As the G20 meet this coming weekend at the Bharat Mandapam International Exhibition Convention Centre (IECC) in New Delhi, leaders will be reviewing progress on the Just Energy Transition Partnerships (JETPs) signed with South Africa and Indonesia last year and with Vietnam this year whereby the developed World would finance those countries to build more renewable energy and – this is the difficult bit – pay them to prematurely close existing coal – fired plants so as to reduce atmospheric emissions in the aggregate.
Some working groups etc. have been set up; some funds have flowed to South Africa but none to the other two countries – so, it won’t take long to review progress. This is not surprising.
The challenge is colossal. 4.2 billion people live inside the Valeriepieris circle (pictured). Some 59 – 60% of their existing power supply currently derives from coal. They need more power, not less, so do not want to close what little they have which is typically much younger (i.e. the opportunity cost of closing it prematurely is greater) than that in the West anyway. And they are poorer than in the West so cannot remotely afford to fund the perhaps $1.8 trillion needed by Asia to meet its climate finance targets by 2030.
Where to start?
First, recognise that some flexible thinking is needed on the physical engineering. Co-firing coal with ammonia might work, whereby the proportion of the latter is gradually increased until coal is phased out altogether. Can Carbon Capture and Storage (CCS) be made to work? Surely unlikely at scale. There are plenty of other ideas.
Second, on the financial engineering, establish a model deal structure whereby the loss from prematurely closing the coal – fired plant is distributed amongst as many parties as possible – host governments a bit, well – meaning investors and lenders a bit more but, most of all, Western governments and their Export Credit Agencies and Multilateral Development Banks – see Logie Group’s advice on the matter from a year ago and podcast with Joseph Jacobelli in July. Then replicate this structure until the money runs out.
Third, focus on Negawatts i.e. smoothing peak demand. This will require i) incentives to increase efficiency in the use of electricity such as better insulation ii) greater use of battery storage to shift demand from peak to off – peak times (and which is already needed to handle the intermittency of most renewables) so that less capacity, coal – fired or otherwise, needs to be built in the first place … almost none of which is reflected in current financing structures.
And lastly, get China on board. That may be beyond Logie Group’s pay grade, though …
