Clean Energy Finance and Investment in Indonesia webinar, 26 July 2023, Paris OECD

1. Singgih W. Mukti
Webinar Clean Energy Finance and Investment in Indonesia

3. (a) Holding the increase in the global
average temperature to well below 2°C
above pre-industrial levels and pursuing
efforts to limit the temperature increase
to 1.5°C above pre-industrial levels,
recognizing that this would significantly
reduce the risks and impacts of climate
change
(b) Increasing the ability to adapt to the
adverse impacts of climate change and
fostering climate resilience development
and greenhouse gas emission
reductions in a manner that does not
threaten food production
(c) Making finance flows consistent with
a pathway toward low greenhouse
gas emissions and climate-resilient
development
Efforts, Policies, Actions Toward
Mitigation of and Adaptation to Climate
Change Impacts
Rising and Increased
Coastal Flooding
Loss of Biodiversity
Impact on Water
Resources
Extreme Weather
Events
Displacement/ Migration
of Communities
Health Impacts
GLOBAL WARMING
Degradation of Free
Ecosystem Services
Degradation of Land
Productivity
Loss of Productivity Due to
Disruptions
Impact on Business
Increased Cost Due to
Extreme Weather
Increased Cost of Energy
Resources
Increased Coping Costs
Climate
volatility
Nutrient and waste
management
Flood control
Costal protection
Provision of food,
freshwater, fuel,
medicines, building
materials
Fertile soils and
breathable air
Climate regulation

4. • Climate change will affect how much energy is produced,
delivered and consumed
• Increased use of electricity for cooling (+5-20%).
• Less natural gas, oil and wood for heating (-3-15%).
• Growing crops for biomass and biofuel energy could stress water
resources in certain regions.
• Extreme weather events can disrupt energy generation and distribution.
• 2015 was the hottest year on record since 1850.

5. • Hydroenergy
• Droughts, retraction of glaciers, higher temperature and evaporation levels →
less water for energy generation.
• Fossil/Nuclear Energy
• Higher air/water temperatures → reduced efficiency of energy generation.
• Biomass Crops
• Higher temperatures/reduced precipitation → reduced yields and increased
stress on water resources in certain regions.
• Solar
• Higher temperatures reduce efficiency.
Source: Econoler

8. • TFC by sector and industry subsector, 2022
• TFC by fuel type for selected sectors, 2022

9. Source: Clean Energy Finance and Investment Policy Review of Indonesia

10. 1982 1993 2007 2009 2011 2012&2013 2014 2015 2016 2017
Presidential
Instruction
9/1982 on
Energy
Conservation
1st Master
Plan of
National EC
Law No.
30/2007 on
Energy*
GR
No.70/2009
Energy on
EC*
••Pres. Instruction
No. 13/2011 on
Energy and Water
Saving
•• Pres Decree No.
61/2011
on National Action
on Mitigation of
CO2 Emission
• Pres. Decree on
GHG No. 71/2011
• Ministry of MEMR
Regulation No. 13/2012
on Electricity Saving
• Ministry
of MEMR Regulation No.
14/2012 on Energy
Management
• Ministry
of MEMR Regulation No.
15/2012 on Water
Saving
• Ministry
of MEMR Regulation No.
01/2013 on Fuel Saving
• Ministry
of MEMR Regulation No
. 18/2014 on Labeling for
CFL
• Govt Regulation No.
79/2014 on National
Energy Policy
• Ministry
of MEMR Regulation No
. 7/2015 on MEPS &
Label for AC
• Labour Ministerial
Resoultion No. 80/2015
on National
Competence of Energy
Manager for Industry
and Building
•Ministry of Public
work Regulation No.
2/2015 on Green
Buildings
• Ministry
of MEMR Regulation No
. 14/2016 on ESCO
(Revoked on 2018)
• Presidential Decree
No. 22/2017 untuk
National Energy Plan
• Ministry of MEMR Reg
ulation No. 57/2017 on
MEPS & Label for AC

13. No Program Output
1 Establishment of 28 Green Industry
Standards
28 Green Industry Standards (powder milk,
crumb rubber, fertilizer (Urea, SP-36, ZA), ribbed
smoked sheet rubber, portland cement, ceramic
tile, pulp and integrated pulp & paper, dying,
stamping, and finishing textile, etc)
2 Machinery restructuring program for
textile, textile products, footwear and
sugar industry
✓ Energy Efficiency (10-29,5%)
✓Increasing productivity (2-9%)
3 Guideline Energy Conservation & CO2
Emisison Reduction in Industrial Sector
8 Guidelines (Steel, pulp & paper, fertilize,
ceramic & glas, chemistry, textile, agrochemical,
Foor & baverage)
4 Developing information system for
reporting GHG emission
GHG emission monitoring information system

