Incollaborationwith

KhazanahNasionalBerhad,

KhazanahResearchInstitute

andAccenture

MobilizingInvestmentsforCleanEnergyinMalaysia

COMMUNITYREPORT

SEPTEMBER2023

Images:GettyImages,Unsplash,WorldEconomicForum

Contents

Executivesummary

3

1OverviewofMalaysia’senergysector

4

1.1Malaysia’selectricitymarketstructure

6

1.2RenewableenergyinMalaysia

8

1.3Currentelectricitysupply-demanddynamics

8

1.4Cleanenergyfinancerequirement

9

2Policyopportunitiestoadvancecleanenergyinvestment

10

inMalaysia

2.1Policyplanningandimplementation

10

2.2Regulatoryenvironment

11

2.3Renewableenergytariffregimeandincentivemechanisms13

2.4Powerpurchaseagreement(PPA)practices

15

3SolutionstoacceleratefinancingforMalaysia’scleanenergysector16

Solution1RenewableEnergyZones(REZ)

16

Solution2Residentialsolarsubscriptions

17

Solution3Harnessingnewpoolsofcapitalforcleanenergy18

Solution4Carboncapture,utilizationandstorage(CCUS)hubs19

Conclusion

20

Keyabbreviations

21

Contributors

22

Endnotes

23

Disclaimer

Thisdocumentispublishedbythe

WorldEconomicForumasacontribution

toaproject,insightareaorinteraction.

Thefindings,interpretationsand

conclusionsexpressedhereinarearesult

ofacollaborativeprocessfacilitatedand

endorsedbytheWorldEconomicForum

butwhoseresultsdonotnecessarily

representtheviewsoftheWorldEconomic

Forum,northeentiretyofitsMembers,

Partnersorotherstakeholders.

?2023WorldEconomicForum.Allrights

reserved.Nopartofthispublicationmay

bereproducedortransmittedinanyform

orbyanymeans,includingphotocopying

andrecording,orbyanyinformation

storageandretrievalsystem.

MobilizingInvestmentsforCleanEnergyinMalaysia2

Solution4:Carboncapture,utilizationandstorage(CCUS)hubs

Createnationalhubstocapture,transportandstorecarbondioxidefromvariousemittingsources,suchasheavy

industriesandpower,asawaytochannelinvestmentfordecarbonization.

Executivesummary

Malaysiahastheambitiousvisiontoachievenet-zeroitsambition.Together,theyestablishedapublic-

greenhousegas(GHG)emissionsasearlyas2050,privateworkinggroupofMalaysianandinternational

andtoreduceGHGemissionsintensityofitsgrossstakeholdersfromindustry,financeandacademia

domesticproduct(GDP)by45%by2030relativetotoexploresolutionstounlockcapitalforclean

2005levels.Thisvisioncallsforarapidtransformationenergyinvestmentsinthecountry.Theworking

ofthecountry’senergylandscape,asoutlinedbythegroupselectedfourkeyfocusareasforinvestment:

recentlyrevisedtargetofreaching70%ofrenewablesolarandstorage,coalretirementprojects,

energy(RE)capacityinthecountry’senergymixtransmissionanddistribution,andcarboncapture,

by2050.Theassociatedinvestmentrequirementsutilizationandstorage(CCUS).

areimmense,amountingtoanestimatedMYR637

billion,orUSD($)140billionby2050.Thisreportsummarizesthekeyfindingsofthe

workinggroup,includingrecommendationsfor

Duringthefirsthalfof2023,theWorldEconomicimprovingtheregulatoryandpolicyenvironment,as

Forum,supportedbyAccenture,collaboratedwithwellasnon-policysolutionstofacilitatecleanenergy

KhazanahNasionalBerhadandtheKhazanahinvestment.Theoverarchingaimistosupportnet-

ResearchInstitutetosurfacekeychallengesandzerotargetswhileacceleratingdeploymentofREand

solutionsforMalaysiatoattractcleanenergymakingprogressonrecentlyannouncedplanssuch

financeatthescaleandpaceneededtorealizeastheNationalEnergyTransitionRoadmap(NETR).

