SINGAPORE, Sept 24 (Reuters) - Southeast Asian governments
must back the Asian Development Bank's (ADB) plans to expedite
the closure of coal plants in the region with strong regulation
to win funding for the programme, an energy consultancy said in
a report on Friday.
The ADB is leading a group of financial firms that plan to
create a public-private partnership model to buy out coal-fired
power plants and wind them down within 15 years, far sooner than
their usual life.
The model, for which the ADB expects to release further
details by the COP26 climate conference in Glasgow in November,
could be a game changer for Southeast Asia's energy transition
to renewables, the Institute for Energy Economics and Financial
Analysis (IEEFA) said in the report.
For the plan to work, the IEEFA said, regional governments
must support the model with regulation and strong governance so
that outside investors will commit the sums required.
The magnitude of finance to retire up to half of the coal
fleet in Indonesia, the Philippines and Vietnam, for instance,
would be much as $55 billion, the IEEFA report found.
"Unfortunately ... power market decision making (in
Southeast Asia) typically sits with energy, power, or industry
ministries that often have more loyalty to domestic energy
interests and public or private power companies than
price-sensitive power consumers," IEEFA analyst Melissa Brown
said in the report.
The ADB has not yet released full details on what will be
required from participating governments.
Wanhar, a director at Indonesia's Energy and Mineral
Resources Ministry who goes by one name, told a virtual seminar
earlier this week that the government has initiated talks with
domestic power and coal industries in line with a study by the
ADB on how to implement the model in Indonesia.
"There will be a lot of challenges in this (energy
transition), so it is good to have ADB support", he said.
The energy ministry did not respond to queries about any
active discussions with the ADB and the government's view on the
An ADB spokesman told Reuters on Friday it is working with
authorities in Indonesia, the Philippines and Vietnam to study
the model's feasibility.
"We are conducting initial system level analysis, plant
level modelling, and regulatory and policy review, as well as
examining how best to ensure a just transition for affected
communities, workers, and the environment," he said.
Top coal exporter Indonesia has said it will phase out
coal-fired electricity by 2056, but it is wrestling with how to
balance its emissions targets with the cost of pulling the plug
on an industry that contributed $38 billion in export earnings
in the first seven months of 2021.
The ADB model involves buying and operating coal-fired power
plants at a lower cost of capital than is available to
commercial plants, allowing them to run at a wider margin but
for less time in order to generate similar returns.
(Reporting by Fathin Ungku and Melanie Burton; Additional
reporting Bernadette Christina Munthe; Editing by Tom Hogue)