14. Source: Kementerian Perindustrian

18. Energy Efficiency Technologies Risk Level
• High efficiency lighting Low
• Heating ventilation air-conditioning
(HVAC) upgrades
(Med to high)
• New automated building and HVAC controls (High – difficult to measure)
• Variable speed drives (VSDs) (Med to high)
• High efficiency chillers Low
• High efficiency boilers Low
• Combustion and burner upgrades Low
• Fuel switching (Low if prices are stipulated)
• Water conservation: i.e. toilets, showers, faucets Low
• Heat recovery and steam traps Low
• Power factor correction Low

19. Energy Efficiency Technologies Risk Level
• New automated process controls Low
• Heat recovery from process air and water Low
• Cogeneration used for peak savings High (many variables)
• Water recycling Low
• Process equipment upgrades (Low to high)
• Process changes (Med to high - depending on
technology)

21. Cost Savings
• Payments for energy (kWh, GJ, or mmBTU
of gas, etc.)
• Payments for peak power demand (kW)
• Operation and maintenance costs
• Power factor charges
Potential Ancillary Benefits
• Comfort, productivity, and safety
improvements
• More reliable operation and longer
equipment life
Environmental Concerns
• Greenhouse gas emissions related to
global climate change
• Local pollution of air, water, and land
Addressing Risk
• Future liability for pollution and
emissions
• Fuel cost volatility
Marketing
• Green image

22. Industry Transport Power
generation
Buildings
20%
40%
60%
80%
100%
Realised
energy
efficiency
potential
Unrealised
energy
efficiency
potential
Two-thirds of profitable investments to improve energy efficiency remain untapped in the
period to 2035
Source: IEA, World Energy Outlook 2012

23. • EE projects are effectively cost-cutting solutions
• EE is the “cleanest” and “cheapest” energy
• Project benefits depend as much on installed assets (and their O&M) as it
does on the behavior of involved staff
BUSINESS CASE DEVELOPMENT
SAVING IDENTIFICATION ENERGY & CARBON SAVINGS
OPERATIONS ASSETS

24. Fuel
5) Maximise efficiency
6) Optimise supply
End
Use
3) When/where is the end
product consumed?
1) What are costs for
fuel?
2) How is fuel converted into an
end product?
4) Reduce waste
Understand
Improve
Intensitas Konsumsi Energi
(Energy Use Intensity) atau
IKE adalah besar energi
yang digunakan dalam
suatu bangunan gedung
per luas area yang
dikondisikan, atau yang
digunakan oleh industry
per satuan produk, dalam
satu bulan atau satu tahun

25. Behavioural
$
Build an
energy
managing
culture
Put people in
the feedback
loop
Operational &
technological
actions

26. • Adequate to market demand
• Mitigates some barriers
• Captures market investment drivers
• Makes use of existing legal frameworks
• Bridges gaps between financing supply and demand
• Favours simplicity
• Recognises and manages all stakeholders

27. › The market assessment can
narrow down priority market
sectors with high potential.
› Additional assessments cut
across technologies to
identify financing sweet
spots aligned with the
bank’s business model.
Factors
affecting EE
technology
profitability
Energy
tariffs
Hours of
operation
Market
sector
Technology
cost
Exchange
rate
Local
regulations

28. Key market
barriers to EE
projects
Lack of capacity among project
developers to transform EE project
ideas into bankable projects.
Lack of awareness of beneficiaries
about efficient technologies.
Absence of qualified EE technology and
service providers.
Perceived high initial investment costs
threaten market-driven energy saving
measures.

29. Contractor
Selection
Audits Design
Construction Cost
Evaluation
Construction
Management
Health and Security

30. Energy Savings
Achieved
Change in Facility
Use
Client Credit
Strength
Financial
Parameters
Savings
Evaluation
Maintaining
Energy Savings
Over Time
User Behaviour

34. Source: OJK on IEECCE, 2021

36. •
•
•
Why use an ESCO model?
▪ To guarantee the energy performance of a new building compared to a building complying with a building/industrial code or
standard

37. SUPPLY
• Banking capital options, Public
Finance Mechanism standard
• Corporate financingLoan > 5 or
even 10 billion
• Asset based lending
• Loans for working capital and
company expansion (productivity)
• The additional income approach
• There are debt instruments and
require collateral
• Short tenor (3 – 5 years)
DEMAND
• “Cheap” funding for EE projects
• Project financing
• Can be in the form of small loans <
5 billion
• Cost saving as Collateral
• Loans for retrofit / installation of
new equipment (efficiency)
• Energy/cost saving approach
• Firms has limited assets or without
the ability to provide guarantees
• Tenors are more relaxed/flexible

39. 39
Business Process ESCO for Energy Conservation

40. Contractors
Governments
Equipment
Manufacturers
Financial
Institutions
Professional
Consulting
Engineers
Energy
Suppliers
Contractors
Equipment
Manufacturers
Governments
Financial
Institutions
Energy
Suppliers
Professional
Consulting
Engineers

