The Launching of “Indonesia Sustainable Finance Outlook 2023”

Jakarta, October 17, 2022 – Institute for Essential Services Reform (IESR) launched its latest flagship report titled Indonesia Sustainable Finance Outlook (ISFO) 2023. This report is part of the Indonesia Energy Transition Outlook (IETO) which will be launched in December 2022. ISFO 2023 specifically discusses the development of energy transition financing in Indonesia. In his opening remarks, IESR Executive Director, Fabby Tumiwa stated that Indonesia needs massive and drastic transformation steps to ensure that we are in line with the Paris Agreement target, which is to limit the earth’s temperature to 1.5 degrees.

“In 2030 we have to cut 45% of emissions at 2010 level. For that, massive and drastic transformation efforts must be made. Especially by the G20 countries which are responsible for 85% of the world’s total GHG emissions. Indonesia is ranked 7th as an emitting country originating from the forest and land sector, and energy,” explained Fabby.

A study by IESR and the University of Maryland shows that in order to comply with the 1.5-degree temperature increase limit, the entire capacity of PLTU in Indonesia, totaling 44 GW, must be terminated by 2045. In the period 2022 – 2030, 9.2 GW of PLTU must be retired. The remaining capacity will be phased out until 2045.

IESR estimates the cost to close 9.2 GW of the coal-fired power plant during 2022-2030 at $4.6 billion. Early retirement of all coal-fired power plants in 2045 with an average age of 20 years requires $28 billion, this cost for stranded asset compensation and decommissioning costs.

Farah Vianda, IESR’s Green Economy Program Officer and one of the authors of ISFO 2023 explained that the financing situation for the energy transition in Indonesia is still very low.

“We still lack funding to achieve our renewable energy targets by 2025, to halt coal operations, and to mitigate transition risks,” he said.

Farah added that technically the limited availability of public funding (APBN) and the existence of government policies that support the use of fossil energy sources make financial and investment mobilization for the energy transition quite difficult, in terms of financial institutions themselves there are still few policies that support financial institutions to support transition financing energy.

Ichsan Hafiz Loeksmanto, Lead Author of ISFO 2023, highlighted one of the sustainable financing instruments, namely the carbon tax. According to Ichsan, although he has planned to implement a carbon tax, and a cap & trade mechanism on 92 coal-fired power plants in 2022, the carbon tax revenue is not earmarked. This means that the use of carbon tax revenues has not been devoted to financing climate change mitigation and adaptation efforts.

“The government needs to ensure the allocation of carbon tax revenues for climate mitigation & adaptation, and social safety nets. In addition, there is also a need for public transparency regarding payment of carbon taxes and carbon transactions,” explained Ichsan.

Fransiska Oei, Head of Legal & Regulatory Study Development at Perbanas, said that local financial institutions need at least two supports. First, for financing risk management and capacity building support for risk analysis for renewable energy projects.

“The bank’s ability to analyze the feasibility of the renewable energy project is still lacking, we are trying to work with other organizations (ex: USAID) to understand the risks and their mitigation, besides that maybe we also need regulatory support to ease the prudential banking regulation for this renewable project,” said Fransiska.

Lutfyana Larasati, Senior Analyst of Climate Policy Initiatives, stated that in the future there should be more eligible projects to be included in green bonds or green sukuk. PBI 24 of 2022 has provided greater space for banks and financial institutions to contribute to green financing, especially in projects funded by green bonds and green sukuk.

“We need to synchronize the indicator criteria for the green taxonomy so that there are more (green) projects that are eligible to receive public funding, either through green bonds or green sukuk,” said Lutfyana.

Radian Nurcahyo, Assistant Deputy for Maritime Law and Agreements, Ministry of Maritime Affairs and Investment emphasized that energy is the driving force of the economy. Therefore, the investment for this energy transition must continue to be mobilized.

“The Ministry of Finance has issued blended finance schemes such as the energy transition mechanism and country platform for funding sources for phasing down coal power plants, the SDG Indonesia one platform as green energy development to achieve NZE 2060,” explained Radian.

ASEAN Must Work Together for Energy Transition

Jakarta, 29 July 2022 – Southeast Asia is a strategic area with the second largest economic growth in Asia after China. Southeast Asia is predicted to continue to develop economically. Energy demand is also predicted to continue to rise. With the condition that fossil energy is still abundant in the Southeast Asian region, joint efforts between countries in Southeast Asia are needed to achieve decarbonization without compromising economic growth.

