The energy paradox: Cheap versus clean
January-March 2018
By: Bob S Effendi

Every developing country dreams of achieving a prosperity level similar to the United States or European countries, with a per capita gross domestic product above $35,000. Turning these dreams into reality, however, is a daunting task. The per capita GDP of most developing countries is less than $10,000. Simply put, half of the world’s population lives on less than $2.50 a day, and about 1.2 billion people live without electricity. The biggest challenge humanity faces right now is poverty alleviation.

Economic growth has a direct relationship with energy – specifically, electricity. Robert Ayres, an economist with INSEAD, the international graduate business school, shows that every one kilowatt-hour (kWh) of electricity consumption contributes about $4 to GDP. Ayres asserts that electricity is the actual driver of economic growth, not investment, as most economists believe.

Developing countries need about 10,000 kWh per person annually to reach the level of prosperity enjoyed by the United States. Indonesia consumes around 900 kWh per person, per year (a 100-watt average), and China about 4,000 kWh per year (a 450-watt average). But for electricity to lead to prosperity it must be cheap and affordable. For Indonesia, electricity needs to cost less than $0.11 per kWh, the price consumers now pay. The only such sources of reliable energy that can meet this price are hydro and coal, but hydro resources are limited and require large areas of land far from the points of demand. Consequently, Indonesia and most developing countries have come to depend on cheap and dirty coal to power their economies.

Bill Gates said the single most important thing you can do to alleviate poverty is to provide cheap and clean energy, a quest that Gates has called “the energy miracle.”

The energy paradox

Adding climate change to the equation creates a conundrum for developing countries that signed the Paris climate accord. To achieve prosperity, they need cheap energy that pollutes, but to save the planet, they need clean energy, which is not affordable. This is the energy paradox.

A case in point is a recent Indonesian government decree, No 12/2017, issued by the Ministry of Energy and Mineral Resources, which caps the feed-in tariff for renewable energy sources at 85 percent of the regional electricity production cost, at around 10 cents per kWh, far below the previous feed-in tariffs of 18 cents to 25 cents per kWh. This decree has put a hard brake on renewable energy investment in Indonesia. Paul Butarbutar, of the Indonesian Renewable Energy Society, said there was a lack of transparency from the government regarding this issue. In The Jakarta Post newspaper last May, he said the country’s energy law required that energy prices, or tariffs, be based on “just economic value,” consisting of production, conservation and environmental costs, in addition to ensuring that the public can afford the electricity. Again, the energy paradox.

Indonesia’s pragmatic energy minister, Ignasius Jonan, given a choice between clean energy and cheap energy, chose the one that will boost the economy – cheap energy – which can be read from his controversial statement: “Renewables also need to compete with the big boys.” This “grow, then clean up later” paradigm follows in the footsteps of China and India. Even Germany, the climate change champion, despite all its hype about renewables, still mainly powers its economy with coal, following the pragmatic approach.

Another example of the energy paradox is the United States’ withdrawal from the Paris accord. According to President Donald J Trump, the climate change mitigation program has impacted the American economy, could cost it 2.7 million jobs by 2025 and reduce GDP by nearly $3 trillion by 2040. Given the choice between prosperity first and climate first, both Trump and Indonesia’s energy minister have chosen prosperity.

The situation in Indonesia illustrates how the clean and cheap energy pathway for developing countries is nonexistent. Rich countries can afford whatever energy source they choose, but that is not the case for the rest of the world. Even the United Nations assumes that most countries should subsidize renewable energy, without considering that most developing countries have limited financial resources and are likely to have more pressing issues on which to spend their money.

If renewables could run 24-7, they could be the solution for clean and cheap energy. Unfortunately, they can’t. The fundamental reason renewables can’t compete with coal as the primary energy source in most countries is their low power density and intermittency. David MacKay, in his book “Sustainable Energy: Without the Hot Air,” points out that intermittent renewables are a nonsolution to power a whole country, let alone solve climate change, so the 100 percent renewables solution proposed by some scholars is a pipe dream.

As an economic case, renewables have a very low energy return on energy invested: in fact, below the economically viable threshold, making it an unsustainable economic investment unless given some sort of subsidy to sustain its economic viability. According to James Conca, an American writer and energy consultant, energy return on investment is still the best tool to evaluate whether an energy source is sufficient to power our society into the future. In that light, intermittent renewables should be considered a complementary solution, not the solution.

If we cannot find a cheap and clean solution to replace coal, then the paradox will continue – coal will power the planet for the next 100 years. This paradox probably is the hardest challenge humanity faces right now: how to achieve prosperity without polluting and destroying the planet. No country has a workable solution yet, and we need to examine all possible solutions, even if they are only on paper.

The energy miracle

It is obvious that the solution to the paradox is clean, base-load electricity. The choices are: large hydro, geothermal and nuclear. Hydro and geothermal are relatively cheap, but their locations are fixed. We cannot simply move the energy source closer to the load demand, meaning that it cannot replace coal. Nuclear, on the other hand, has the highest power density of all energy sources and can be built near points of demand. Unfortunately, it has two problems. First, there is a negative public perception of the safety of nuclear power. Second, a current conventional nuclear power plant cannot compete with coal on price. This is most probably why energy giants such as Westinghouse filed for bankruptcy.

But it’s a different case for the molten salt reactor (MSR), a liquid fuel-based fission power reactor. Three were built in the 1960s by American nuclear physicist Alvin Weinberg, who also designed the current conventional pressurized water reactor. The MSR was designed for safety and economics. The public’s meltdown fears can be eased – the fuel itself is already melted. So, on paper, the MSR could possibly be the solution to the energy paradox: clean and cheap energy that is affordable for developing countries.

MSR developers have stepped up to the challenge to be competitive with coal and inherently safe. Among them is US-based Thorcon, with a hull-based 500-megawatt complete fission power plant on a barge, which according to its publications can produce electricity at 3 cents per kWh. At this price, Thorcon could compete with coal on price anywhere in the developing world. If so, the solution is only a matter of educating the public and decision makers about the realities of nuclear energy.

Indonesia’s state-owned electricity company, Perusahaan Listrik Negara, state-owned oil and gas company Pertamina and state-controlled mining company Timah have completed a 10-month prefeasibility study on Thorcon’s technology and concluded that it is a doable technology that can be built now and is financially feasible. Next, Thorcon, with Indonesia and international nuclear experts, are to do a technology assessment using tools from the International Atomic Energy Agency, to be completed in early 2018. If satisfactory, this could lead to the construction of Indonesia’s first nuclear power plant.

It seems the only current viable solution for clean, cheap and reliable base-load energy that could possibly replace coal in Indonesia is the molten salt reactor: the energy miracle. So, let’s not waste time on a nonworkable solution to solve climate change and alleviate poverty. Let’s make a miracle happen now in Indonesia, but we must remember that if it’s not affordable, then it will be coal forever. This is the cold, hard reality of the energy paradox. 


Bob S Effendi is founder of the Indonesia Nuclear Professional Association and a member of the Indonesian Chamber of Commerce and Industry’s Task Force for the Acceleration of Renewable Energy Investment.

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