Jakarta, 20 April 2022– The issue of financing is still one of the big obstacles in developing renewable energy such as rooftop solar power plants in Indonesia. There is a large gap between the government’s agenda to accelerate solar penetration and access to funding for both developer and household projects. Difficult access to funding can also be a challenge for the development of solar energy in Indonesia.
Enthusiasm to develop solar energy is growing rapidly in Indonesia. At the Indonesia Solar Summit 2022, at least 31 parties are committed to installing solar PV with a capacity of up to 2,300 MW. The availability of cheap financing mechanisms can support the achievement of these commitments.
Elvi Nasution, Director of Solutions Initiatives, explained that there is one financing scheme that is not widely available, namely project financing. Project financing is limited financing of a new project that will be carried out through the establishment of a new company (separate from the existing company). The project finance provider can be a bank or a special financial institution (special mission vehicle).
“Compared to Malaysia, Thailand and the Philippines, project financing in Indonesia is relatively expensive. The contributing factors include government guarantees, the amount of debt, and the structure of the electricity business which is currently monopolized by PLN, so developers often encounter difficulties because there is only one offtaker in Indonesia,” explained Elvi.
Jagjeet Shareen, Assistant Director of General International Solar Alliance, in the same forum saw the importance of the role of financial institutions such as banks to participate in accelerating solar penetration.
“Providing training to bank employees is important to make them understand the character of solar business and calculate the financing risk for it. The cost of installing solar PV may still be relatively expensive, but it’s actually not that expensive because the cost of solar continues to decline,” he said.
Jagjeet shared India’s experience in providing massive training to bank employees which had a significant impact because the bank then became more familiar with PV rooftop projects, their risks and development opportunities.
Both Elvi and Jagjeet agreed that in order to accelerate the penetration of PV rooftop, synergies from various parties, such as financial institutions, need to study the financing structure based on the conditions and potential in each location.
PLN as the single offtaker in Indonesia also needs to transform its business model so that it is relevant to the current situation and in the future where renewable energy will have a larger portion. Especially for solar development, PLN needs to make regular auction plans and finalize the development plan (pipeline). Good and clear project planning will increase the confidence of investors and financial institutions to fund a PV rooftop project for instance.
Prospective users of rooftop solar power plants are more or less aware of the situation of developing solar energy in Indonesia, which still needs a lot of improvement. Erwin Kasim, one of the participants of the Financing Solar Energy Indonesia Solar Summit 2022 workshop, asked about the minimum subsidy for initial installation costs for households who want to install rooftop PV and what schemes can be considered to relieve potential PV rooftop customers.
The bank, as the party that is expected to provide a solution to this initial cost problem, emphasizes the government’s role in making policies that are friendly to all parties in the development of this rooftop solar power plant.
“The use of solar requires government intervention to create financing schemes, protect banks from repayment failures, and incentives for customers,” said a representative of Bank Rakyat Indonesia (BRI) who attended the same forum.
The government’s role in issuing a customer-friendly rooftop PV financing policy is highly expected. Because at this time, financing through the bank occurs because of a business-to-business agreement between the developer and the bank without any special policy from the government that regulates the financing of rooftop solar power plants by the bank.