South Korea and China, which are investors in various fossil projects, especially coal-fired power plants in the Southeast Asia region, have committed to no longer finance PLTU projects abroad in 2021. This commitment is expected to be a signal that will lead to more massive renewable energy investment.

Dongjae Oh, program lead for climate finance, Solutions for Our Climate (SFOC) in a webinar entitled “The State of Southeast Asia Energy Transition” stated that South Korea’s commitment to no longer finance coal-fired power plants is indeed quite surprising but there are other things that should be wary of related South Korean investment preferences.

“Despite having withdrawn funding for coal-fired power plants, South Korea continues to invest in the oil and gas sector in Southeast Asia with a value of 10 times, namely $127 billion from coal investment of only $10 billion. Indonesia is the largest recipient of oil and gas investment from South Korea,” Dongjae explained.

Dongjae added that gas is considered by the Korean government as a clean alternative energy for the transition period.

China also announced that it would no longer finance overseas coal projects in September 2021. A number of Chinese foreign and domestic policies have changed since then. Isabella Suarez, a researcher at the Center for Research on Energy and Clean Air, explained that the Chinese government has begun to include a clause on the termination of coal financing in their law.

“A number of local Chinese banks are also starting to state that they will no longer finance coal projects,” Isabella added.

The withdrawal of South Korea and China in financing coal-fired power plants is expected to urge ASEAN countries to develop renewable energy more massively.

Meanwhile, the energy transition situation in several Southeast Asian countries still needs a lot of encouragement and incentives.

Handriyanti Diah Puspitarini, a senior researcher at the Institute for Essential Services Reform (IESR), said that the current state of the energy transition in Indonesia is quite slow and not enough to meet the climate mitigation target to limit global temperature rise to 1.5 degrees.

“If Indonesia doesn’t do something to accelerate the penetration of renewable energy, according to the IESR calculation in 2025 we will only reach 15% renewable energy in the energy mix and 23% in 2030,” explained Handriyanti.

Handriyanti emphasized the importance of the Indonesian government to seek funding models and have consistent political will in Indonesia’s energy transition process, considering that the transition process takes a long time and requires large amounts of funds.

Similar to the situation in Indonesia’s electricity sector, the Philippines is still dominated by fossil energy in its electricity sector. Albert Dalusung, energy transition advisor, Institute for Climate and Sustainable Cities (ICSC) said that the Philippine government is currently focusing on reducing the use of oil in the transportation sector and developing renewable energy.

“The president has stated that renewable energy is at the forefront of the climate agenda, the high price of fossil energy has also made the government change its energy policy,” explained Albert.

Indonesia’s neighboring country, Malaysia, has a target of 31% renewable energy by 2025 and achieves carbon neutral status by 2050. Antony Tan, executive officer (Sustainability & Finance), All Party Parliamentary Group Malaysia on Sustainable Development Goals (APPGM – SDG), stated that currently Malaysia is optimistic that it can achieve this target.

“However, there are things that need to be improved in energy policy in Malaysia, namely the need for a specific ministry of energy and a more holistic policy to design a more sustainable transportation system,” Antony explained.

Energy Transition Development in the Southeast Asia Region

press release

Jakarta, 1 August 2022 – Achieving the renewable energy mix target of 23% in 2025 in the Southeast Asian region needs strong collaboration among the countries to support the sustainable energy transition and shift the fossil fuel investment into renewable energy.

It was confirmed by Fabby Tumiwa, Executive Director Institute for Essential Services Reform (IESR) on the webinar ‘The State of Southeast Asia Energy Transition’ (29/7). According to him, Southeast Asia is growing to become a region that is entitled the second largest powerful economy in Asia after China so the energy demand will continually increase in the future.

“Many countries in the Southeast Asia region still relied on fossil energy such as coal, gas, and oil. Meanwhile, Southeast Asia is a region that is vulnerable to the impact of the climate crisis. Collaborative measures of transition from fossil into renewable energy in this region may give significant contributions toward global efforts to achieve the Paris Agreement target,” he said.

