Green Infrastructure Finance
Green Investment Climate Country Profile – Indonesia
East Asia and Pacific Region
Copyright Š2013 International Bank for Reconstruction and Development/The World Bank East Asia and Pacific Region/Water and Energy Management Unit (EASWE) 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org
All rights reserved This volume is a joint publication of the staff of the International Bank for Reconstruction and Development/ The World Bank and the Australian Agency for International Development (AusAID). The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of The World Bank, its Board of Executive Directors, the governments they represent, or AusAID. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Moreover, the statistical database and other country-related information is time sensitive and subject to updates and/or changes. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to the work is given. For permission to reproduce any part of this work for commercial purposes, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; Telephone: 978-750-8400; Fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Task Team Leader, Aldo Baietti: The World Bank, 1818 H Street NW, Washington, DC 20433, USA; e-mail: abaietti@worldbank.org.
Design: Miki FernĂĄndez, ULTRA Designs, Inc., miki@ultradesigns.com
Table of Contents Acknowledgements................................................................................................................................................ iii List of Abbreviations and Acronyms.......................................................................................................................iv 1. Statistical Overview........................................................................................................................................... 2 2. Energy................................................................................................................................................................ 4 3. Green Policies and Incentives............................................................................................................................ 6 4. Green Programs and Institutions.................................................................................................................... 11 5. Green Regulatory Framework........................................................................................................................ 15 6. Investment Trends and Challenges................................................................................................................. 17 7. Concluding Remarks........................................................................................................................................ 23 8. Summary of Policy Instruments...................................................................................................................... 25 9. Annex............................................................................................................................................................... 27 10. References........................................................................................................................................................ 45 List of Tables and Figures: Table 1: Electricity Generation by Source (% of total)...................................................................................... 4 Table 2: National Energy Policy Targets by 2025............................................................................................... 6 Table 3: RE Resources and Installed Capacity..................................................................................................... 7 Table 4: Target Sectors of RAN-GRK (reduction in GT)...................................................................................... 8 Table 5: FiT Rates (US$/kWh),.............................................................................................................................. 9 Table 6: FiT for Geothermal................................................................................................................................ 9 Table 7: Measures Reducing Taxable Base......................................................................................................... 9 Table 8: RIKEN-Energy Saving Potential........................................................................................................... 10 Table 9: Targets in Development of Renewable Energy (million BOE).......................................................... 11 Table 10: Selected EE Programs.......................................................................................................................... 13 Table 11: Minimum Obligations for Biofuel Use (% blend).............................................................................. 15 Table 12: Credit Rating and Gini Index............................................................................................................... 17 Table 13: Investments in PPI - 2002 to 2010 (current US$ millions).................................................................. 18 Table 14: FDI (net BoP, current US$)................................................................................................................... 20 Table 15: CDM Program Participation................................................................................................................ 22 Table 16: List of Mini-hydro Projects.................................................................................................................. 41 Table 17: Geothermal Projects Development Plan............................................................................................ 44
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Green Infrastructure Finance
Figure 1: Total Primary Energy Supply................................................................................................................. 4 Figure 2: Road Map of PLN’s Solar PV Program................................................................................................. 12 Figure 3: DGE & EU Structure............................................................................................................................. 15 Figure 4: Global Competitiveness Index............................................................................................................. 17 Figure 5: Domestic Infrastructure Financing Needs Through 2014.................................................................. 18 Figure 6: Major Business Environment Constraints........................................................................................... 18 Figure 7: Top 21 Prospective Host Economies.................................................................................................... 19 Figure 8: Private Investment in New or Additional RE Capacity (US$ million)................................................ 21 Figure 9: Breakdown of RE Investments (US$ million)...................................................................................... 21 Figure 10: Domestic Policy Direction.................................................................................................................... 42 Figure 11: Share of Global Emissions................................................................................................................... 43
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Green Investment Climate Country Profile - Indonesia
Acknowledgements
T
his country profile has been prepared by the East Asia and Pacific Region of the World Bank. The work was led by Aldo Baietti, Lead Infrastructure Specialist (EASWE) under the overall guidance of John Roome, Sector Director (EASSD) and Charles Feinstein, Sector Manager (EASWE). The team and co-authors included Andrey Shlyakhtenko and Roberto La Rocca (EASWE) from the World Bank. The team wishes to acknowledge the peer reviewers and other contributors inside and outside the World Bank Group including, Timothy Brown, Senior Natural Resources Management Specialist (AFTN1), Dhruva Sahai, Senior Financial Analyst, Peter Johansen, Senior Energy Specialist (EASWE), Alexander Jett, Research Analyst (TWISI), John Probyn (PPIAF), Bastiaan Verink (TWISI), Banuchandar Nagarajan, Amar Causevic (EASWE), Yani Witjaksono (Local Consultant) and 10EQS, Ltd. Edward Charles Warwick edited the report. The country profile also benefited from the comments and suggestion provided by the Indonesia Energy, PREM and Environment teams. Finally, the team wishes to acknowledge the generous support from the Australian Agency for International Development (AusAID) provided through the World Bank East Asia and Pacific Infrastructure for Growth Trust Fund (EAAIG).
