Fair Planet-Indonesia obtained billions from G20 countries to meet its climate goals, but no public won’t participate in monitoring the grant’s allocation. Meanwhile, the private sector is hesitant to invest in the country’s renewable energy schemes due to regulatory oversight.

Indonesia has pocketed in mid-November USD 20 billion from International Partners Group (IPG) during the Partnership for Global Infrastructure and Investment (PGII) event at the G20 Summit in Bali.

At the summit, the Indonesia Just Energy Transition Partnership (JETP) was launched with the support of countries including the United States, Japan, Canada, Denmark, France, Germany, Italy, Norway, and the United Kingdom. The programme seeks to help Indonesia develop a comprehensive investment plan to meet its climate and energy goals, drive up renewable energy generation, invest in communities and workers and reduce emissions while enhancing security, according to The White House release.


Trissia Wijaya, a researcher at the Center for Indonesian Policy Studies (CIPS), assessed that such direct investment from JETP members will require active involvement from the Indonesian government to mitigate the regulatory and political risks.

Wijaya told FairPlanet that in this Public-Private Partnership (PPP), the government has a role as an ‘off-taker,’ which means the guarantor of profit for the private sector. This ‘off-taker’ role, she noted, can be mandated to the Indonesia’s state owned-electricity company Perusahaan Listrik Negara(PLN).

“In terms of renewable energy, surely there are more financing alternatives, but which one is really feasible with Indonesia is not clear yet,” she cautioned.

Wijaya referenced the example of the 330 megawatt geothermal Sarulla power plant in Indonesia’s North Sumatra province, which is one of the biggest geothermal power plants in the world. The government engaged in years of negotiation and PLN assumed the role as an off-taker, Wijaya added.

“The private sector tends to see uncertainty regarding the PLN’s roles, whether it will be a price maker or a price taker,” she said.

This echoes the comments of another expert, Ery Wijaya – a senior analyst with the Climate Policy Initiative (CPI). The government should use such grant to favour the creation of an excellent investment situation, he said.

“For example, providing tax and non-tax incentives, guarantees or any instruments to reduce investment risk,” Ery Wijaya told FairPlanet.


Meanwhile, Wijaya warned that the government must exercise extreme caution when developing a strategy to use the funds, adding that the USD 20 billion could be used to improve the economy and people’s welfare in an equitable way.

He said that JETP prioritises efforts to increase energy efficiency in the demand sector and ensure that energy transition efforts run fairly, in addition to efforts to accelerate the termination of coal power plant agreements.

But as the largest country in Southeast Asia, Indonesia may need USD 37 billion to shut down its 118 existing coal plants and up to 10 years of contracted coal power generation, according to a Bloomberg report.

“The energy transition will undoubtedly entail an enormous cost, both direct and indirect,” Wijaya told FairPlanet.

Thus, there are social costs to be anticipated for the commitment to accelerate an energy transition, such as loss of economic resources for coal-producing areas, job losses in the coal sector and the possibility of higher energy costs due to the use of green technology, according to Wijaya.

To meet these challenges, the Indonesian government launched the Indonesia Energy Transition Mechanism Country Platform (ETM) in November this year, according to a press release by the Ministry of Finance.

The ETM Country Platform is primarily responsible for managing the funding and financing framework of the country’s energy transition. According to the release, this energy transition measure is expected to reduce around 50 million tons of carbon emissions by 2030, or 160 million tons by 2040.

The ETM Country Platform in Indonesia will use a hybrid finance approach to accelerate the transition from fossil fuels to green energy.

The long-term partnership plans to raise an initial USD 20 billion in public and private financing over the three to five years, using a combination of grants, concessional loans, market-rate loans, guarantees and private investments.

But given the short timeline for implementing the JETP fund, Andri Prasetiyo, a researcher with Trend Asia, believes the Indonesian government will be rushed. He added that this will be detrimental to the country as the government lacks structural and regulatory preparedness.

“There is no technical guide yet from the government,” Prasetiyo told FairPlanet.

Read more…

Photo by Nuno Marques on Unsplash