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De-risking Instruments for Renewable Energy Funding

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Jakarta, September 24, 2021 – The world is moving in accelerating the energy transition to clean energy to pursue the Paris Agreement target of preventing the earth’s average temperature from rising above 1.5 degrees Celsius. Renewable energy financing in Indonesia is increasingly wide open as the commitment of developed countries to assist the transition of renewable energy in developing countries. This funding requires the support of government policies to minimize the funding risks and increase investment interest in renewable energy.

It was said by Deni Gumilang as advisor to Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in the fifth day of the Indonesia Energy Transition Dialogue (IETD) 2021, Friday (24/09/2021).

Deni said that currently there are various kinds of de-risking instruments in funding renewable energy for Indonesia, including the provision of guarantees, green bonds, and concessional debt. However, in his opinion, the de-risking instruments need to be supported by policies and regulations to reduce the risk of renewable energy investment, such as by setting clear renewable energy targets.

“So far, there are still many differences in emission reduction targets within the government. If there is consistency in the target, the collaboration between all stakeholders will be easier to be implemented, ” added Deni.

Moreover, Deni explained that Indonesia needs to consider the technical support for integrated renewable energy development, create a licensing climate that supports small-scale projects, and increase the credibility of renewable energy projects to be bankable in obtaining funding.

In response to this, the President Director of PT SMI, Edwin Syahruzad, said that PT SMI has provided a de-risking project by providing technical support. This makes it easier for developers to access technology and funding a renewable energy project.

Member of the Indonesia Clean Energy Forum (ICEF), Faisal Basri said that renewable energy is needed to encourage Indonesia’s economic development. Because, if decarbonization is not immediately implemented, Indonesia is predicted to have a large energy deficit.

“If we don’t immediately decarbonize, then by 2040 we will have an energy deficit of USD 80 billion. Because we will import more energy than export. It happens because our needs (on energy) will grow higher. Therefore, we need a long-term plan of macroeconomics by more accelerated decarbonization,” said Faisal.

However, he thought that, in reality, the government’s policies have not supported renewable energy. As it is reflected in Indonesia’s State Budget, which still provides hundreds of trillions of subsidies for fossil energy.

Faisal believes that the government needs to put forward the right policies to support the research of renewable energy and ensure the development of the renewable energy industry, to ensure that Indonesia will be a player too, rather than just a consumer.

Supporting the statement of Faisal, Lisa Wijayani, Manager of the Green Economy Program, IESR revealed that the synergy of economic growth with energy transition is essential to provide positive benefits for human life.

“There are several opportunities that can be developed, such as through the development of electric vehicles, implementing energy efficiency, creating a green industry so it can generate many green jobs,” said Lisa.

Arunabha Ghosh, Founder, and CEO of the Council on Energy, Environment, and Water (CEEW) added the importance of aligning human resource development to meet with green jobs that will be created forward with the energy and economic transformation of the country.

“In India, we have a skill council for green jobs which is set up to improve manpower in renewable energy. Within the skills council, there are various programs to train tens of thousands of people from various backgrounds, they graduate from well-known universities, not have from top universities” he explained.

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