TABLE1Summaryofpolicymessagesandnon-policysolutionsidentifiedbytheworkinggroup

Policymessage#1:Policyplanningandimplementation

Enableproactivepolicyplanningbackedbyeffectiveimplementationmeasures.

Policymessage#2:Regulatoryenvironment

Removeregulatorybarriersandimplementstableframeworkstofacilitatetheuptakeofrenewableenergy.

Policymessage#3:Renewableenergytariffregimeandincentivemechanisms

Createalevelplayingfieldforrenewableelectricitytocompetefairlywithfossilfuel-basedelectricity.

Policymessage#4:Powerpurchaseagreement(PPA)practices

Improvetheexistingmarketconditionsfordirecttradebetweencorporatebuyersandrenewableelectricitysuppliers.

Solution1:Renewableenergyzones(REZ)

Developlarge,integratedandsustainableREzonestofacilitatetheflowoffinanceintoREprojects,togrowRE

demandandtoovercomebarrierstoinvestmenttypicallylinkedtotheconstructionanddevelopmentofgrid

infrastructureforrenewables.

Solution2:Residentialsolarsubscriptions

Aggregatesmallresidentialsolarprojectsunderasubscriptionleasemodelcreatingacriticalmassofprojectsand

providinghomeownerswithmoreflexiblefinancingterms.

Solution3:Harnessingnewpoolsofcapitalforcleanenergy

Tapintointernationalclimatefinanceanddynamizecapitaldeploymentforexistingsustainablefundscurrently

managedbyinstitutionalinvestors.

Non-policysolutions

toaccelerate

financingfor

Malaysia’sclean

energysector

Policyopportunitiestoadvanceclean

energyinvestmentinMalaysia

MobilizingInvestmentsforCleanEnergyinMalaysia3

1

Source:MalaysiaEnergyStatisticsHandbook,2021.

Consumptionbysector(%)

Transport

37.6%

Residentialandcommercial

Industry

28.5%

Non-energyuse

20.5%

1.4%

12%

Agriculture

OverviewofMalaysia’senergysector

Malaysia,strategicallylocatedinSoutheastAsia,

isaculturallydiversenation.Thecountryhas

energyconsumption,followedcloselybyindustry,accountingfor37.6%and28.5%offinalenergyconsumption,respectively.2

Malaysia’selectricitygenerationisprimarilybasedonfossilfuels,whichaccountformorethan80%.In2020,coalandnaturalgasweretheleading

sources,makingfor50.9%and30.8%oftotalgeneration,respectively.3

experiencedrapideconomicgrowthoverthepast

decades,withitsfinalenergyconsumptionin2019

reaching2.8EJ(exajoule),1equivalentto67%of

thetotalprimaryenergysupply.Asthecountryhas

evolvedfromanagriculturalandcommodity-based

economytowardsamanufacturingpowerhouse,

transportisnowthelargestsectorintermsof

FIGURE1

Malaysia’sfinalenergyconsumptionbysector(2019)

MobilizingInvestmentsforCleanEnergyinMalaysia4

FIGURE2InstalledcapacityandgenerationmixinMalaysia(2020)

Generationmix(gigawatt-hour)

Installedcapacity

(megawatt)

Naturalgas

14,403

39.9%

52,850

30.8%

Coal

13,284

36.8%

87,282

50.9%

Hydro

6,190

17.1%

27,301

15.9%

Diesel

577

738

1.6%

0.4%

Solar

996

3,285

2.8%

Biomass

441

1.2%

Biogas

146

1.9%

0.4%

Others

84

0.2%

36,121

Total

171,456

Source:MalaysiaEnergyStatisticsHandbook,2021.

