Energy Corner Discussion Series: The Role of Financial Institutions in Supporting Energy Sector Decarbonization and Green Economy Recovery

It is expected that renewable energy investment will continue to increase and open up opportunities for Indonesia to make an energy transition while decarbonizing the energy sector. However, this investment needs to be scaled up rapidly to build renewable energy at a scale suitable for meeting the Paris Agreement. The IESR study with Agora Energiewende and Finland’s LUT University shows that investment in renewable energy and the clean energy sector needs to reach 20-30 billion USD per year in the next decade.

This investment requirement is a challenge in itself considering that the large investment in the renewable energy sector (EBTKE) is only targeted by the government at 2 billion USD for 2021. However, the movement of international financial institutions that no longer finance fossil energy projects (especially coal) provides an opportunity that such financing will shift to the clean energy sector. On the other hand, the participation of local financial institutions is also important so that these investment needs can also be met in order to encourage a more sustainable energy transition for Indonesia’s economic growth.

In this series of discussions, IESR would like to invite several resource persons to discuss trends and the need for massive investment in renewable energy and to see the views of local financial institutions regarding this trend and its readiness. In this discussion, some of the topics discussed are around funding sources so far, policies related to financing, funding instruments, and distribution mechanisms, bringing together financial institutions with various renewable energy projects, as well as future challenges for financing renewable energy projects.