In a historic move, Indonesia, in collaboration with the Asian Development Bank (ADB), is set to retire a major coal-fired power plant in Java seven years ahead of schedule. The groundbreaking agreement, under the Energy Transition Mechanism (ETM), aims to expedite the transition from coal to renewable energy, with potential savings of up to US$300 million.
Green Initiative: Early Closure and Emission Reductions
The Cirebon-1 power plant, a crucial energy supplier to Jakarta, is slated for closure by 2035 instead of the originally planned 2042. This bold step is estimated to prevent approximately 15 million tonnes of greenhouse gas emissions, according to Mr. David Elzinga, ADB’s senior climate change energy specialist.
Financial Mechanism: Refinancing and Repurposing Conditions
To achieve this early closure, the agreement involves refinancing the project with a reduced overall cost of capital, akin to lowering mortgage costs. ADB and its partners plan to utilize market-based and concessional funds to achieve this financial restructuring. Critical conditions include ensuring the funds are not diverted to new coal projects and requiring either decommissioning or repurposing the plant for renewable or low-carbon energy production.
The comprehensive deal, signed by ADB, PT Cirebon Electric Power, PT PLN, and the Indonesia Investment Authority, underscores the commitment to environmental, social, and financial due diligence. The completion of the transaction is anticipated in the first half of 2024.
As the first of its kind, this pilot agreement is seen as a catalyst for similar initiatives across Asia, reflecting a growing global focus on early closure strategies for coal power plants, a major contributor to carbon emissions and air pollution.
Source: straitstimes.com
