Indonesian Coal Plant Retirements Lack Financial Support from Western Nations

KONTAN.CO.ID - NUSA DUA. Western countries are not ready to fund the early retirement of Indonesian coal-fired power plants under the Just Energy Transition Partnership (JETP), a government official said on Monday, a major setback to expedite a reduction in emissions.

The lack of consensus on the plan, which was billed the "single largest climate finance transaction" by a U.S. treasury official when first announced in November, could add to delays to slash emissions by the world's seventh-largest producer of coal-fired power.

"During the discussion it is very clear that they are not eager to provide financing for early retirement," Septian Hario Seto, Indonesia's deputy of investment at its Coordinating Ministry for Maritime and Investment Affairs, told Reuters.

The coalition of western countries, which had planned to deliver $20 billion to help Indonesia decarbonise, have told the Asian nation they were more interested in financing commercial renewable projects, which Seto said it did not need.

"We have excess electricity. So if we continue adding renewable, it will impact our budget," Seto said on the sidelines of the Coaltrans industry conference, adding that Indonesia could also self-finance renewable projects if required.

"Our demands are very clear, early retirement of coal fired power plants and building a smart grid," he said, adding that Indonesia was still in discussions to seek financing for a smart grid under the JETP.

Indonesia had agreed to cap and peak the power sector's carbon emissions at 290 million metric tons by 2030 under the JETP, following commitments by western nations lead by the United States and Japan to provide financial support through a blend of equity investments, grants and concessional loans.

A U.S. embassy spokesperson in Indonesia did not immediately respond to a request seeking comment.

Indonesia worked out a separate deal with the Asian Development Bank in November to retire a 660-megawatt coal-fired power plant in West Java through refinancing of between $250 million to $350 million.

South Africa was the first country to reach a deal under JETP, securing a $8.5 billion financing pledge in 2021, while Vietnam secured $15.5 billion in a deal struck in late 2022.