Speeding up coal retirement
Biden-jokowi mega deal is just one step to turn nation green
A MASSIVE deal worth Us$20bil (Rm91bil) with the US and Japan will kick-start Indonesia’s drive to wean itself off coal power, though the country may still need trillions more to reach net-zero emissions while meeting growing demand for energy.
US President Joe Biden and Indonesian President Joko “Jokowi” Widodo announced the climate finance deal, known as the Just Energy Transition Partnership, or JETP, on Tuesday at a meeting of Group of 20 (G20) leaders in Bali.
In exchange for a mix of funds from government and private sources, Indonesia has committed to retiring South-east Asia’s largest coal power fleet and reaching net-zero emissions from its power sector.
But even after retiring coal plants and boosting renewables, Indonesia has a long way to go in providing clean energy for a growing economy where per-person energy use is a fraction of richer nations.
Setting aside a rapid energy transition, Indonesia would still require US$2 trillion of investment into its energy system through 2050, according to Bloombergnef.
Reaching net-zero by 2050 could cost US$3.5 trillion (RM15.9 trillion).
The JETP arrangement is a good start. Some of the funding will be used for renegotiating debt tied to existing coal plants, so they can retire early without financial penalties.
The deal is crucial on this front for Indonesia, where one of the main hurdles to building more renewables is a surplus of coal power plants with contracts that guarantee they get paid whether they generate or not.
Until those plants start to shutter, there’s little room on the grid to add clean energy.
The good news is that Us$20bil can go a long way toward speeding up coal retirements.
The Jakarta-based Institute for Essential Services Reform estimated that it would cost Us$28bil (Rm127bil) to expedite retirements by 2050.
And London-based Tranzitionzero said Us$37bil (Rm168bil) would be needed to buy out existing contracts and close all plants by 2040.
“JETP should be the final piece of Indonesia’s puzzle to accelerate its energy transition,” said Achmed Shahram Edianto, Asia electricity analyst for climate research firm Ember.
“Under the JETP, Indonesia should maintain its remarkable momentum and show its leadership on accelerating the efforts to fully decarbonise its energy sector.”
Indonesia is rich in coal, with a mining industry that leads the world in fuel exports and employs about 250,000 people.
The nation also has one of the highest shares of coal power generation in its electricity mix.
Indonesia’s coal output began to soar in the 1990s, when the country anticipated a boom in demand for electricity and invested heavily in coal power.