Indonesia introduces three options to axe coal plants early

Out-Law News | 04 Nov 2022 | 10:04 am | 1 min. read

Indonesia has introduced three options to let coal-fired power plants be retired earlier than planned, according to a report.

The three options are writing off the plants from the book of Indonesian state-owned electricity company Perusahaan Listrik Negara (PLN); spinning off the plants from public sector ownership using blended financing; and independent power producer refinancing, according to PLN’s director Hartanto Wibowo.

Indonesian state-owned coal miner Bukit Asam has planned to take over an operating 1.05 gigawatts (GW) coal-fired power plant from PLN and shorten its lifecycle from 24 years to 15 years. The shortened lifecycle of the coal plant will reduce lifetime carbon dioxide (CO2) emissions by about 51 million tonnes of carbon dioxide (CO2), and could save up to about US$12 million business cost. It is reported that this deal might use the blended finance scheme.

Climate change expert John Yeap of Pinsent Masons said: “Of the countries in the southeast Asian region that have historically relied on coal fired power plants to fuel their economic growth, Indonesia is showing regional leadership in the steps it is taking to early retire those plants. Other nations in the region may have other challenges, such as the relatively young age of the fleet, or the lack of the required market or regulatory mechanisms to enable such plants to be retired early.” 

“However, for all these nations to meet their net zero commitments, much will need to be done to facilitate the transition from fossil-based power generation towards greater use of renewable energy sources. Progress in the immediate decade will likely determine the region’s ability to meet such targets by 2050-60,” he said.

In November 2021, Indonesian finance minister Sri Mulyani Indrawati said the country could retire all coal-fired power generation by 2040 with enough financial support from the international community.

In the meantime, Indonesia joined a pilot programme to support its transition from coal to clean energy, set up by global climate finance body the Climate Investment Funds (CIF).

Indonesia signed the COP26 Global Coal to Clean Power Transition statement. However, it excluded a clause promising to “cease issuance of new permits for unabated coal-fired power generation projects, cease new construction of unabated coal-fired power generation projects and to end new direct government support for unabated international coal-fired power generation”.

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