Indonesia itself has a 23% target for renewable energy mix in 2025 and 31% in 2030. Nonetheless, according to Handriyanti Puspitarini, the IESR study found that if there was no policy change, then Indonesia would only achieve 15% of the renewable energy mix in 2025 and 23% in 2030.

“If we look at the trend from 2013-2021, the renewable energy market has increased though in slow progress. In the meantime, according to the IESR study, Indonesia has technical potential in renewable energy for more than 7.000 GW. Meanwhile, the utilization only reaches 11,2 GW,” Handriyanti explained. 

She examined the duration of permission matters and the complexity of the mechanism for procuring renewable energy projects in Indonesia makes investors reluctant to invest in Indonesia.

“Indonesia needs to increase its political aspect, policy and financial regulation to encourage the massive development of renewable energy, especially based on the results of IESR study, public awareness of the energy transition and climate change begin to increase,” she said.

On the other hand, in 2021, the commitment to increase the renewable energy mix in Malaysia had been conveyed by the Ministry of Energy and Mineral Resources Malaysia through Malaysia’s Energy Transition Plan until 2040.

“Malaysia increased the renewable energy mix target from 20% in 2025 to 31% in 2025 and 40% in 2030. Malaysia’s commitment would no longer establish a new CFPP to achieve carbon neutrality as soon as possible by 2050,” explained Anthony Tan, Executive Officer (Sustainability & Finance), All Party Parliamentary Group Malaysia on Sustainable Development Goals (APPGM-SDG) at the same occasion.

However, according to him, the Malaysian government also needs to encourage energy efficiency and holistic sustainable transportation planning.

“Malaysia needs a holistic national energy policy. Besides, Malaysia must develop or change National Automotive Policy to become a holistic National Transport Policy to reduce the utilization of fossil energy in the transport sector,” said Antony.

Vietnam’s commitment to achieving zero emission in 2050 was also conveyed by Nguyen Thi Ha, Sustainable Energy Program Manager at Green Innovation and Development Centre (GREENID). She explained that Vietnam was committed to ceasing the 7-8 GW CFPP operation to support decarbonization in the energy system by increasing the renewable energy mix on offshore wind turbines by 11,7 GW (9,7%) in 2030 and 30 GW onshore wind turbines (10,5) in 2045. The Solar Park itself will achieve 8,7 GW (7,2%) in 2030 and will increase by 20,6% in 2045.

To achieve zero emission, it will need significant investment in the energy sector, transportation, agriculture, and industry.

“According to the World Bank study, the required total financing for decarbonization is approximately USD 114 million in 2022-2040,” Thi Ha explained.

Vietnam has also planned a new strategy to develop an environmentally friendly transportation system.

“Even from 2025, Vietnam will commit to replace 100% of its buses with electric buses and equip it with supportive infrastructure for Vietnam’s electrification of the transportation system,” said Thi Ha.

Power plants in Vietnam are dominated by 57% of coal in 2020, along with a renewable energy mix of 21% in 2020.

Bert Dalusung, Energy Transition Advisor Institute for Climate and Sustainable Cities (ICSC) said that for the first time the Philippines has a clear plan for renewable energy development.

“In this clean energy scenario, the Philippines is targeting a 30% and 50% share of renewable energy in the power generation mix by 2030 and 2040,” said Bert.

Bert added that the Philippines government realized that renewable energy would be a key element in the climate change agenda. Thus, citing President Ferdinand Marcos’ statement, the government will examine all transmission and distribution systems to accommodate the development of renewable energy and lower energy costs for consumers and industry. ***

The Webinar “The State of Southeast Asia’s Energy Transition” is available on the IESR Indonesia YouTube channel.

Seize the Energy Transition Funding Opportunity

press release

Jakarta, 28 July 2022- Indonesia’s energy transition requires significant investment to develop renewable energy generation, clean fuels, power grids, and energy storage. However, Indonesia also has a huge opportunity to attract investment in the renewable energy sector while developing innovative financing instruments

G20 Seminar
One out of three panel sessions at the G20 seminar series that discuss sustainable financing opportunities for energy transition in Indonesia (27/07/2022). (Doc. Seminar Secretariat )

“Indonesia at least needs investment for the energy transition of around USD 1 trillion by 2060”, said Minister of Energy and Mineral Resources, Arifin Tasrif in his speech at the G20 seminar series entitled “Unlocking Innovative Financing Schemes and Islamic Finance to Accelerate a Just Energy Transition In Emerging Economies”

Based on a study by the Institute for Essential Services Reform (IESR), investment needs for decarbonization of the energy sector range from USD 20–25 billion per year between 2020 and 2030 and around USD 40–60 billion per year from 2030 to 2050. 

