Japan cancels financing Matarbari coal project phase 2

Japan has decided to pull out of funding the Matarbari coal-fired power plant phase-2 that the Bangladesh government planned to implement after having ditched 10 other coal-fired projects last June.

The project was supposed to be implemented by the Japan International Cooperation Agency (Jica) under the Official Development Assistance (ODA).

But at a press conference on Wednesday, Japanese Foreign Press Secretary Hikariko Ono announced that support for coal-fired power generation projects by the ODA for Bangladesh and Indonesia will be suspended, reports The Sankei news.

The major investment suspension decision came following a global campaign against financing coal-fired projects.

Following the announcement, two projects – Bangladesh's Matarbari Ultra-Ultra Critical Pressure Coal-Fired Power Generation Plan Phase-2 and Indonesia's Indramayu Coal-Fired Power Generation Plan – will be cancelled.

The plan was to build a power plant with an output of about 1,200MW in south-eastern Bangladesh.

As per its commitment to become carbon neutral by 2050, Japan has decided to phase out its own coal-fired projects and stop financing overseas ones.

Ono said, "We will continue to cooperate with Bangladesh in its economic and social development, including the development of the Matabari region."

In the revised Power Sector Master Plan 2016, Bangladesh targeted to achieve a capacity to generate 60GW electricity by 2041 through different types of primary energy mix, in which the share of gas was considered 35%, coal 35%, import and renewable 15%, nuclear 10%, and 5% from liquid fuel.

To meet the targets, it has taken dozens of coal fired projects since 2011.

However, amid the growing protests at home and abroad and the scarcity of finance, the government cancelled 10 coal projects.

After that, the Power Division has been working to implement a total of 11 projects, including the Matarbari project, with a capacity of 12,147MW.

The Matarbari power project was planned to be implemented by the Coal Power Generation Company Bangladesh Limited (CPGCBL), one of the state-owned power generation companies. 

Mohammed Shahid Ullah, executive director (Finance) at CPGCBL, told The Business Standard that the project was at the initial stage.

"This was a government-to-government investment plan. We have not received any such decision from Japan yet," he said.

Talking about the progress of the project, Shahid Ullah said Jica was conducting a feasibility study for the project. Apart from this, there was no progress.

At present, the Coal Power Generation Company Bangladesh is implementing the Matarbari 1200MW coal-fired power plant with Jica's finance.

Unit 1 of the 1.2GW project is scheduled to be operational by January 2024 while the second unit is due to be completed by July 2024. The estimated cost of the 1st phase of the project is Tk51,854 crore.

Earlier, the Sumitomo Corporation, one of the three EPC contractors which began implementing the first phase of the Matarbari coal-fired power plant project, dismissed any possibility of taking part in the second phase as per its latest policies on climate change issues.

In the policy updated on February 28, it declared no more investments in any new coal-fired power generation business.

Sources at the Power Division said the project was in the list of the coal-fired projects that the government intended to implement after cancelling 10 such types. 

In the last climate summit, in its Nationally Determined Contribution, Bangladesh committed to limiting the coal-fired power plant capacity to 12,147MW by 2030 as a conditional contribution to reduce greenhouse gas emissions. 

The second phase of the Matarbari plant was considered in the total coal capacity by 2030, sources said. 

Congratulating the Japanese government for this move, Hasan Mehedi, member secretary at the Bangladesh Working Group on External Debt, said, "This is very exciting news that coal is being abandoned globally."

For the Matarbari area, he suggested the authorities follow Orion's example that implemented a solar plant with the capacity of 134.3 megawatts peak on a site that had originally been developed for a coal power project in 2014.

Matarbari should be covered with solar projects, he also said. 

Meanwhile, although there has been a drive to turn against coal, Brussels and NGOs recently expressed concerns about several European Union countries, including Germany, reverting to using coal for power generation following the Russian invasion of Ukraine.

"We have to make sure that we use this crisis to move forward and not to have a backsliding on the dirty fossil fuels," European Commission chief Ursula von der Leyen told several European media outlets in an interview on Tuesday.

The shift comes when a power-hungry Europe is increasingly starved of Russian gas and oil, but the change seriously undermines the EU's ambition to become climate neutral by 2050, Al Jazeera reported.

Countries are continuing to back fossil energy rather than investing enough in renewables,"  Neil Makaroff, of Climate Action Network, an umbrella organisation for such groups, told Al Jazeera.

"The risk is substituting one dependency for another: importing Colombian or Australian coal, US or Qatari liquified natural gas, to replace Russian hydrocarbons."

At present, Bangladesh has an installed capacity of 22,348MW electricity while the demand hovers between 10,591MW to 12,133MW.