal producer and the 2nd largest coal exporter in the world. However, only 21% of the production volume is utilized in the domestic market. In the future, Indonesia's coal production is expected to continue to increase due to the growth in coal demand for electricity generation. This research aims to predict the future of coal production in Indonesia to support economic growth with less damage to the environment and examine its contribution to the national primary energy mix as a part of national energy policy. System dynamics model is utilized, which simulates the future of coal supply and demand in relation to the availability of coal reserves, the interaction between coal and its substitutes, economic growth, and the price of commodities. Four scenarios are introduced to analyze the impact of coal utilization to the economy and environment, which are Business as Usual (BaU), Economic Growth Priority (EGP), Policy Regulation (PR), and Environmentally Oriented (EO) scenario. The results show that coal production in Indonesia will continue to increase in the future. The EO scenario will be the best alternative for future energy policy in Indonesia because of its ability to fulfill both economic growth and low carbon intensity target. Furthermore, the EO scenario also able to achieve the government target in primary energy mix in 2030 with 33.5% of coal, 19.4% of oil, 7.8% of gas, and 39.3% of renewable energy.