“Indonesia owns renewable energy potential and energy needs that will continuously grow. In many ways, Indonesia should become a main investment target. Unfortunately, inconsistency on policy, regulation and lack of integrated coordination across sectors makes investors perceive Indonesia as a high risk investment market,” explained Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR).

According to the IISD (International Institute for Sustainable Development) report in 2020, only 7.8% of total investment was allocated for renewable energy in Indonesia. The rest is still focusing on fossil fuel. Peter Wooders, Senior Director Energy of IISD emphasized that the G20 should set a clear direction towards clean energy – which gradually includes a move away from supporting fossil fuels. 

“While public finance is not enough on its own, its role is essential – and many mechanisms can help”, he added. 

Therefore, in this G20 Seminar Series, the discussion about Islamic financing was elevated such as waqf, sukuk and green bonds to enrich the perspective of energy transition financing potential. 

Islamic finance also plays an important role in funding various sustainable projects, including renewable energy. According to Indonesia Islamic Economic Masterplan 2019–2024, renewable energy has received some support through the Murabaha (the principle of buying and selling) scheme, as well as donations through zakat. 

Anna Skarbek, CEO Climateworks Centre stated that investment opportunities in climate transition and innovations in investment models across ASEAN region are profound. 

Yet, Kuki Soejachmoen, Executive Director of Indonesia Research Institute for Decarbonization (IRID) as well as the seminar’s moderator reminded that any financing mechanism must pay attention to inclusivity and just/ fairness for everyone. Energy transition impact will gradually meet the end of fossil fuel and its relevant supply chain business, early retirement, new job opportunity, new skill, new industry – hence, it must be addressed in a good manner. 

$200 million Grant Commitment from Australia to Indonesia  

In his opening remarks, Andrew Hudson, CEO Centre for Policy Development, specifically raised the recent grant commitment dialogue between President Joko Widodo and Prime Minister Anthony Albanese, as a real example of the importance of cross-border dialogue. 

“It is crucial that we engage in a dialogue that shares experiences of the action required for effective,scalable and impactful cross-border investment in climate transition by both public and private-sector investors. We need to use the ambition and momentum of the $200 million climate and infrastructure partnership announced between Australia and Indonesia at the recent leaders’ meeting”

On the road to G20 Summit, this seminar series was held by Energy Transition Working Group (ETWG) Indonesia G20 2022 and T20 Indonesia, in collaboration with the Centre For Policy Development (CPD) Australia, Climateworks Centre, International Institute for Sustainable Development (IISD), Indonesia Research Institute for Decarbonization (IRID), and the Institute for Essential Services Reform (IESR), supported by Asia Investor Group on Climate Change (AIGCC). 

Strengthening a Just Energy Transition with Sustainable Finance

press release

Jakarta, 28 July 2022– The energy transition is crucial and urgent to be implemented to reduce greenhouse gas (GHG) emissions and limit the earth’s temperature below 1.5 degrees Celsius by 2050, according to the Paris Agreement. Strengthening the just energy transition requires sustainable and innovative funding.

IESR - Wapres - Meneteri Keuangan - Menteri ESDM
Vice President Ma’ruf Amin took a picture with keynote speakers and representatives from each partner organization at the G20 seminar series hosted by the Ministry of Energy and Mineral Resources (Doc. Seminar Secretariat)

Minister of Energy and Mineral Resources, Arifin Tasrif in his speech at the G20 seminar series entitled “Unlocking Innovative Financing Schemes and Islamic Finance to Accelerate a Just Energy Transition In Emerging Economies” said Indonesia already has an energy transition roadmap to achieve carbon neutrality by 2060 or earlier.

“PLN through its national energy supply business plan (RUPTL) by 2021-2023, has also targeted the cleaner business plan by adding power plants generated from renewable energy up to 51.6%. Indonesia has planned to build an archipelago super grid to ramp up renewable energy development and maintain electrical stability and security,” said Arifin.

Arifin added that at least Indonesia needs investment for the energy transition of around USD 1 trillion by 2060.

