The Clean Energy Finance and Investment Review is one of the CEFIM Programme’s key outputs. It will provide an overview of the current policy environment and opportunities for renewable electricity and energy efficiency development in Indonesia, highlighting success stories and good practices as well as identifying areas where Indonesia could strengthen domestic enabling conditions for clean energy finance and investment. The Review endeavours to explore opportunities to accelerate clean energy development in Indonesia as well as consider socio-economic implications of the clean energy transition (e.g. gender equality, regional economy). It will contain an assessment of the current policy environment for clean energy finance and investment and provide recommendations that are actionable as well as mindful of potential trade-offs or adverse impacts.
Achieving a clean energy transition in Indonesia’s more than 16,000 islands is a challenge. This is particularly true for Indonesia’s eastern islands (notably West & East Nusa Tenggara, Sulawesi, Maluku and Papua), which represent lower levels of economic and power network development and where access to electricity is less than in the western parts of the country.
The government of Indonesia and national power utility (PLN) have made significant efforts to widen electricity access and promote use of renewable energy in eastern islands. Yet, those islands still rely heavily on expensive and polluting diesel-fired generators, despite solar and wind sources already being cheaper.
Considerable investment is thus needed to increase renewables deployment and transition from fossil fuels in the eastern islands. In particular, innovative business models and project structures are needed to address issues such as high transaction costs of smaller scale renewable projects, fair and transparent tendering processes, revenue stability and off taker risks.
To support a scale-up of renewable energy finance and investment in Indonesia’s eastern islands, this FGD discussed various business models and policies that can enable renewables deployment in an island context. The FGD also highlighted major policy and financing challenges faced by project developers and highlighted international experiences in overcoming these challenges in similar geographical contexts. Discussions included financing structures best suited to small-/medium-sized island contexts and subnational-level measures that can help lower transaction costs and facilitate investments.