MobilizingInvestmentsforCleanEnergyinMalaysia5

Sarawak

Sabah

EnergyCommissionofSabah(ECOS)1

Regulator

MinistryofUtilityand

Telecommunication

Generation

TNB*

SESB*

IPPs*

IPPs*

Offtaker

TNB*SingleBuyer

(ring-fencedentity)

SESB(Departmentof

SingleBuyer,AssetDevelopment

Division)

Transmission

TNBGrid;

GSO*(ring-fencedentity)

SESB

Distribution

TNBDSO*

TNBDN*

Retail

TNB

retail

Independentretailers

Others4

(implementation/planning/policy)

JPPPET3

1.1Malaysia’selectricitymarketstructure

Malaysia’selectricitymarketregulatoristheEnergyThemarketisacombinationofregulatedmonopoly

Commission(SuruhanjayaTenaga),whichoverseesandcompetitivestructures,TenagaNasional

thegeneration,transmissionanddistributionofBerhad(TNB)beingthelargestverticallyintegrated

electricityforPeninsularMalaysiaandSabah,powerutilityinPeninsularMalaysia,whileSabah

whiletheMinistryofUtilityandTelecommunicationElectricitySdnBerhad(SESB)operatesinSabah

doesthesameforSarawak.(AtthetimeofandSarawakEnergyBerhad(SEB)inSarawak.

writing,Sabah’sregulatoryauthorityforelectricity

supplyandREisbeingtransferredtotheEnergy

CommissionofSabah(ECOS);thetransferis

expectedtobecompletedbyJanuary2024.)

FIGURE3Malaysiaelectricitymarketstructure

PeninsularMalaysia

MinistryofEnergyandNaturalResources(NRECC)

EnergyCommission(ST)

SEB*

(SEBPowerSdnBhd)

SEB

(SyarikatSESCOBerhad)

SEDA2

JPPPETSabah3

*Abbreviations:TNB:TenagaNasionalBerhad;IPP:IndependentPowerProducer;SESB:SabahElectricitySdnBhd;SEB:SarawakEnergyBerhad;GSO:GridSystemOperator;DSO:DistributionSystemOperator;DN:DistributionNetwork;SEDA:SustainableEnergyDevelopmentAuthority;JPPPET:Jawatankuasa

PerancangandanPelaksanaanPembekalanElektrikdanTarif(JPPPET,thePlanningandImplementationofElectricitySupplyandTariffCommittee).

Notes:

1ThetransitionofregulatoryauthorityforelectricitysupplyandrenewableenergyforSabahfromSTtoECOSisexpectedtobecompletedbyJanuary2024.2SEDAisresponsibleforsustainableenergydevelopmentinPeninsularMalaysiaandSabahincludingtheimplementationofthefeed-in-tariffmechanism.

3JPPPETandJPPPETSabahareresponsiblefortheplanning,coordinationandidentificationofelectricitysupplyanddemandinPeninsularMalaysiaandSabah,respectively.

4TheMinistryofEconomyisinvolvedthroughthe12thMalaysiaPlan,NationalEnergyPolicy(NEP)andNationalEnergyTransitionRoadmap(NETR).

MobilizingInvestmentsforCleanEnergyinMalaysia6

FIGURE4Totalinstalledcapacity(megawatt)inMalaysia(2020)

+

+

Sabah

2,081

Sarawak

Peninsular

5,717

28,324

Total

36,121

Source:MalaysiaEnergyStatisticsHandbook,2021.

Thegenerationsectorisliberalized,with

independentpowerproducers(IPPs)andTNB

licensedtoplayasignificantroleinelectricity

generation.InpeninsularMalaysia,thepower

generatedisprocuredviatheSingleBuyer,whichistheentityauthorizedtoprocureelectricityfrom

IPPsandTNBGenerationtomeetdemandatleast

cost.InSarawak,thisismanagedbySEB,while

SESBisresponsibleforSabah.Transmissionanddistributionremainregulated,withTNB,SEBandSESBcontrollingtherespectivenetworksintheir

areas.ThenationalgridinPeninsularMalaysiais

connectedtoThailand’sgridtothenorthandtotheSingaporegridtothesouth.