“Therefore, Indonesia continues to create strengthened relations with cooperation with partner countries and international financial institutions to find innovative funding mechanisms,” he said.

Adding up, Yudo D. Priaadi, Chair of the Energy Transition Working Group (ETWG) G20 2022, said that innovative financing and Islamic (Islamic) financing have the potential to open opportunities to increase accessibility and inclusiveness toward sustainable financing.

“We must deploy an effective and proven platform as well as securing the investment,” he said.

Mahendra Siregar, Chairman of the Board of Commissioners of the Indonesia Financial Services Authority, stressed that besides using sustainable financing to fund the energy transition, it should also be aligned with poverty alleviation efforts. He stated that the energy transition plan with sustainable financing also needs to provide profit.

“OJK plans to balance the transition and green economy, social stability, and alleviate poverty. OJK convinces the banks and public credit companies to address climate change,” he explained on the same webinar.

Kuki Soejachmoen, Executive Director of the Indonesia Research Institute for Decarbonization (IRID), said that the energy transition does not only focus on the gradual transformation of the GHG emitting sectors, but also on new jobs, new industries, new skills, new investments and other opportunities to create a resilient society.

“The inclusiveness and fairness in the energy transition process are significant for society, the economy, industry and the environment,” said Kuki.

A just energy transition also needs to ensure access to quality energy for all, especially for the poor.

“The energy transition, one of which is by retiring coal-fired power plants, as is being reviewed by the Ministry of Energy and Mineral Resources of 9.2 GW. According to the IESR study, it requires about USD 4.3 billion. But it will provide long-term benefits for the people of Indonesia,” explained Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR).

He believed that managing energy transition with a people-centered approach will ensure the benefits and costs involved in the transformation of the energy system are distributed fairly and protect the most vulnerable in society.

Energy Transition Working Group (ETWG) Indonesia G20 2022 and T20 Indonesia, in collaboration with Australia’s Center for Policy Development (CPD), Climateworks Centre, International Institute for Sustainable Development (IISD), Indonesia Research Institute for Decarbonization (IRID), and the Institute for Essential Services Reform (IESR), and supported by the Asia Investor Group on Climate Change (AIGCC), organized the G20 seminar series entitled “Unlocking Innovative Financing Schemes and Islamic Finance to Accelerate a Just Energy Transition In Emerging Economies.”

Coal Funding Discontinued, Southeast Asian Countries Must Plan the Energy Transition Measures

press release

Jakarta, 1 August 2022 –Climate mitigation actions by encouraging the use of renewable energy have led countries that fund coal-fired power plants (CFPP) to shift their investment to renewable energy. This transformation will bring implications and challenges that need to be worked on by the countries that have been the destination for fossil energy investment in Southeast Asia.

China, Japan, and South Korea are the top three countries that fund fossil energy projects in Southeast Asia. As much as 123 GW CFPP operated outside China gained financial support or even Engineering, Procurement, and Construction (EPC) support from China. Those fossil energy projects were developed within the last two decades. In September 2021, President Xi pledged to support the developing countries that carry out an energy transition to renewable energy. He also said that China would no longer fund CFPP overseas. Ever since it was declared, as much as 12,8 GW of coal that had been planned to develop was canceled.

Moreover, several companies and domestic financial institutions in China also ended funding coal projects, such as the Bank of China (BOC) which gave up on funding coal mining and new CFPP overseas, except for the projects that had signed the loan agreement, or Tsingshan Holding Group, a major player in the industrial zone overseas, especially in the steel industry, announced that it would not establish new CFPP abroad.

Isabella Suarez, an analyst, at the Center for Research on Energy and Clean Air at the webinar ‘The State of Southeast Asia Energy Transition’ held by the Institute for Essential Services Reform (IESR), explained that for the first time, President Xi’s statement was formulated within China domestic policy. Besides, there is also a progressing narrative to develop together the green development implementation within Belt and Road Initiatives framework.

According to Isabella, what China needs to do to ensure the implementation of its promise is to determine the period and its achievement target. 

“On the other hand, the countries that have received fossil energy project funding need to begin the cancellation of CFPP development and infrastructure & network efficiency, and implement the green development within Belt and Road Initiatives,” said Isabella.

