The workshop commenced with welcoming remarks from Andi Yulianti Ramli, Deputy Assistant at the Coordinating Ministry for Maritime and Investment Affairs. Hendra Iswahyudi, Director of Energy Conservation representing the Ministry of Energy and Mineral Resources, proceeded by emphasizing that energy efficiency is the 'first fuel' in the clean energy transition, offering a more cost-effective solution compared to large-scale renewable energy investments. He expressed hope that numerous pilot projects would be developed and eventually lead to financing and implementation.

The workshop began with the first discussion session, where participants shared updates on energy conservation measures and electrification initiatives implemented within their respective companies. The majority of industrial companies have adopted Energy Management strategies, including ISO 50001 audits and long-term cost analyses. Key drivers for these initiatives include compliance with emerging regulations, enhanced competitiveness, cost reduction, and increased awareness of decarbonization, alongside access to green financing and established sustainable or net-zero emissions roadmaps. Companies are implementing various energy efficiency activities, such as operational efficiency improvements through technological advancements, equipment upgrades, digitalization, and renewable energy pilot projects. However, they have to deal with high costs, regulatory ambiguities, and collateral requirements from banks.

During the second discussion session, participants examined the financial opportunities and constraints faced by industrial companies in implementing energy efficiency and electrification projects. It was first highlighted that some Indonesian banks offer sustainability-linked loans with flexible ticket sizes based on energy efficiency or other environmental impact thresholds determined collaboratively between parties. However, despite these offerings, transitioning to low-carbon technologies requires high upfront costs and the current financing schemes are not attractive enough due to the traditional collateral requirements which persist, and current cost savings from energy efficiency initiatives cannot serve as collateral.

Additionally, industries generally prefer a payback period of 5-7 years for energy efficiency investments, taking into account the amount, target, and scale of their projects. However, the need for a significant initial investment (high upfront capital expenditures) can be a barrier for these companies. In response, many organizations are seeking collaborations with third-party Energy Service Companies (ESCOs) or solar panel installers who can provide leasing options. This shift towards OPEX-based financing presents an alternative to the traditional CAPEX model, helping to alleviate the burden of initial costs and making energy efficiency projects more accessible for businesses.

The final discussion explored potential financing schemes designed for energy efficiency projects presented by Climate Policy Initiative (CPI). CPI shared that according to data from the Online Energy Management Reporting System by EBTKE, over 50% of EE projects in Indonesia are financed with amounts below IDR 1 billion (USD ~600,000). Moreover, energy efficiency achievements in 2023 accounted for only 24.1% of the target emission reduction of 132.25 million tons of CO2 by 2030. This is partly due to high collateral requirements and the perceived high risks that prevent many ESCOs from securing financing. Therefore, a guarantee mechanism is crucial to support financing for energy efficiency projects and reduce such perceived risks. These mechanisms include partial credit guarantees, first-loss guarantees, and portfolio guarantees. Other financing models, such as the end-user/ESCO model and bundling small projects, could also be explored to mitigate performance risks. Institutions such as KDB and Guarantco can act as guarantee providers. The level of guarantee coverage would depend on the profiles of the companies involved, requiring thorough assessments and trusted verifiers to ensure that energy performance achievements comply with Indonesian National Competency Standard (SKKNI) regulations.

The discussion concluded with a call for further studies to explore additional financing schemes and mechanisms, alongside necessary government support through regulations and incentives to facilitate energy efficiency investments. There was also an emphasis on continued dialogue among participants to develop comprehensive solutions for financing energy efficiency initiatives in Indonesia. Over 100 diverse stakeholders attended the event, fostering collaboration between industrial companies including State-Owned Enterprises, privately owned domestic companies, and foreign-owned firms, as well as financial institutions.

Please click here to access the materials of the speakers and the summary of the proceedings.