MobilizingInvestmentsforCleanEnergyinMalaysia7

2,642

894

158

94

90

102

221

52

3,458

62

1

-

6,190

996

146

441

1.2RenewableenergyinMalaysia

TheMalaysianRenewableEnergyRoadmap

(MyRER)isthekeystrategicframeworkforthe

developmentandpromotionofREinthecountry.ItaimstoincreasetheshareofREinthenationalenergymixwhileimprovingenergysecurityandreducingGHGemissions.

MyRER’stargetis31%ofREinthenational

installedcapacitymixby2025.Thisisaligned

withMalaysia’sglobalcommitmenttoreduceits

economy-wideemissionsintensity(againstGDP)to45%in2030comparedto2005levels.Inaddition,thegovernmenthassincerevisedtheREtargetto70%by2050,4withtheNationalEnergyTransitionRoadmaprollingoutstrategicinitiativesin2023.

FIGURE5Renewableenergyinstalledcapacity(megawatt)inMalaysia(2020)

Solar

Hydro

Biogas

Biomass

Peninsular

Total3,788

Sabah

Total465

Sarawak

Total3,520

Malaysia

Total7,773

Source:MalaysiaEnergyStatisticsHandbook,2021.

1.3

Currentelectricitysupply-demanddynamics

Asof2020,Malaysia’stotalinstalledcapacity

wasaround36.0gigawatt(GW),5withfossilfuels(coalandnaturalgas)makingup76.7%ofthe

total.HydropowermaintainsthelargestshareinREsupplyat17.1%oftotalinstalledcapacityand

79.6%oftotalinstalledREcapacity.Therestoftheinstalledrenewablescapacityisacombinationofgrid-connected,co-generationandself-generationprojects,andinstallationsunderthefeed-in-tariff

(FiT)andlarge-scalesolarprogrammes.

MobilizingInvestmentsforCleanEnergyinMalaysia8

1

2

3

4

5

TheMalaysiangovernmenthasimplemented

severalkeyschemestohelpfacilitatethegrowthofrenewables:

TheFiTschemewasoneoftheprimary

initiativesintroducedtoboostrenewablesby

guaranteeingREinjectionintothegridatanabove-marketpriceforafixedperiod.

Thenetenergymetering(NEM)mechanismallowsself-consumptionofrenewablesand

exportofexcesselectricitytothegridatafixedratefordomesticconsumersandatthesystemmarginalprice(SMP)fornon-domesticconsumers.

TheSelf-Consumption(SELCO)schemeallowsanentitytogenerateelectricityfrom

itsownsolarphotovoltaic(PV)systemtooffsetorreduceitselectricitybills.SELCOallowsfor

consumptionofalltheelectricitygeneratedby

anindividualsolarprojectbutdoesnotallowanyexcesstoflowintotheutilitygrid.6

TheLargeScaleSolar(LSS)programmeisdesignedtosupporttheuptakeofutility-

scalesolarPVsystemswithcapacitiesof1-100megawatts(MW).TheprogrammeusesareverseauctionsystemtoawardLSSrightsbasedonthelowestbidforofftakeprices.

TheCorporateGreenPowerProgramme

(CGPP)enablesoff-siteREprocurementviaa

virtualpowerpurchaseagreement(PPA)throughacontractfordifference(CfD)mechanismontheNewEnhancedDispatchArrangement(NEDA)markettoenableentitiestouseREfortheiroperations.The

pricesettlementisagainstthehalf-hourlySMP.

Inparallelwithrenewablesdevelopment

programmes,thegovernmenthasalsointroducedfinancialincentiveschemesincludingaGreen

TechnologyFinancingSchemecurrentlyinitsfourthroundwithatotalofMYR3.0billioncommittedupto2025,agreeninvestmenttaxallowanceanda

greenincometaxexemption.