Aside from China and Japan, Dongjae Oh, Program Lead for Climate Finance Solutions for Our Climate (SFOC) explained that South Korea has also become the third largest country in the world that funds CFPP projects. As much as 87% (USD 8,6 million) of the coal downstream funding from South Korea was allocated to Southeast Asia (2011-2020).

In April 2022, the South Korean President declared to stop the new funding for CFPP projects overseas. However, according to Dongjae, South Korea still relied on other fossil energy such as oil and gas.

“If we compare the coal funding that only reaches USD 10 million, oil and gas funding can reach USD 127 million within 10 years,” said Dongjae.

Indonesia becomes one of the largest beneficiaries of oil and gas industries from South Korea. This investment will make the Southeast Asia region shift its energy into oil and gas.

Dongjae added that if it is the case, the Southeast Asia region will fail to achieve the Paris Agreement target as the gas emits a significant amount of greenhouse gas emissions. Besides, sustaining fossil energy using CCS will only increase the energy price.

“The South Korean government and Southeast Asia have to cooperate in intensifying the termination of coal operations and accelerate the transition into renewable energy. On the other side, South Korea must stop coal and gas funding or investment, considering renewable energy prices are getting cheaper,” Dongjae asserted.

Lisa Wijayani, Program Manager Green Economy IESR said that the funding ending in fossil energy from China and South Korea was a concrete step to supporting energy transition globally.

“Indonesia is supposed to benefit from this chance to expand renewable energy development. A clear policy of green taxonomy and green investments should be able to attract investors to shift their funding into the green sector such as renewable energy,” she said. ***

The Webinar “The State of Southeast Asia’s Energy Transition” is available on the IESR Indonesia YouTube channel.

Providing Affordable Financing for Energy Transition

Jakarta, 27 June 2022 – Energy transition has been a global concern lately. As the urge to address climate change rises, energy transition becomes one of the key actions in keeping the global temperature. Fossil fuel burning is believed to be one of the biggest pollutants of GHG that causes temperature rises. Therefore, shifting the energy system into a renewable one is essential to cut  polluting emissions. 

Minister of Energy and Mineral Resources of Indonesia, Arifin Tasrif, in the G20 seminar titled “Unlocking Innovative Financing Scheme and Islamic Finance, to Accelerate a Just Energy Transition in Emerging Economies” said that during this time, energy transition is challenging.

“With the Covid-19 and the escalation of conflict between Ukraine and Russia, energy transition is challenging as well as for Indonesia as the G20 presidency this year,” he said. 

Minister Tasrif added that with a comprehensive strategy, Indonesia can boost energy transition. Financing has become one of the issues as Indonesia needs around 1 trillion USD by 2060 for the energy transition. 

The Vice President of the Republic of Indonesia Ma’ruf Amin encouraged the development of the Islamic bond to fund the energy transition. He also emphasized the role of shariah finance in energy transition.

“One of the potentials to finance the transition is Sukuk/Islamic bonds as an instrument to raise funds from the public for the energy transition. Sukuk innovation and promotion need to be improved so that people are more interested to invest,” Amin said.

At the same event, the Minister of Finance, Sri Mulyani, explained that Indonesia is currently looking for a strategic way to finance energy transition through various schemes.

“We just launched Energy Transition Mechanism (ETM) with ADB to support coal retirement. We will also apply a carbon pricing mechanism for CFPP, as well as develop blended finance. Since 2018 Indonesia successfully issued green sukuk, and it is allocated for the green sector and climate mitigation project,” she concluded.

Sri Mulyani also added that to fulfil Indonesia’s NDC target, the state budget is only able to cover around 34% of the required budget. For the rest, we need to figure out a way, in order to finance the transition. 

The fossil fuel economy has supported Indonesia’s economy for decades. Not only the economy, but the electricity and energy system is also dominated by fossil fuels. No wonder shifting it into a renewable-based system is challenging, not to mention requires huge investment. However we cannot just stay in the fossil-based economy either. Coal demand around the world will be declining as the climate commitment strengthened, and the coal mining region will see the impact soon in 2030. Coal has brought revenue for Indonesia especially for the coal mining region, transforming from coal meaning that we will lose this revenue. This has to be anticipated or else there will be a catastrophic impact on the coal transition.

Fabby Tumiwa, the Executive Director of the Institute for Essential Services Reform highlighted that providing sufficient finance for transition is not only addressing the finance issue but also the impact of the energy transition itself. 