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List of Abbreviations and Acronyms ADB
Asian Development Bank
ASEAN
Association of Southeast Asian Nations
BAPPENAS
National Development Planning Agency
BAU
Business-as-Usual
BOE
Barrel of Oil Equivalent
BP MIGAS
National Upstream Oil and Gas Regulatory Agency
BPH MIGAS
National Downstream Oil and Gas Regulatory Agency
CDM
Clean Development Mechanism
CER
Certified Emission Reduction
CFL
Compact Fluorescent Lamps
COP
Conference of Parties
CO2
Carbon Dioxide
CPI
Corruption Perceptions Index
DEN
National Energy Council
DGE & EU
Directorate General of Electricity and Energy Utilization
DGNREC
Directorate General of New and Renewable Energy, and Energy Conservation
DSM
Demand Side Management Program
DSM PJU
Demand Side Management Program for Public Street Lightning
EE
Energy Efficiency
FCFP
Forest Carbon Partnership Facility
FDI
Foreign Direct Investment
FiTs
Feed-in Tariffs
FTP
Fast Track Program
GCA
Government Contracting Agency
GDP
Gross Domestic Product
GEF
Global Environmental Facility
GHG
Greenhouse Gas
GOI
Government of Indonesia
GT
Giga Ton
ha
Hectares
ICCTF
Indonesian Climate Change Trust Fund
ICED
Indonesia Clean Energy Development
IGIF
Indonesian Green Investment Fund
IIGF
Indonesian Infrastructure Guarantee Fund
IPPs
Independent Power Producers
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Green Investment Climate Country Profile - Indonesia
KEN
National Energy Policy
Kgoe
Kilogram(s) of Oil Equivalent
km
Kilometers
kW
Kilowatt
kWh
Kilowatt Hour
MEMR
Ministry of Energy and Mineral Resources
MFOR
Ministry of Forestry
MOF
Ministry of Finance
MP3EI
Master Plan for Acceleration and Expansion of Indonesia Economic Development
Mt
Metric Ton
Mtoe
Million Tons of Oil Equivalent
MW
Megawatt
m/s
Meter per Second
NA
Not Available
NAP
National Action Plan Addressing Climate Change
PEN
National Energy Management Blueprint
PIP
Government Investment Unit
PLN
Perusahaan Listrik Negara
PPA
Power Purchased Agreement
PPI
Private Participation in Infrastructure
PPP
Public-Private Partnership
PROPER
Program for Pollution Control Evaluation and Rating
PT IIF
Infrastructure Finance
PT SMI
Multi Infrastructure Facility
PV
Photovoltaic
P3CU
Public-Private Partnership Central Unit
QIA
Qatar Investment Authority
RAN-GRK
National Action Plan for Mitigation
RE
Renewable Energy
REDD+
Reduced Emissions from Deforestation and Degradation
RIKEN
National Energy Conservation Master Plan
Rp
Indonesian Rupiah
RUEN
National Energy Master Plan
RUPTL
General Planning on Electricity Power Plant
SNI
Indonesia National Standard
S&P’s
Standard and Poor’s
TPES
Total Primary Energy Supply
UKP4
Development Monitoring and Delivery Unit
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UNDP
United Nations Development Program
UNFCCC
United Nations Framework Convention on Climate Change
USAID
United States Agency for International Development
US$
United States Dollar
VAT
Value Added Tax
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Green Investment Climate Country Profile - Indonesia
Indonesia
is the world’s largest archipelagic state. The 54,716 km coastline of over 17,000 islands is the second longest in the world and has tremendous marine power potential (10-35 MW per km), while the land area features 40 percent of the world geothermal resources with nearly 200 active volcanoes.1 The country is rich in coal and coal-bed methane, allowing it to remain a net energy exporter over many years. A vast feedstock of second-generation biomass, if processed, could substitute over half of the domestic crude oil consumption.2 As a tropical country, Indonesia has significant solar energy potential as well as abundant hydro resources supported by substantial annual rainfall (70–125 inches in the lowlands, up to 240 inches in mountainous regions). Wind resources are, however, rather weak (average speed 5 m/s).
