Indonesia has delayed the launch of a $20 billion clean energy plan as it needs more time to bridge divisions with wealthy donor nations on financing terms and new coal plants.
The investment blueprint is supposed to set out how foreign funding will help wean the Southeast Asian country off coal. But international talks on it have been tense, with Indonesia wanting more money on better terms from rich countries.
Originally slated for public release on Wednesday, the Just Energy Transition Partnership (Jetp) document is now scheduled to be officially unveiled later in the year as experts need additional time to develop “a technically credible pathway”, the Jetp Secretariat said in a statement. The Secretariat acts as a coordinating body and represents both Indonesia and the donor countries.
Tense negotiations
The setback follows nine months of tumultuous behind-the-scenes negotiations since the deal between Indonesia and a group of international partners led by the US and Japan was announced at the G20 summit in Bali.
Disagreements over the type of funds provided and technical challenges in ensuring the coal-to-renewables switch have been the biggest roadblocks so far, according to sources with knowledge of the discussions.
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Instead of launching the plan, on Wednesday the Jetp Secretariat submitted a draft document to the Indonesian government and its international partners for further review.
Dadan Kusdiana, Indonesia’s Secretary General of the Ministry of Energy and Mineral Resources, told Climate Home News the government is “committed to the energy transition”, but it will have to review the technical findings “to see if the targets are credible and workable”.
Energy transition targets
The partnership aims to peak Indonesia’s total power sector emissions by 2030, bring the sector’s net-zero target forward by ten years to 2050 and accelerate the rollout of renewable energy to reach at least 34% of all power generation by 2030.
Indonesia relies on coal for nearly half of its electricity production. Coal consumption in the country hit a record high in 2022, while the share of renewables in the energy mix slightly declined. The financial help promised by developed countries aims to reverse the course.
Similar deals have been struck with South Africa and Vietnam, but the Indonesian program is going to face particular challenges.
Whereas South Africa’s Apartheid-era coal plants are close to retirement, Indonesia’s are only on average nine years old, which makes compensating their owners for shutting them down early much more costly. On principle, the program should also strive to make the transition to clean energy fair for more than a quarter of a million people employed by the country’s coal industry.
Major roadblocks
Indonesia’s plans to build new coal power plants to power metal smelters – so-called captive plants – have also raised concerns. A coalition of NGOs recently sent a letter to the Jetp’s funders saying the plans “threaten global climate goals ” and could “stifle any progress” made on the other fronts.
Kusdiana told Climate Home the pipeline of captive plans is among a set of additional information currently being discussed by Jetp partners, alongside the need for a “massive” grid expansion and financial arrangements.
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The announcement said $10bn will come from the public sector and $10bn will be from private banks that are part of the Glasgow Financial Alliance for Net Zero (Gfanz). But the breakdown of how much this will come in the form of grants or loans – and on how favourable terms those loans will be – has not been published yet.
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The wealthy governments involved have also sworn each other to secrecy over which of them is providing how much. The European Investment Bank, whose contribution is included in the $10 bn from the public sector, said its €1bn ($1bn) stated contribution to the figure was only the amount it was “willing to consider” rather a definite promise.
‘Debt trap’ fears
The Indonesian government has repeatedly criticised the rich nations’ reluctance to provide better financing terms. In June it revealed that the portion of grants proposed at the time was only $160 million – or 0.8% of the total. That’s even less than the 3% of South Africa’s support that was in the form of grants.
Negotiations are ongoing, but civil society groups fear that if loans take up the bulk of the support the Jetp could become “a debt trap” for the country.
Kusdiana says the government needs to understand if the available financing can be matched to the projects needed to reach the targets.
Fabby Tumiwa, director of the Jakarta-based Institute for Essential Services Reform (IESR) think tank, believes a much bigger share of grants – up to $2 billion – is needed to achieve the goals. “$160 million is not fit for purpose to support ambitious Jetp targets”, he said.
Esther Tamara from the Foreign Policy Community of Indonesia remains “cautiously optimistic” despite the setback. “The government must ensure the plan publication will not be delayed again,” she told Climate Home News. “Indonesia knows the stakes are high and the success of the Jetp will make or break future financing opportunities for itself and other countries”.