March 19, 2024

Addressing Captive Coal Fired Power Plants is Essential to Decarbonizing Southeast Asia’s Commercial & Industrial Sector

Addressing Captive Coal Fired Power Plants is Essential to Decarbonizing Southeast Asia’s Commercial & Industrial Sector

Picture of Kanchuya Sukdheva, Senior Advisor

Kanchuya Sukdheva, Senior Advisor

Picture of Farzana Hoque, Senior Advisor

Farzana Hoque, Senior Advisor

Picture of Kanchuya Sukdheva, Senior Advisor

Kanchuya Sukdheva, Senior Advisor

Picture of Farzana Hoque, Senior Advisor

Farzana Hoque, Senior Advisor

Today, Climate Smart Ventures released a new report – Accelerating Decarbonization in Southeast Asia: Commercial and Industrial Sector Captive Coal Fired Power Plants are the Low-Hanging Fruit Too Many are Ignoring. The paper identifies challenges and opportunities in Asia’s commercial and industrial (C&I) energy transition. The analysis is designed to support stakeholders within the energy transition ecosystem, in particular local banks.

“Captive power” refers to the generation of power to produce electricity, heating, cooling, and steaming by an entity or a facility for its own  consumption, rather than relying solely on the main grid for power supply. Captive power plants play a significant role in the electricity sector of many emerging and developing economies, with the Asia-Pacific region hosting the largest captive power market globally.
 
Captive C&I power consumption is of concern and an important area to address because it has mostly relied on inefficiently sized coal-fired power plants (CFPPs) or expensive diesel power plants. While some companies have begun to integrate renewable energy into their captive energy systems, this has not yet achieved widespread adoption within the region, particularly for coal-dependent heat related processes.

The report offers insights into the captive power market in Asia and the various sector opportunities within the region. It discusses existing technological solutions available to support C&I decarbonization and energy transition, particularly hybridization. The paper also examines global dynamics seeking to mitigate Asia’s C&I carbon footprint, such as EU trade requirements and the growing prevalence of sustainable supply chain commitments of multinational corporations.

The paper evaluates the involvement of local banks in C&I energy transition. It finds that many banks finance energy efficiency and renewable energy projects through sustainable finance programs. However, they typically do not explicitly label these initiatives as “transition finance” or reference “energy transition.” Moreover, some banks state that such financing is for small and medium enterprises (SMEs) or only for green and sustainable companies.
 
This underscores that while technological innovations, global trade requirements and other international forces are catalyzing C&I captive power energy transition in Asia, gaps in financial support have impeded scaling.

To respond to this, Climate Smart Ventures recommends that banks expand their scope to provide financing for energy efficiency and renewable energy projects for larger C&I companies, including those that are hard-to-abate such as steel and aluminum and with captive power systems. We further encourage local banks to embrace the language and momentum of transition finance.

Finally, the report includes a section on alternative sources of capital, highlighting blended finance options and global transition funds. It also offers a comprehensive appendix describing local bank financing options for projects related to energy transition initiatives.
 
To download the report in English, click here.
To download the report in Vietnamese, click here.

About Climate Smart Ventures
Climate Smart Ventures (CSV) is an advisory firm advancing the energy transition in Asia. Our expertise and projects span coal to clean utility-level energy transition, industrial decarbonization, grid transformation, transition finance, and government-level policy recommendations. We also provide ESG and sustainability advisory services, focused on decarbonization and management of environmental and social impacts. Ecosystem building and collaboration are key elements of our firm, which partners closely with the region’s leading corporates and power portfolio owners, investors, off-takers, and others. For more information, visit our website https://climatesmartventures.com or send us a message at contact@climatesmartventures.com.
 

For inquiries and more information, please contact:

Joyce Almadrones

Senior Associate – Climate Smart Ventures Pte. Ltd.

Email: joyce@climatesmartventures.com