SUSTAINABLE ENERGY FINANCE IN INDONESIA
Indonesia’s energy demand has significantly increase along with its population growth and its economic growth, however this soaring demand does not equal to the availability of Indonesia’s fossil fuel reserves. As consequences, there is an urgent need to develop alternative energy source from renewable energy such as solar PV, wind, geothermal, wave, hydro energy etc. Up to now the shares of renewable energy only take 6% in our energy mix. Data on investment of renewable for the last 3 years suggested that the investment has been relatively stranded or having a slow growth. In contrary, Indonesia government through DEN (Dewan Energy Nasional - Indonesia National Energy Board) has put a target of 23% renewable energy shares by 2025 in the national energy mix. This ambitious target will need massive investment and measures in order to achieve those target.
Despite the optimum utilization of renewable energy, the future energy demand would not be met unless supported by considerable efforts of energy efficiency. However, the level of development of energy efficiency potential is still far behind the renewable energy. Recent study by IESR and MEMR (2014) of 500 energy audit reports carried out in 2009-2010 for industrial and building indicated potential investment of 1 trilion rupiah that can be quickly implemented through companies’ internal fund and credit support from financial institutions. However, investment realization int this area remains slow and low.
WWF Indonesia sought the importance of an effective funding mechanism to enhance the renewable energy development as well as energy conservation, therefore in 2015, it collaborated with Institute Essential Services Reform (IESR) studied several energy finances scheme available in Indonesia. This study elaborated and analyzed the effectiveness of financing policy framework and its mechanism. Moreover, national and international case studies were discussed in the document, including: Indonesia Domestic Biogas Program, Indonesia Solar Loan Program (ISL), microhydro power plant in Seloliman, Thailand’s Energy Conservation Fund, Small Firms Guarantee Loans (SFGL), India’s Renewable Energy Development Authority (IREDA).
List of recommendations presented in the study are directed for Government of Indonesia as policy maker and grouped in 5 major objectives, i.e. (1) Establish coherent and consistent policies in place, (2) Improve level of sustainability of off grid, community based renewable energy technologies, (3) Maximize financial leverage of Public Finance Mechanism (PFMs), (4) Establish or strengthen financial support instrument and mechanism for small scale and rural energy project finance, and last is to (5) Increase awareness and capacity sustainable energy finance of national and local policy makers and domestic financial institutions. The recommendations among others are: improve feed in tariff scheme, improve coordination in various ministries and agencies, mobilize corporate finance, establish small scale financing facility for rural renewable project, and provide technical assistance to establish Public Service Agency (Badan Layanan Umum) at local level.