Rich countries seek clean energy deals with Indonesia and Vietnam

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Following a funding deal for South Africa to regenerate coal mining areas, Western climate diplomats are discussing similar packages with Asian countries

Rich countries are discussing partial funding for a coal-to-renewable energy transition in Indonesia and Vietnam, COP26 President Alok Sharma has hinted.

The UK, France, Germany, US and EU announced a partnership with South Africa in November, under which they are investing in renewable energy, electric vehicles and green hydrogen. It aims at the economic regeneration of coal mining areas to provide green jobs.

Details are still being negotiated, with South Africa is pushing for a high proportion of grants or soft loans rather than commercial arrangements.

Asked if there were any more of these “just energy transition” deals planned, Sharma said during a press briefing on Monday: “As for the countries we are looking at… I recently went to Indonesia and Vietnam.”

He continued: “There are two countries that have significant growth in the economy, significant growth in the need for energy use and both have great clean energy potential – both in terms of wind energy but also in terms of solar energy.”

Sharma traveled to Hanoi, Vietnam’s capital, in February with Cop26 envoy John Murton, who held talks with South Africa. In the same week, the two traveled to Jakarta, the Indonesian capital.

At the end of April, US Treasury Secretary Janet Yellen met with her Indonesian counterpart Sri Mulyani Indrawati and discussed the “just energy transition”. Last week, German climate envoy Jennifer Morgan met with energy minister Arifin Tasrif and discussed the same topic.

Indonesia gets more than 60% of its electricity from coal and has a powerful domestic coal industry. Vietnam gets about half of its electricity from coal and this percentage has increased over the last decade.

Esther Tamara, a researcher at the Foreign Policy Community of Indonesia, told Climate Home: “Indonesia is absolutely interested in this kind of funding. One of the three main priorities of his presidency of the G20 is the energy transition.

But Elrika Hamdi, an Indonesian researcher at the Institute of Energy Economics and Financial Analysis, said there were “mixed signals” from the government.

On the one hand, sources of coal finance are drying up, she said, while Indonesia has a huge untapped resource of renewable energy, including solar.

Indonesia’s use of coal for power generation has grown rapidly (Graph: OUCH)

On the other hand, she said that “Indonesia depends a lot on coal export revenue”, especially now that the price of coal has surged following Russia’s invasion of Ukraine.

Indonesia is the second largest coal producer in the world by energy value and its coal industry is politically powerful. President Joko Widodo’s right-hand man on climate is Minister of Maritime Affairs and Investment Luhut Pandjaitan, a former general and owner of a coal mine.

The government plans to continue increasing the amount of coal it uses for primary energy until at least 2050.

Hamdi said that shutting down coal-fired power plants early would cost billions of dollars and even if the Indonesian government could spend money on it, it would not be enough. “So we need foreign capital to come in,” she said.

As Vietnam’s electricity demand grew, it used more and more coal (Chart: OUCH)

While the use of coal in Vietnam has increased over the past five years, it has also had a huge boom in solar installations. IEEFA energy finance analyst Minh Thu Vu told Climate Home that this was “private sector driven”.

Continuing the trend, Danish toymaker Lego announced plans in December to build a 100% solar plant in Vietnam.

Vietnam has coal mines, mainly in the north from the country. But for nearly a decade it was a net importer, shipping coal from Indonesia and Australia.

Partnerships for a just energy transition are also under discussion with several African countries including Senegal, according to Climate Home News.

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