JAKARTA: Indonesia’s early coal retirement programme has received paltry funding in the Just Energy Transition Partnership (JETP), which experts say indicates how hard it is to persuade donors and financial heavyweights to back the programme.
According to the draft investment plan, only around US$1.5bil of the US$21.5bil total pledged for Indonesia’s JETP is designated for the early retirement and managed phaseout of coal-fired power plants in the country.
That figure could rise to around US$4.1bil if Indonesia could use other funds, currently have no defined project or programme to be allocated for.
Andri Prasetiyo, a researcher at Senik Centre Asia, told The Jakarta Post that the small portion of funds allocated for early coal retirement was inseparable from donors’ judgment that the programme was commercially unviable.
The miniscule amount of grants for the JETP had also proved challenging for Indonesia, as he understood this was why the government had opted to delay its plan to retire the country’s coal plants early.
Of the total US$21.5bil pledge, only US$300mil were grants, including those designated for technical assistance.
Meanwhile, commercial loans comprised the lion’s share of US$10bil in pledges from private financial institutions, coordinated through the Glasgow Financial Alliance for Net Zero (GFANZ).
Following these were US$6.9bil in concessional loans and then US$2.1bil in guarantees from multinational development banks and the International Partners Group’s (IPG), coled by the United States and Japan.
The government is now planning to start retiring coal plants no earlier than 2035, compared to its previous commitment to begin the phaseout by 2030.
The plan foresees that coal-based power-generating capacity will be reduced by 1.7 GW by 2040 through early retirement of plants.
“The early coal retirement programme is not attractive from the business as usual approach, so grants from rich countries are the most ideal type of funding,” said Andri.
“It is a form of (their) climate commitment and responsibility as large emitters for reaping obscene profits from fossil fuel,” he explained.
Indonesia has been battling with surplus electricity, most of which is generated by coal-fired power plants. Experts say the excess supply has partly contributed to hindering the country’s transition to renewables.
“Early retirement of coal-fired power plants is and should be part of Indonesia’s energy transition,” the US Embassy in Jakarta said in a statement on Nov 7.
“It is one of the five key investment focus areas outlined in the JETP investment plan, and it should happen in tandem with a build-up of affordable renewable energy sources.”
Separately, the Japanese Embassy said last Wednesday that retiring coal plants early was crucial to Indonesia’s energy transition.
It also said Tokyo had shown its commitment to help kick-start the project by providing US$25mil for the Energy Transition Mechanism (ETM), which the Asian Development Bank (ADB) established during COP26 in 2021. — The Jakarta Post/ANN
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