PLN, ADB to Plan Early Retirement for Independent Coal Power Plants

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Laila Afifa

18 November 2022 13:42 WIB

TEMPO.CO, Jakarta - PT PLN (Persero) with Asian Development Bank (ADB) plans early retirement of coal power plants through the Energy Transition Mechanism (ETM) scheme. The scheme is adopted to accelerate the energy transition in Indonesia to achieve the net zero emissions (NZE) goal by 2060. 

The collaboration between PLN and ADB is established through a memorandum of understanding (MoU) between PLN and ADB, in which both agreed to explore early retirement plan of a PLTU owned by an independent power producer (IPP), the Cirebon-1 PLTU with ETM scheme as a pilot. 

The MoU was signed by ADB President Masatsugu Asakawa, PLN President Director Darmawan Prasodjo, Cirebon Electric Power (CEP) President Hisahiro Takeuchi, and Indonesia Investment Authority (INA) CEO Ridha D. M. Wirakusumah. The signing was carried out at the launch of the ETM Country Platform in Nusa Dua, Bali on Monday, November 14. 

Finance Minister Sri Mulyani Indrawati said Indonesia is fully committed to overcome climate change by energy transition. To support the commitment, a platform called Energy Transition Mechanism (ETM) was launched and is expected to be an example for other PLTU IPP and even other countries. 

ETM is a cooperation scheme offered by the Indonesian government for various parties to be involved in clean energy projects in Indonesia. The scheme was formed to provide transparency for investors, international donor institutions, and the private sector for clean energy projects in Indonesia. ETM was intended as a base for clean energy projects financing in Indonesia, mixed from all sectors. 

"Through this ETM scheme, we will provide a more transparent platform. By providing this ETM platform, funding by all stakeholders from multilateral development banks (MDbs), bilateral, to private sector, will have the same regulatory scheme to achieve this energy transition," said Sri Mulyani. 

According to Sri Mulyani, this scheme could be a win-win solution for PLN. Because in addition to providing clean and cheap energy for the community, this scheme is said won’t burden PLN's finances in the energy transition process. 

"This fair and affordable energy transition should not make PLN's financial condition worse. This should make PLN's financial situation healthier, but at the same time it can still encourage more significant carbon reduction, and make energy financing in Indonesia more efficient and competitive," Sri Mulyani said. 

Meanwhile, PLN President Director Darmawan Prasodjo said, as a commitment in the energy transition, PLN has developed a comprehensive roadmap to achieve net zero emissions by 2060. 

Furthermore, collaboration between stakeholders plays an important role in accelerating the energy transition. Therefore, PLN welcomes cooperation with ADB through the ETM scheme to help accelerate energy transition in Indonesia. 

"We want more space for EBT to enter our ecosystem and how we can retire coal power plants early. So, under the leadership of the Minister of Finance Sri Mulyani Indrawati, we are building an energy transition mechanism," said Prasodjo. 

ADB President Masatsugu Asakawa said in the MoU, ADB agreed to open detailed discussions regarding efforts to accelerate the termination of the Cirebon-1 PLTU with a capacity of 660 megawatts (MW) belonging to CEP in West Java. This collaboration aims to achieve a significant reduction in CO2 emissions through models that can be imitated and applied to other IPPs in Indonesia, as well as Asia Pacific regions. 

"ADB is proud to be working with Indonesia and our partners to change the energy landscape," Asakawa said. 

After the agreement is reached between the parties, ADB will provide early retirement facilities in the form of senior debt with the power purchase agreement between CEP and PLN shortened through ETM. This step is a part of ADB's commitment to realizing a prosperous, inclusive, resilient, and sustainable Asia and Pacific region while continuing its efforts to eradicate extreme poverty. 

"ETM also provides an example for other countries to forge a path to the zero-emission target. In the future, ADB is committed to supporting this effort throughout Asia and the Pacific," Asakawa explained. 

The President Director of CEP, Hisahiro Takeuchi, welcomed this collaboration. He said he was proud to be able to take part in the energy transition initiative in Indonesia to provide clean energy. 

"ETM provides an innovative approach for companies such as CEP to make a transition from coal to clean energy as well as provide reliable and affordable power for Indonesia's energy infrastructure. This MoU is a big step forward for Indonesia and we are proud to be working with the ADB and the Indonesia Investment Authority," said Asakawa. 

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