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ADB funds fossil fuel transition study

Out-Law News | 13 May 2021 | 2:58 am | 1 min. read

The Asian Development Bank (ADB) will fund a feasibility study into the use of an energy transition mechanism (ETM) to speed up the phasing out of fossil fuel power stations.

ETM is a financing vehicle consisting of a combination of equity, debt and concessional funding that will purchase or contractually take over coal power plant assets to speed up their retirement while supporting the scaling up of renewables.

The ADB has asked companies to express an interest in the $1.5 million, two year feasibility study that it will fund. The deadline is 30 May.

The assigned countries include Indonesia, Philippines and Vietnam.

The ETM includes a coal retirement facility and a clean energy financing facility. A pre-feasibility study is expected to be completed by May. It was established under the technical assistance (TA) provided by ADB to support the acceleration of clean energy transition in southeast Asian countries.

ADB is providing $2.25 million for the TA through two technical assistance special funds.

John Yeap of Pinsent Masons, the law firm behind Out-Law, said: “Transitioning away from fossil fuel will be a challenge for developing nations where the issue of affordability remains a challenge. These nations also tend to have fossil based generating assets that have yet to reach their full economic life, which pose stranded cost challenges if they are to be prematurely decommissioned.”

“These challenges cannot be fully managed by the private sector through economic and regulatory considerations alone, which highlights the important role multi-lateral agencies such as the ADB could play in assisting these nations with their energy transition. A holistic approach to energy transition which takes into account considerations that go beyond management by the private sector will therefore be important to ensure equity and fairness for all stakeholders involved in the global net zero challenge,” he said.