By Fathin Ungku and Melanie Burton

SINGAPORE (Reuters) – Southeast Asian governments must back the Asian Development Bank’s (ADB) plans to expedite the closure of coal plants in the region with strong regulation to win funding for the programme, an energy consultancy said in a report on Friday.

A group of financial companies is spearheading a plan to form a public-private partnership to purchase coal-fired power stations and reduce their lifespan by 15 years.

According to the Institute for Energy Economics and Financial Analysis, this model could make a significant impact on Southeast Asia’s transition to renewable energy.

IEEFA stressed that the model must be supported by regional governments with regulations and strong governance in order to allow outside investors the confidence to make substantial investments.

Melissa Brown from IEEFA stated in the report that “Unfortunately…power market decision-making (in Southeast Asia), typically sits with power, energy or industry ministries, which often have more loyalty domestic energy interests and private or public power companies than price sensitive power consumers.”

However, the ADB is yet to provide details about what government participants will need.

Wanhar (a director in Indonesia’s Energy and Mineral Resources Ministry) said earlier in the week in a webinar that talks have been initiated with the domestic power and coal sectors in response to a study done by ADB about how the model could be implemented in Indonesia.

His comments were: “There are many obstacles in this (energy transformation), so it’s good to get ADB support.”

Energy ministry didn’t respond to questions about active talks with ADB, or government views regarding the bank’s program.

IEEFA found that $55 billion would be required to pay off half of the Indonesian coal fleet.

Indonesia is a major coal exporter and has stated that it will eliminate coal-fired electric power by 2056. But it faces challenges in balancing its emissions goals with the financial cost of removing an industry that earned $38 million in exports in just seven months in 2021.

ADB models involve purchasing and operating coal-fired electricity plants at lower capital costs than commercial ones. This allows them to operate at greater margins but generate comparable returns.