Malaysia’sacceleratingindustrializationand

urbanizationareboostingitselectricitydemand,

withtotalenergyconsumptionincreasingbyan

annualaverageof3%,reaching158,603gigawatt-hour(GWh)in2019.7ThecurrentreservemargininPeninsularMalaysiareached32%in2020and42%in2021.8PeninsularMalaysia’smasterplanaimstoreducethisto21%by2039.9Conversely,Sabah’sreservemarginstoodbelowits30%optimumlevelat19%in2021.Ofcourse,2020and2021peak

demandswereaffectedbytheCovid-19lockdown.PartsofMalaysiaalsofaceaccessibilityissues.Forinstance,Sabahhasasignificantruralpopulation(38.8%)withover120,000peoplewithoutaccesstoreliableandaffordableelectricity.

TheTwelfthMalaysiaPlan,2021-2025,outlines

Malaysia’snationalaspirationstoachievecarbonneutralityasearlyas2050,whiletheNational

EnergyPolicy,2022-2040,laysthegroundworkfortransformingtheenergylandscapeandachievingafairandinclusiveenergytransition.Mostrecently,thegovernmentlaunchedtheNationalEnergy

TransitionRoadmap(NETR)toaccelerate

Malaysia’senergytransitionandsetthecountryoffonatransformationaljourneytoreshapeitsenergylandscape.

1.4

Cleanenergyfinancerequirement

AcceleratingtheinstallationofREcapacitycan

significantlybolsterMalaysia’senergysecurityandreduceitsrelianceonfossilfuelimports.InadditiontohelpingMalaysiameetitsclimatetargets,it

alsopromisesjobcreation,innovationandsocio-economicbenefits.

ItisestimatedthattransitioningtoREwillsave

Malaysiabetween$9billionand$13billionannuallyby2050inavoidedenergy,climateandhealth

costs.10Malaysiaisendowedwith423gigawattsofrenewablesproductionpotential,butlessthan10%ofitssolarandoffshorewindpotentialandonly

10-50%ofitsbiomassandhydropowerpotentialiscurrentlyrealized.11Energytransitioneffortscanalsofostergreaterinternationalcooperation.Malaysia,

asakeymemberoftheLaoPDR-Thailand-

Malaysia-SingaporePowerIntegrationProjectandwiththeimpetusoftheAssociationofSoutheastAsianNations(ASEAN)PowerGrid(APG)initiative,iswell-positionedtotapintoitsstrongrenewablessupplypotentialandbecomearegionalclean

powerhub.

Toachievethetargetof70%renewablesinits

installedcapacitymixby2050,MalaysiawillneedanestimatedMYR637billion,or$140billion,ininvestment.12Aftercarefulanalysisofthecountry’scontextandthedifferentneedstoclosefinancinggaps,theworkinggroupidentifiedkeypolicy

aspectsandaseriesofnon-policysolutions,

which,ifimplemented,wouldcreateaconduciveenvironmentforcleanenergyfinancetoflowintothecountryatthisscale.

MobilizingInvestmentsforCleanEnergyinMalaysia9

2

PolicyopportunitiestoadvancecleanenergyinvestmentinMalaysia

TheworkinggroupidentifiedfourkeyareasfortakingactiontoimproveMalaysia’s

currentregulatoryandpolicyenvironment.Its

recommendationsareinlinewiththeRE100globalpolicymessage.13

2.1

Policyplanningandimplementation

Situation

Theworkinggroupfounddiscrepanciesinplanningandpolicyconsiderationsindocumentspublishedbyvariousnationalagencies,suchastheNationalEnergyPolicy(NEP),MalaysiaRenewableEnergy

Roadmap(MyRER)and12thMalaysiaPlan.Thesedifferencescreatecomplexityforinvestorsand

projectdevelopersindesigninginvestmentplansandprojectpipelines.

