NEWS

Captive coal-fired power plants hinder Indonesia energy transition deal

A $20 billion climate financing deal between Indonesia and a group of industrialized nations led by the U.S. and Japan has hit a snag due to captive coal-fired power plants.

Indonesia was supposed to launch an investment plan on Aug. 16 that underpins the deal, called the Just Energy Transition Partnership (JETP), but the launch was delayed to late 2023 because emissions from captive coal plants that are in the pipeline haven’t been included in the plan.

Indonesia will use the money from the JETP deal to cap its emissions from the power sector at 290 million metric tons of CO2 by 2030, down from 357 million metric tons of CO2 that are estimated to be released under a business-as-usual scenario.

When emissions from upcoming captive coal plants are accounted for, the 2030 baseline emissions increased significantly, making it more difficult for Indonesia to hit the target.

Indonesia’s deal with industrialized countries for the latter to channel $20 billion in funding to help speed up the former’s energy transition is hitting a snag due to captive coal-fired power plants. Indonesia is among the world’s biggest consumers of coal, the single largest energy source of planet-heating carbon dioxide. Last year, Indonesia burned more coal than any other year, putting the country on track to become one of the largest carbon emitters from fossil fuel in the world. Therefore, to mitigate global warming, Indonesia has a plan to accelerate the retirement of its existing coal-fired power plants and to develop renewable energy.

Last year, a coalition of industrialized nations led by the U.S. and Japan signed a deal with Indonesia to help the country in its energy transition. Under the deal, called the Just Energy Transition Partnerships (JETP), the G7 group of industrialized countries, plus Denmark and Norway as well as private financial institutions, pledged to channel $20 billion to Indonesia. Indonesia is the second country in the world to have the JETP deal after South Africa. Therefore, analysts hope the Southeast Asian country could be a model to get other developing countries off coal power. Before the money can start pouring in, Indonesia needs to come up with a plan for how it will spend the $20 billion.

In February, the Indonesian government established a secretariat to formulate the document, called the comprehensive investment and policy plan. The JETP secretariat was scheduled to finish drafting the investment plan and release it to the public Aug. 16. The secretariat has submitted a draft of the plan to the government and the JETP partners, but the comprehensive strategy will not be made public until late this year.

In a statement, the secretariat said it had to go back to the drawing board because unspecified “additional data” need to be included in its analysis.

These “additional data” are related to emissions from the country’s captive coal-power plants and mineral processing infrastructure, according to the Institute for Essential Services Reform (IESR), a think tank that is part of the secretariat’s technical working group.

Under the JETP deal, Indonesia aims to cap its greenhouse gas (GHG) emissions from the power sector at 290 million metric tons by 2030, down from 357 million metric tons of CO2 that are estimated to be released under a business-as-usual scenario.

This baseline value of 357 million metric tons comes from a calculation made by the International Energy Agency (IEA), which was requested by the Indonesian government to develop a comprehensive road map for the country to reach net zero emissions by 2060.

In the road map, which charts a path for the country’s energy transition over the coming decades, the IEA used government data, which include data on captive coal power plants aimed at supplying industrial and commercial consumers without feeding into the grid.

But the data used in the IEA report were not the most recent. Since the report was written, many captive coal plants have gone online, IESR executive director Fabby Tumiwa said.

So when the JETP secretariat’s technical working group calculated Indonesia’s projected emissions in 2030 again using the latest data, which included the recent captive coal plants that went online, the projections were significantly higher than 357 million metric tons, he said.

“When [emissions from] all these [new captive coal plants] were calculated, we came up with a new emission baseline for 2030 that’s much higher than the one calculated by the IEA in 2021,” Fabby told Mongabay. This increase in the 2030 baseline emissions makes it more difficult for Indonesia to hit the target to cap its power sector emissions at 290 million metric tons.

https://news.mongabay.com/2023/08/captive-coal-fired-power-plants-hinder-indonesia-energy-transition-deal/