41. SHARED SAVING
End User
ESCO
Financial Institution
Loan
Repayment from portion of
saving share
Payment based on saving share
according to ESPC
Project development, financing, and
implementation
ESCOs take both performance and credit risk

42. Source: ESDM 2014

43. Baseline 2018
Status Jumlah Keterangan
Nilai Investasi Rp 30,000,000,000
Biaya Energi 2018 Rp 12,000,000,000
Biaya energi/bulan 2018 Rp 1,000,000,000
Penghematan/bulan Rp 350,000,000 hasil IGA
Penghematan/tahun Rp 4,200,000,000 hasil IGA
Contoh Simulasi Sederhana
*ESCO Fee merupakan biaya untuk jasa jaminan penghematan dan
monitoring program ESCO
Asumsi 2019
setelah penggantian
AC
Status Jumlah Keterangan
Target Penghematan/bulan Rp 350,000,000 Kesepakatan ESCO dan Owner
Aktual Biaya Energi/bulan Rp 650,000,000 Pay to PLN
Cicilan Pembayaran Alat/bulan Rp 500,000,000
Minimum ESCO Fee/bulan* Rp 50,000,000 EMI
Minimum ESCO Fee/tahun Rp 600,000,000 EMI
Guaranteed Savings
Jika Aktual > Target
Aktual Penghematan/bulan Rp 400,000,000
Profit Rp 50,000,000 dibagi antara ESCO dan Owner
Jika Aktual < Target
Aktual Penghematan/bulan Rp 300,000,000
Selisih Rp 50,000,000 Dikurangi dari ESCO Fee
Waktu Investasi Pembayaran Penerima
0 30,000,000,000
1 6,000,000,000 BANK
750,000,000 EMI
2 6,000,000,000 BANK
650,000,000 EMI
3 6,000,000,000 BANK
700,000,000 EMI
4 6,000,000,000 BANK
650,000,000 EMI
5 6,000,000,000 BANK
600,000,000 EMI
**Perhitungan finansial ini merupakan simulasi
sederhana dan hanya untuk ilustrasi saja. Fluktuasi
pembayaran ke EMI diasumsikan karena terjadi
fluktuasi target vs aktual penghematan yang
berdampak terhadap ESCO fee yang diterima EMI
CONTOH OPSI I GUARANTEED SAVINGS

44. Contoh Simulasi Sederhana
*ESCO Payment termasuk cicilan investasi,
O&M, profit ESCO, dll
Waktu Investasi Pembayaran Penerima
0 30,000,000,000
1 7,580,000,000 EMI
2 7,450,000,000 EMI
3 7,600,000,000 EMI
4 7,250,000,000 EMI
5 7,200,000,000 EMI
6 7,300,000,000 EMI
7 7,400,000,000 EMI
8 7,200,000,000 EMI
Baseline 2018
Status Jumlah Keterangan
Nilai Investasi Rp 30,000,000,000
Biaya Energi 2018 Rp 12,000,000,000
Biaya energi/bulan 2018 Rp 1,000,000,000
Penghematan/bulan Rp 350,000,000 hasil IGA
Penghematan/tahun Rp 4,200,000,000 hasil IGA
Asumsi 2019 setelah
penggantian AC
Status Jumlah Keterangan
Target Penghematan/bulan Rp 350,000,000 Kesepakatan ESCO dan Owner
Target Aktual Biaya Energi/bulan Rp 650,000,000 PLN
Cicilan Pembayaran Alat/bulan Rp 500,000,000 1
O&M + Profit ESCO dll Rp 100,000,000 2
Minimum ESCO payment/bulan* Rp 600,000,000 EMI = 1 + 2
Minimum ESCO payment/tahun Rp 7,200,000,000 EMI (kondisi normal)
Shared Savings
Jika Aktual > Target
Asumsi Aktual Penghematan /bulan Rp 400,000,000
Selisih (Profit) Rp 50,000,000
dibagi antara ESCO dan Owner (cth EMI 80% -
Owner 20%)
ESCO Payment/bulan Rp 640,000,000 minimum payment + profit tambahan
Jika Aktual < Target
Asumsi Aktual Penghematan /bulan Rp 300,000,000
Selisih (Rugi) -Rp 50,000,000 ditanggung oleh EMI
ESCO Payment/bulan Rp 550,000,000 Pay minimum payment - selisih
Jika Aktual = Target
Asumsi Aktual Penghematan /bulan Rp 350,000,000
Selisih (Rugi) Rp -
ESCO Payment/bulan Rp 600,000,000 Pay minimum payment
**Perhitungan finansial ini merupakan simulasi
sederhana dan hanya untuk ilustrasi saja. Fluktuasi
pembayaran ke EMI diasumsikan karena terjadi
fluktuasi target vs aktual penghematan yang
berdampak terhadap ESCO payment yang diterima EMI

48. Singgih W Mukti
Marketing Executive
singgih.mukti@gmail.com
+628118539898