MalaysiaalsohasroomtorampupitsnationalREtargets,astheInternationalRenewableEnergy

Agency(IRENA)highlightedinitsMalaysiaEnergyTransitionOutlook(METO).14InthewakeofMETO’srelease,Malaysiaincreaseditslong-termRE

targetsfrom40%ofthepowermixby2035to70%by2050.

WhiletheNETRhighlightstheinvestmentsrequiredfortransmissionanddistributioninfrastructure,littlevisibilityhasbeengivenastotheoverallstrategyforitsdevelopmenttoaccommodatemoreRE.

Insomeinstances,agapexistsbetweenpolicy

enactmentandimplementation,whichlikely

discouragesREuptake.ThisincludesreformsoftheMalaysiaelectricitysupplyindustry,third-partyaccessframework,anduncertaintiesaroundthefutureoftheNEMmechanism.

Lastly,theroleofdecarbonizationenablersinthenationalenergytransition–suchasbatterystorageandCCUS–isdifficulttoascertainduetothelackoftargetsandregulatoryframeworkssurroundingthesetechnologies.

Policymessage#1

Enableproactivepolicyplanningbackedbyeffective

implementationmeasures.

Malaysiashouldconsiderthefollowingmeasurestoenableeffectivepolicyplanningandimplementation:

–ClarifytargetsforfutureregulationsandRE

capacityadditionaswellascomplement

themwithshort-,medium-andlong-term

implementationplans.Defineindustry-wide

decarbonizationstrategiesincludingkey

implementationmilestones,especiallyforhigh-emittingsectors.

–FormulatemoreaggressiveREtargetsatthe

nationallevelinlinewiththeoverallnational

emissionsreductiongoals,aswellascreate

rulessurroundingnewtechnologies(e.g.energystorage,floatingsolarandCCUS).

–Increasecoordinationinenergypolicymakingandregulationsothatmultipleplanningbodiesissuecoordinatedplans;ensurecoordination

amongkeyindustries;establishproactive

rulemaking,backedbyeffectiveandfirm

implementationmeasuresandmechanisms(forinstance,definingtherolesofvariousagenciesatbothfederalandstatelevelstoenhance

investmentcertainty).

–Developpoliciesaroundmini-gridsaskey

enablersofruralelectrificationandcatalystsforeconomicdevelopmentinunder-servedregions.

MobilizingInvestmentsforCleanEnergyinMalaysia10

2.2

Regulatoryenvironment

Situation

Malaysiapresentsoneofthemostadvanced

regulatoryframeworksintheASEANregion.

Followingtheannouncementofthe70%RE

capacitytargetby2050,theNationalEnergy

TransitionRoadmaphasproposedstrategicpolicyimprovementsaswellaskeyinitiativestofacilitateinvestmentsincleanenergy.However,certainareas

needfurtherpolicyandregulatoryimprovement.Forexample,anenergystoragepolicyorguidanceis

necessarytoovercomeintermittencyconcerns.

Additionally,whilethegovernmentannounced

ano-new-coalpolicyin2021,15andtheNETR16

plansforcoaltorepresent0%ofthecountry’stotalinstalledcapacityby2050,veryfewpolicysignalsarevisiblebeyondthephasedownefforts.

Policymessage#2

Removeregulatorybarriersandimplementstableframeworkstofacilitatetheuptakeofrenewableelectricity.

ThefollowingmeasurescouldhelpMalaysiaremoveexistingregulatorybarrierstoREandreinforcethestabilityofitsregulatoryframework:

–LargeScaleSolar(LSS):Removetheone-

bid-per-companyrestrictionandincrease

thecapacityofLSSprojects,allowinglarge

playerstoscaletheirsolarportfolios;introduceapre-qualificationmechanismforbidders

todemonstratetheirfinancialandtechnical

capabilities;facilitateinterconnectiontothegrid;improvetheregularityandperiodicityofnewLSSbiddingroundstoboostinvestorconfidence;

opentheprogrammetoforeignparticipation.

–Self-Consumption(SELCO):Enableprovisionstoallowground-mountedplantsunderSELCO.

