Indonesia seeks ADB funding to retire coal power plants

Market: Coal
05/10/23

Indonesia's energy ministry (ESDM) has requested financial support from the Asian Development Bank (ADB) to help fund efforts to accelerate the retirement of the country's coal-fired power plants.

The ESDM is looking for external funding because of the high investment needed for the project, which is one of the pillars of Indonesia's decarbonisation plans. The state budget will be unable to cover the costs needed for the successful implementation of the retirement plan, the ESDM said.

Indonesia and the ADB signed an initial agreement in November 2022 to jointly explore the early retirement of the 660MW Cirebon-1 coal plant as part of the ADB's Energy Transition Mechanism. The refinancing needed to shorten the operational life of the coal plant by 10-15 years is expected to cost $250-350mn. It is hoped that similar financing could be extended to other coal power plants identified as candidates for early retirement, the ESDM said.

The Indonesian government originally planned to use the funding pledged in the international Just Energy Transition Partnership (JETP) totalling $20bn for the early retirement project. But JTEP sponsors expressed disinterest in the partnership, preferring instead to use the funding for the development of new renewable energy projects. The government is pushing for early retirement, as the country currently has an oversupply of power and additional renewable energy plants will only widen the gap. The JETP between Indonesia and its international partners calls for renewable energy to comprise 34pc of Indonesia's power generation by 2030.

Jakarta is aiming to remove up to 6.7GW of coal-fired generation capacity by 2040. This will be done in two parts, the decommissioning of old coal power plants totalling 3.2GW and 3.5GW from the early retirement of newer plants.

The country is aiming to completely remove coal-fired power plants from its overall generation mix by 2058 in pursuit of its net zero target by 2060, the ESDM said.

By Antonio delos Reyes

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