Can Southeast Asia afford to retire its coal plants?
- Category
Governance
- Published
6th Jan, 2024
-
Context
Indonesia and Vietnam will need to balance their sustainability ambitions and financing, with the reality that many of the power systems already approved for construction will be coal-fired.
About
About Just Energy Transition Partnership (JETP):
- In recent developments, Indonesia and Vietnam have unveiled their plans to utilize funds from the Just Energy Transition Partnership (JETP), a G7-backed initiative, to drive sustainable development.
- The JETP, supported by the International Partners Group and private banks in the West, aims to allocate €18 billion to Indonesia and €14.1 billion to Vietnam for their green energy transition efforts.
Indonesia's Ambitious Roadmap
- Targets and Projects
- Indonesia aims to raise the share of renewable energy in its power generation to 44% by 2030, a significant increase from the previous target of 34%.
- The Comprehensive Investment and Policy Plan outlines 400 priority projects, seeking substantial investment from JETP donors.
- Public Involvement
- The plan is currently in draft form, with the Indonesian government actively seeking stakeholder inputs to formulate a final investment plan expected to be released next year.
- EdoMahendra, Head of Indonesia's JETP Secretariat, emphasizes the public's role, stating that energy transition is a matter of public interest.
Funding Sources for Indonesia
- Government and Development Banks
- Japan, the US, and European governmentsand development banks will contribute half of the JETP funds, primarily in the form of loans.
- Notable pledges include nearly €1 billion from the European Investment Bank, €500 million from the French Development Agency, and almost €1.3 billion from Germany.
- Private Financing
- The remaining €9 billion will come from private financing through the Glasgow Financial Alliance for Net Zero, involving key financial institutions such as BlackRock, Bloomberg, Brookfield, and HSBC.
- The initial $10 billion aims to jump-start clean energy investment, with the expectation that the private sector will follow suit.
Vietnam's Vision at COP28
- Equity Investments and Grants
- At COP28, Vietnamese officials outlined their vision for utilizing €14.1 billion in equityinvestments, grants, and concessionary loans from JETP.
- The initiative has garnered support from the International Partners Group, private banks, and investors, showcasing a collaborative effort in sustainable development.
Concerns and Controversies
- Leaked Documents and Disappointments
- Reuters reported that only 2% of the €7.3 billion committed to Vietnam will be in grants, raising concerns about the substantial reliance on loans, some of which are at market rates.
- Indonesia's plan has faced criticism for excluding power plants supplying off-grid systems, potentially neglecting significant capacity and future projects in the coal sector.
- Decarbonization Challenges
- Indonesia acknowledges the need for a detailed study and roadmap on decarbonizing off-grid captive power systems, addressing concerns raised by stakeholders.
- The EU ambassadorto Indonesia emphasizes the opportunity to collaborate on off-grid decarbonization pathways.
Regional Dynamics and Future Challenges
- Comparison with China's Investments
- In contrast to China's direct investments, there are concerns in Vietnam and Indonesia about the nature of the support they receive through JETP.
- Critics argue that some proposals may be unambitious, potentially allowing for the continued development of unsustainable energy production.
- JETP's Regional Impact
- South Africa and Senegal have already joined the JETP, while India and China grapple with vast numbers of permitted and under-construction coal-fired power stations.
- JETP's impact on the region's sustainability ambitions is a subject of ongoing debate, highlighting the complexities of balancing national interests and environmental commitments.
Way Forward:
- As Indonesia and Vietnam navigate the challenges and opportunitiespresented by the JETP, the success of these initiatives hinges on effective collaboration, transparent planning, and responsiveness to stakeholder concerns.
- The region's journey toward sustainable development underscores the delicate balance between economic growth and environmental responsibility.