–Netenergymetering(NEM):ProvideclarityonthefutureofNEMafterthecurrentNEM3.0regimeexpiresin2023.

–GreenTechnologyFinancingScheme:Exploreblendedfinancingmechanismstoreducethedomesticfiscalburden;simplifytheapplicationandapprovalprocesses;introducemore

consistencytotheschemetooffermorecertaintytodevelopers.

–Coalrepurposing/retirement:Establishclearnationalmandatesforcoalrepurposing/

retirement;insettingthosemandates,

considerthebenefitsofco-firingandcapacityswappractices.

MobilizingInvestmentsforCleanEnergyinMalaysia11

CASESTUDY1

Indonesia’spolicyeffortstoreducecoaldependence

Inrecentyears,Indonesiahastakenaproactiveapproach

tocoalretirement.Indonesia’sPresidentialRegulation112

of2022committedtoearlyretirementofcoalpowerplants

whilealsoactingasamoratoriumonnewcoalplants(with

theexceptionofnationallystrategicprojects).ThisregulationfollowedIndonesia’snewElectricityBusinessPlan(RUPTL)

2021-30,whichincludesaroadmapforthestate-owned

powercompany,PLN,toachievenet-zeroemissionsby2060.

Thisnewregulatoryframeworkmarkedaturningpointinthecountry’senergytransitionandsentastrongsignaltointernationalinvestors.Sincethen,internationalsupporttowardscoalretirementhascomeintheformofaJust

EnergyTransitionPartnership(JETP),whileIndonesiahasmadenewnationalannouncementsunderanEnergy

TransitionMechanism(ETM)scheme.

1.TheJETPbetweenIndonesiaanditsinternational

partnerscallsforREtocomprise34%ofIndonesia’s

powergenerationby2030.Overthenextthreetofive

years,thepartnershipintendstomobilizeaninitial$20

billiontohelpIndonesiaphaseoutcoalenergyand

investinREinfrastructure,thusputtingthecountryon

atrajectorytoreachnet-zeroemissionsinthepower

sectorby2050,whilereachingpeakemissionsby2030,sevenyearsaheadofthepreviousschedule.FiftypercentoftheJETPschemewillbefinancedbyinternational

support,comingmostlyfromtheGroupofSeven(G7)

countriescombinedundertheInternationalPartners

Group(IPG),whiletheotherhalfwillbeprovidedby

financialinstitutionsundertheGlasgowFinancialAllianceforNetZero(GFANZ).Indonesia’sJETPwillconsistofamixofconcessionalloans,market-basedloans,grants,guaranteesandprivateinvestmentsfrompublicand

privateentities.Concessionalloansandgrants,thoughunlikelytomakeupthemajorityofthefinancemobilized,areimportantforacountrysuchasIndonesiathatfacesincreasedcostsofborrowingontheinternationalmarket.

2.TheEnergyTransitionMechanism(ETM)isaninnovativeprogrammebeingdevelopedbytheAsianDevelopmentBank(ADB)toacceleratetheretirementandrepurposingofexistingcoalpowerplantsandtofundcleanenergy

replacementcapacityacrossAsia,withaninitialfocusonSoutheastAsia.TheETMfundwillcompriseoftwofacilities:

–ACarbonReductionFacility(CRF)tofundtheearly

retirementorrepurposingofcoal-firedpowerplants

(CFPPs)whilekeepinginmindthereplacementcapacityofcleanenergyprojects.

–ACleanEnergyFacility(CEF)todevelopandfundnewREgenerationprojects,energystorageinfrastructure

andrequisitegridupgrades.CEFwillprovidefinance,technicalassistanceandknow-howtothehostcountrytoaccelerateREcapacityaddition,buildstorageandupgradepowergrids.

In2022,ADBsignedamemorandumofunderstanding

(MoU)withanIPP,CirebonElectricPower(CEP),toexploreearlyretirementofits660MWcoalpowerplantinWesternJavaanditsreplacementwithrenewables.