“This (providing finance for transition) is a key for Indonesia to reach a just and inclusive transition that leads to equitable development,” Fabby said.

Besides seeking affordable financing, there should be a shift in the behaviour of the financial institution. Indonesia’s financial institutions usually lack the technical ability to assess the risk of renewables projects. Amjad Abdulla, Head of Partnership IRENA, emphasized  this matter.

In terms of moving away from coal, the government needs to calculate how much it can be covered by the just transition mechanism, and how much is left behind so we need to prepare for them; this includes upskilling workers, creating economic diversification, etc.

Udetanshu, Climate Transition Analyst, said that besides the budget that should be prepared, the government also needs to ensure that the local workers who previously worked in the CFPP get new job opportunities.

“If possible, the new plant (that will be renewable) should be built near the old one, to ensure that the workers can be hired locally,” she said.

Webinar The State of Southeast Asia Energy Transition

To support the low carbon transformation process, it is imperative to strengthen cooperation among key stakeholders in the SEA countries. Achieving this goal will face different challenges across the region as some countries are more advanced in terms of infrastructure in renewable energy and financial instrument compared to other countries. Therefore, discussion among key stakeholders in the region is pertinent to address the gaps and learn from each other to scale up the clean energy transition and meet the net zero economy targets.

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Financial Support for the Energy Transition in the Residential Sector

Jakarta, June 9, 2022 – The potential for the use of rooftop PV in the residential sector is one of the largest in accelerating the energy transition and achieving Indonesia’s renewable energy mix target. Appropriate policy instruments and attractive financial support are some of the supporting factors in encouraging the massive adoption of rooftop solar PV in Indonesia.

Andriah Feby Misna, Director of New and Renewable Energy, stated that Indonesia has several national targets, i.e achieving a 23% renewable energy mix by 2025, reducing emissions by 29% with own efforts and 41% with foreign assistance by 2030, and achieving net zero emission by 2060.

“For this reason, the Ministry of Energy and Mineral Resources has developed various strategies such as green RUPTL at PLN and encouraging the use of rooftop solar in the household sector and including them in national strategic programs. As support (on rooftop PV), we issued the Minister Regulation No. 26/2021,” she explained. 

Feby added that the current number of rooftop solar customers is 4,377 households, and there has been significant growth since the issuance of a ministerial regulation that regulates PLN customers who install rooftop PV in 2018.

Feby does not deny that currently there are still barriers in the implementation of the MEMR Regulation No. 26/2021, but she said that her party is currently trying to find a win-win solution so that the regulation can take effect immediately.

In addition to regulations that are still not optimal, another obstacle to the use of rooftop solar in the household sector is the initial investment which is still relatively large for the community. However, there is still a large market potential in the household sector.

Fabby Tumiwa, Executive Director of IESR, explained that based on a gradual market survey conducted by IESR since 2019, the market potential for rooftop solar PV in the residential sector in a some big cities in Indonesia such as Greater Jakarta, Surabaya, Central Java and Bali reached 34 – 116 GW.

“The potential of the energy transition market in the household sector is huge. Those who fall into the category of early followers and early adopters need to be caught. Because they are quite familiar with their products (rooftop PV) and have the intention to install them, but are constrained by a large initial investment,” Fabby explained.

Respondents of the survey expect credit products from banks with a tenor range of 24-48 months with low interest.

Veronika Susanti, Digital Lending Division Head of OCBC NISP bank explained that the renewable energy sector is one of the concerns of the banking sector to obtain funding.

“Currently we have a solar panel financing program with two schemes. First, 0% credit card installments and cash loan for a maximum of 36 months,” said Veronika.

She added that her party was collaborating with solar panel service providers to make it easier for customers to access this rooftop PV financing scheme as well as to learn about technology so that they better understand the risks and opportunities of rooftop PV.

Fendi Gunawan Liem, founder and CEO of SEDAYU Solar also emphasized that the potential for the residential sector to grow and develop is enormous.

“The residential sector is the sector that has the latest solar panel installation regulations, but has the largest customer growth compared to other sectors,” said Fendi.

Banks as financial institutions need to see rooftop solar as a low-risk asset, for that it is necessary to study rooftop solar power technology so that they can make accurate risk analysis. Thus, banks can design more friendly credit schemes with more diverse tenors and lower interest rates.