Scaling Financing for Coal Phase out in Emerging Economies 2025

Obtaining system operator approvals and ensuring closure in line with phase-out time frames BOX 5 System operator and regulator buy-in for CFPP early retirement is vital to obtaining the necessary approvals to remove CFPP capacity from the system. These entities will not approve these transactions if they cannot be sure that replacement capacity will come online at similar cost. As such, phase-out transactions that incorporate renewables investments may be more likely to succeed, as well as find it easier to access financing. In practice, however, pairing CFPP retirement with renewable investments at another site can be hard to achieve from a regulatory perspective. Additionally, it is important to remember phase-out time frames included in this study are 12 years-plus, leaving plenty of time to consider replacement options in the intervening period and raising the question as to whether replacement options need to be in place at the time of the retirement deal. Investors will also need assurance that the CFPP will close in line with the agreed phase-out time frame. Contractual covenants are therefore essential in ensuring closure in line with phase-out plans, as they legally bind asset owners to specific timelines and commitments, minimizing the risk of delayed closures by providing recourse to arbitration courts. Scaling Financing for Coal Phase-out in Emerging Economies 20