Breaking Down Silos: Lessons from Indonesia’s Coal Transition Kick-off

In 2022, in collaboration with a team of partners, RMI advised the launch of a Just Energy Transition Partnership (JETP) focused on decarbonizing Indonesia’s electricity system. At $20 billion, the multilateral financial package was the largest yet assembled. The funds will help speed Indonesia’s transition to renewable sources away from coal.

To evaluate potential tradeoffs in the phaseout of coal, RMI developed a model that pairs detailed asset-level and corporate-financial analysis with a simple economic dispatch model, applying it to coal-generating units in Indonesia’s Java-Bali grid.

This insight brief includes an applied case of a plant-level analysis that holistically considers grid operations, along with the financial feasibility of transitioning away from coal, and overall climate mitigation outcomes, as proposed by RMI’s Power Sector Implementation of a Country Coal-to-Clean Transition Framework Report.

RMI draws four key lessons from this work, centered on how to keep the lights on and costs low during a transition away from fossil fuels:

• Clean resources, like solar and storage, will be the cheapest way to replace a coal plant’s generation that is retiring by the end of the decade.
• Necessary certainty in emissions reductions from retiring the coal plant will only be realized if the capacity is replaced by clean resources.
• Financial interventions will de-risk coal transition investments, avoid cost spikes, and make space for just transition assistance, in addition to improving overall economics.
• Savings from cheaper clean resources improve the utility’s bottom line.

To act on these lessons, RMI draws three recommendations for the path forward both for Indonesia’s case and other applications.

• Analyze coal retirement and clean deployment together.
• Integrate the effects of finance in the techno-economic and operational aspects of transition planning.
• Make a first iteration of a coal retirement roadmap by ranking coal plants in reverse merit order, from least efficient to most efficient.