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Analysis: RI receives flurry of global pledges to help retire coal plants early
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Smokestacks at the Suralaya coal-fired power plant belch fumes into the skies above Cilegon, Banten, on Sept. 21, 2018. International pressure to accelerate decarbonization may force Indonesia’s hand in transitioning from coal. (AFP)
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ndonesia has received pledges totaling US$20 billion from developed countries and global private lenders through the Just Energy Transition Partnership (JETP), led by the United States and Japan, to help the country retire its coal power plants, bringing forward the power sector’s peak emissions target to 2030 and achieving net-zero emissions by 2050. The JETP scheme is complemented by another global fund led by the Asian Development Bank (ADB) for Indonesia’s energy transition.
According to a US Treasury official, the Indonesia JETP, which had been more than a year in the making, “is probably the single largest climate finance transaction or partnership ever”. The scheme is based on the $8.5 billion JETP, led by the US, the United Kingdom and the European Union, for South Africa’s coal phase-out program, launched during last year’s COP26 climate conference in Glasgow.
Indonesia’s $20 billion JETP program comprises $10 billion in public sector pledges in the form of grants and concessional loans from multilateral development banks and the International Partners Group (IPG) coled by the US and Japan that also includes Canada, Denmark, the EU, France, Germany, Italy, Norway and the UK. The other $10 billion derives from the investments of private financial institutions coordinated by the Glasgow Financial Alliance for Net Zero (GFANZ), which includes the Bank of America, Citi, Deutsche Bank, HSBC, Macquarie, MUFG and Standard Chartered.
To access the loans, which are to be made available over a period of three to five years, Indonesia needs to develop a comprehensive investment plan to achieve its new targets. These include bringing forward the deadline of the power sector’s peak emissions target by seven years to 2030 and reducing its peak emissions target to 290 million tonnes of CO2 from a baseline value of 357 million tonnes of CO2. In addition, Indonesia has also committed to bringing forward the power sector’s net-zero emissions target by 10 years to 2050.
In addition to the JETP, Indonesia has also secured pledges from a group of development banks, private lenders and philanthropic institutions led by the ADB to buy up or refinance coal power plants for retiring them early, as well as to build renewable power plants under the Energy Transition Mechanism (ETM). The government has assigned PT Sarana Multi Infrastruktur (SMI) to manage the ETM country platform and coordinate the fund, though no pledges have been made under the mechanism to date.
Meanwhile, the government, the ADB and independent producer Cirebon Electric Power agreed on Monday to provide between $250 million and $300 million to refinance and prematurely retire the 660-megawatt Cirebon 1 coal-fired power plant in West Java as the ETM’s first project. The power plant is to be shut down 10 to 15 years before the end of its operating life of 40 to 50 years.
The government has targeted retiring a total of 33 coal-fired power plants with a combined capacity of 16.8 gigawatts and build renewable energy power plants of up to 700 GW to achieve its new Nationally Determined Contribution (NDC) targets in 2030 and net-zero emissions by 2060.
