Indonesia, Vietnam energy transition financing through G7 funding plans

JAKARTA/HANOI, Nov 1 2011 (Reuters) – Western donor-funded plans to cut coal use in Indonesia and Vietnam face teething problems, which could have implications for rich nations’ hopes of transitioning poorer people to clean energy.

Both countries are negotiating a scheme known as the Just Energy Transition Partnership (JETP) in which they will receive equity investments, grants and concessional loans from Group of Seven (G7) members, multilateral banks and private lenders. Helping power transitions.

In the year South Africa was the first country to reach an agreement under the JTP, securing a financial commitment of $8.5 billion by 2021. Indonesia has pledged $20 billion and Vietnam has reached an agreement of $15.5 billion by the end of 2022. Senegal recently signed a €2.5 billion deal. Package.

An update on the development of JETPs in Indonesia and Vietnam follows. Their efforts are likely to be the subject of debate at this year’s United Nations Climate Change Conference.


Indonesia plans to reduce carbon emissions to 250 million metric tons in the grid power sector and increase its share of renewable energy generation to 44% by 2030.

Without the plan, Indonesia’s greenhouse gas emissions are expected to exceed 350 million tons by 2030.

Indonesia initially agreed to cap its power sector’s carbon emissions by 290 million metric tons by 2030, but officials said at the time they didn’t understand the extent of energy potential outside the state’s utility grid. Grid metal processing.

Therefore, private coal plant operators in the steel sector, with 13.74 gigawatts (GW) of capacity and another 20.48 GW planned, are excluded from Indonesia’s JETP plan.

How does Indonesia plan to deploy JETP funds?

Indonesia’s JTP Secretariat has identified 400 priority energy transition projects requiring at least $67.4 billion.

There will be five areas of investment that include accelerated renewable development, distribution upgrades and early retirement of coal plants.

Indonesia plans to close 1.7 GW of coal capacity with funding from the Climate Investment Fund and the Asian Development Bank.

How is JETP financing arranged?

G7 donors as well as Norway and Denmark have pledged a total of $10 billion in public financing to Indonesia, with the remaining $10 billion coming from public financing.

A total of $153.8 million has been earmarked as grant funds. The rest of the public financing may include sub-market loans.

Personal finance can include commercial loans that carry market value, equity investments or other structures.


JTP Agreement Vietnam It is expected to help it reach a peak in greenhouse gas emissions from the power sector in 2030, ahead of the 2035 forecast.

In July, Vietnam established a secretariat to implement the JTP, headed by Minister of Natural Resources and Environment Dang Quoc Khanh and comprising the ministries of finance, industry and trade, and planning and investment.

What are the targets?

The JTP plan covers coal-fired power generation from 25.3 GW by the end of 2022 to 30.13 GW by 2030.

The government wants to encourage the development of renewable projects and electric vehicles.

What should be done?

Vietnam has drawn up a draft plan outlining its reform commitments and more than 400 projects that could receive G7 funding, including 272 energy infrastructure projects such as wind and solar farms, power grid upgrades and battery systems.

Donors have encouraged Hanoi to be more ambitious with reforms to facilitate renewable development and improve the grid.

How close to Vietnam?

As part of a $15.5 billion pledge by G7 countries and partners in December, G7 members and partners have provided nearly $8.08 billion in public assistance to Vietnam, according to a document completed by donor countries in late October and reviewed by Reuters.

However, only $321.5 million, or 2 percent, of the public funding provided comes in the form of grants from the European Union and EU governments. $2.7 billion is available in concessional loans at low interest rates, most of which are loans at market rates, which Vietnam has refused to accept.

The remaining $7.5 billion is expected to come from high-cost loans from private investors, but investments are contingent on regulatory reforms and the quality of certain projects.

Reporting by Francisca Nangoy, Khanh Vu, Francesco Guaraccio; Edited by Robert Birsle.

Our Standards: The Thomson Reuters Trust Principles.

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