The Asian Development Bank is launching a new fund that will purchase coal-fired power plants to shut them down as soon as possible and take a new approach to the energy transition.
ADB is launching a US$2.5-3.5 billion pilot fund called the “Energy Transition Mechanism”, which will focus on purchasing factories in Indonesia, the Philippines, and Vietnam. In terms of emissions, coal is the dirtiest fossil fuel, but it is widely used for power generation in Asia and other regions.
ADB senior energy expert David Elzinga (David Elzinga) said that the plan is aimed at shutting down 50% of coal-fired power plants in these three countries at a cost of between US$30 billion and US$60 billion.
“We are here to buy coal-fired power plants to accelerate their retirement lives. This is the only reason we make any acquisitions,” he said.
The group will work with other funding sources, including governments, charities and private investors, to obtain low-cost loans to purchase utilities. These factories will continue to operate until the loan is repaid, and then they will not be closed.
“This idea [initiative] Elzinga said: “It is to use the range of investors and mix different financing to create a very low average cost of capital.”
He estimated that under this model, a coal-fired power plant with 20 years of operating life left may shut down 6 to 8 years earlier.
“People say, why not close them tomorrow? Well, that’s really expensive,” Elzinga said. “This really means accelerated retirement in a managed manner. Ensure that the market remains stable and viable for future investment in clean energy.”
In addition to purchasing coal-fired power plants, the plan will also use incentives to pay for early retirement of certain operators and build renewable energy projects where appropriate.