The U.S. and other countries have announced a $20 billion financing plan to help Indonesia more quickly shutter the country’s coal-fired power plants and decarbonize its power generation sector.
“We’ve built a platform for cooperation that can truly transform Indonesia’s power sector from coal to renewables and support significant economic growth,” U.S. Special Envoy on Climate Change John Kerry said Nov. 15 during the COP27 climate conference in Egypt. The Biden administration in a statement Tuesday from the G20 summit in Bali, where President Biden is meeting with other world leaders, said the U.S. and Japan will co-lead the effort with Indonesia. Other countries supporting the plan include Britain, Canada, France, Germany, and Italy, along with Denmark, Norway, and the European Union.
The strategy, called the “Just Energy Transition Partnership,” or JETP, will utilize a “mix of grants, concessional loans, market-rate loans, guarantees, and private investments.” Funding will come from both the public and private sector. The White House in its statement said the countries would “pursue an accelerated and ambitious” energy transition plan for Indonesia that “supports a trajectory that keeps within reach a warming limit of 1.5 degrees C above pre-industrial levels.”
‘Committed to Green Economy’
“Indonesia is committed to using our energy transition to achieve a green economy and drive sustainable development,” President Joko Widodo said in a statement. “This partnership will generate valuable lessons for the global community and can be replicated in other countries to help meet our shared climate goals through concrete collaborative actions.”
A U.S. Treasury official in Bali told a news conference the plan was more than a year in the making, and “is probably the single largest climate finance transaction or partnership ever.”
Officials said the Indonesia JETP is modeled on the $8.5 billion initiative to help South Africa more quickly decarbonize its power sector. That plan was launched at last year’s COP26 climate summit in Glasgow, Scotland, and led by the U.S., Britain, and the European Union.
Indonesia as its part of the plan has committed to capping emissions from its coal-dominated power sector at 290 million tonnes by 2030, with that year marking peak emissions. That will enable the country to access the program’s $20 billion in grants and concessional loans over a three- to five-year period, officials said Tuesday.
The plan’s partners in a statement Tuesday said they think the program will eliminate 300 million tonnes of greenhouse gas emissions through 2030, with a reduction of more than 2 billion tonnes through 2060, as coal-fired plants are closed and more renewable energy resources are developed.
Net-Zero by 2050
Indonesia has an announced goal to reach net-zero emissions in its power sector by 2050, 10 years ahead of the country’s current target in its national climate plan. Indonesian officials have said they want to at least double the pace of renewable energy deployment in the country, with an eye toward renewable energy accounting for more than one-third of all installed power generation capacity by the end of this decade.
The U.S. Treasury official in Bali said peak power emissions for Indonesia in 2030 under the plan would be at a level 25% lower than their currently estimated peak in 2037. Indonesia’s annual emissions reduction over those years would be larger than Britain’s annual power sector emissions, the official said.
About a third of the $10 billion in public funding for the plan is expected to come from multilateral development banks and the Climate Investment Funds (CIF) group, according to Mafalda Duarte, head of CIF, which has allocated about $500 million to support Indonesia’s energy transition.
“There is a recognition that this is the first move, a first package of support, and that more will be needed,” Duarte said of the plan announced Tuesday. The JETP program was announced one day after Japan said it would help Indonesia move away from coal-fired power with funding from both public and private groups, including the Japan Bank for International Cooperation (JBIC).
Closure Plan Announced
Indonesia, the Asian Development Bank (ADB), and a private power producer on Monday announced plans to refinance and accelerate the retirement of a 660-megawatt coal-fired power plant in West Java province. It’s the first such move under the ADB’s new carbon emissions reduction financing program.
The groups said the power plant, located in Cirebon about 125 miles from the capital Jakarta, began operating in 2012. It is jointly owned by Marubeni Corp., PT Indika Energy, Samtan Co., Korea Midland Power Co., and JERA, Japan’s largest power generating company.
ADB on Monday said the Cirebon plant was chosen because of its owners’ interest in the plan, and because it has suitable financial structure. ADB said the plant could be shuttered as early as 2037, or 15 years earlier than its planned 40-year service life. The plant’s generation would be replaced with renewable energy.
The bank said the cost to retire the plant is estimated at $250 million to $300 million.
—Darrell Proctor is a senior associate editor for POWER (@POWERmagazine).