Indonesia gives up on the energy transition




The Manila Times


In november RPRRL with “reat fanfare, officials from the Asian Development Bank (ADB) and the Indonesian government signed a memorandum of understandM ing (MoU) to launch the Energy Transition Mechanism (ETM). The ETM is a financing model developed by ADB to help heavM ily coal-dependent countries in Asia transition to cleaner sources of energy by facilitating the early retirement of coal-fired generation plants. Indonesia and the PhilipM pines were designated the pilot countries for the program, with Indonesia being the first to launch the ADB-supported ETM. However, the Philippines actuM ally beat them to it: about a week before the signing of the MoU in Jakarta, Ayala’s ACEN announced it had divested its South Luzon Thermal Energy Corp. (SLTEC) holdings in a deal similar to the model under the ADB’s ETM but organized privately. SLTEC owns the 2 x 135-megawatt coal-genM erating plant in Calaca, Batangas, and the end result of the compliM cated transaction is that the facility can be retired in 2040, 15 years sooner than previously planned. That was treated as an auspiM cious start, even though there seemed to be an undercurrent of consternation in ADB’s compliM mentary acknowledgment of the ACEN deal; after all, it had kind of demonstrated that an ETM or an ETM-like initiative didn’t necesM sarily have to rely on governments and multilateral institutions and their bureaucratic pace. Be that as it may, the ACEN deal could at least be considered a successful proof of the concept, and hopes were high that Indonesia could become a model of energy transition, particularly in light of the country’s higher global profile from holding the G20 presidency at the time. Both countries are heavily reliM ant on coal for electricity generaM tion, but Indonesia’s appetite is the highest in the region; it gets about 61.5 percent of its electricity from coal, compared to about 46 percent in the Philippines. Based on its Nationally Determined Contribution (NDC) pledge as part of the 2015 Paris Agreement, Indonesia needs to reduce its overall carbon emissions by 32 percent by 2030 to meet its stated goal of “net zero” by 2060. And it has a long way to go; while various forms of renewable enM ergy make up about 28 percent of the energy mix in the PhilipM pines, they account for less than 10 percent in Indonesia. It is a huge challenge for IndoM nesia, but fortunately it has an excellent tool at its disposal in the ETM, as well as another $20 billion in potential energy transiM tion funding offered by the US and Japan that could complement the ETM. So, what has Indonesia done in the almost-year since the launch of the ETM? If you said, “started the process to apply an early retireM ment model to one or more coal plants,” you’re not thinking outM side the box the way Indonesians apparently do, because what they have done instead is gone all-in on coal power. A study released at the beginM ning of this month by the climate think tank Ember revealed that Indonesia’s per-capita emissions attributable to coal are increasing the fastest among the world’s 20 largest economies, having jumped 56 percent between 2015 and 2022. That is considerably faster than notoriously coal-dependent China (which increased by 30 percent in the same period) and India (29 percent). The report punctuated a discouraging deM velopment in mid-August, when Indonesia shelved the $20 billion in funding from the US and Japan — called the Just Energy Transition Partnership (JETP) — because of an impasse over including a number of newly built or under construction captive coal plants. Indonesia does not want them counted as they are not really part of the overall energy mix, but the point of view of the JETP is that a coal plant is a coal plant, and if a country is accessing funding to transition away from coal power, then it is obviously pretty stupid to be building new ones. Just about the time the Ember report was published, Indonesia took another step deeper into the coal rabbit hole by disclosing that government financial regulators were considering adding new coal generation to the country’s green investment taxonomy. Indonesia’s first version of the taxonomy, published in January of last year, limited the green label to projects sourced from renewable energy. With the advent of the ETM, InM donesia proposed adding coal plants slated for early retirement to the acceptable list; this raised a few eyebrows but was generally considered practical as it would presumably make more funding available for ETM projects. However, adding new coal generation to the green taxonomy has drawn a storm of criticism, as it should. Indonesia contends the green label would only be applied to “clean” coal plants “aimed at the energy transition,” with the specific example provided being a captive coal plant such as the ones that upended the JETP.