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Green Infrastructure Finance
Indonesia
Philippines
Vietnam
China
Rep. of Korea
Singapore
Malaysia
1. Statistical Overview
847
225
124
7,318
1,116
240
278
242
95
88
1,344
50
5
29
49.9
48.7
30.4
49.2
82.9
100
72
5.1
4.5
6.4
9.6
3.4
5.8
4.5
24.7
50.9
48.8
16.5
34.7
108.3
51.8
5.4
4.7
18.7
5.4
4.0
5.2
3.2
Agriculture
15
12
21
10
3
0
11
Industry
47
33
41
47
39
28
44
Services
38
55
38
43
58
72
45
Energy production (Mtoe)10
352
24
77
2,085
44
0.03
90
Energy use (Mtoe)
202
39
64
2,257
229
19
67
Net energy exports/imports (Mtoe)11
147
(19)
11
(185)
NA
(51)
18
71
90
98
99
100
100
99
Electric transmission and distribution losses (%)
9.4
12.1
9.6
4.9
3.7
5.2
3.8
Energy intensity (kgoe/US$1,000 2005 PPP)
230
126
274
273
184
80
191
Macro Indicators GDP (current US$ billion)3 Population (million)
4
Urban population (% of total)
5
Economic Indicators Constant GDP 10 Year CAGR (%)6 Public debt (% of GDP)
7
Inflation, consumer prices (annual %)
8
Sector mix (% of GDP)9
Energy Indicators 10
Electricity access (% of population)
12 13
14
CO2 emissions (Mt of CO2)
376
71
114
6,832
515
45
208
Electricity tariffs (US$/kWh)16
0.07
0.14
0.05
NA
0.13
0.22
NA
6,095
348
165
126,215
139
NA
4.4
15,i
Fossil fuel endowment
17
Coal (2008, million short tons)
3.9
0.1
4.4
20.4
0
0
4
141.1
3.5
24.7
107
0.3
0
83
Coal and peat
15.1
15.2
19.7
67.2
28.3
0
15.8
Crude oil
Oil (2012, billion barrels) Natural gas (2012, trillion cubic feet)
Total Primary Energy Supply (%)18 26.5
19.3
4.2
16.8
39.5
61.4
35.5
Oil products
6.7
14.3
21.2
0
0
0
0
Natural gas
17.4
8.3
11.1
3.3
13.8
38.4
43.4
0
0
0
0.8
16.8
0
0
Hydro
0.5
2.2
4.0
2.4
0.1
0
0.9
Geothermal, solar, wind
7.9
22.9
0
0.5
0.1
0
0
Nuclear
i CO2 emissions from fuel combustion only.
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Indonesia
Philippines
Vietnam
China
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Singapore
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Green Investment Climate Country Profile - Indonesia
26.0
17.9
39.3
9
1.3
0.2
4.5
0
0
0.5
0
0
0
0
Renewables
13.3
32.6
36
17.5
1
0.1
6.3
Oil
22.8
8.7
2.5
0.4
4.4
18.8
2.0
0
0
0
1.9
32.7
0
0
Natural Gas
22.1
32.1
43.4
1.4
15.6
81.0
60.7
Coal
41.8
26.6
18
78.8
46.2
0
30.9
S&P’s Credit Rating (Foreign Currency)20
BB+
BB+
BB-
AA-
A+
AAA
A-
Doing Business Ranking
129
136
98
91
8
1
18
CPI Transparency Ranking
100
129
112
75
43
5
60
FDI, net (% of GDP)23
1.6
0.3
6.8
2.2
(1.9)
8.5
1.6
37,113 45,114
8,328
78,438
NA
NA
46,401
Energy Indicators (cont.) Combustible renewable and waste Electricity and heat Electricity Sources (%)
19
Nuclear
Investment Climate 21 22
PPI (US$ million)24,ii PPI renewable energy (US$ million)
24
Lending interest rate (%)
25
Lending - deposit spread (%)26 Liquid assets to deposits and short term funding (%)
27
3,876
3,844
1,839
8,380
NA
NA
198
13.2
7.7
13.1
5.9
5.4
5.6
5
6
4
2
3
2
5
3
30
29
35
20
8
37
27
ii Investments amounts include greenfield projects, concessions and management, and lease contracts.
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Green Infrastructure Finance
2. Energy
I
ndonesia’s economy continues its heavy reliance on fossil fuels. Oil, the primary energy source, is being increasingly imported, despite substantial domestic reserves and decreasing consumption. Domestic oil production has declined, owing to ageing oil fields, lack of new investments and preservation measures. Coal is the largest domestic source of energy and is used particularly to fuel new power generation capacities. This is followed by traditional biomass, although most of its use occurs in the informal economy.28
Figure 1: Total Primary Energy Supply Oil products 7%
Combustible renewables and waste 26%
Natural gas 17%
Other 35%
Crude oil 26%
Coal 15%
Hydro 1% Geothermal, solar, wind 8%
Source: International Energy Agency, 2009.29
Indonesia’s tremendous geothermal endowment — some 100 geothermal fields with a total of 30,000 MW of potential (capable of meeting up to 40 percent of energy needs) — sparked a wave of active development in the 1990s, which until 2000 was exclusively led by Pertamina. However, results were lackluster. After 11 independent power contracts were awarded (a total of 3,417 MW), the Asian financial crisis triggered the bankruptcy of 7 and, as of 2011, only 1,200 MW were developed.30 Subsidies for electricity and fuel through the state-owned electricity company Perusahaan Listrik Negara (PLN), and Pertamina, respectively represent a massive financial burden to the state. In 2011, electricity subsidies cost the Government US$10.3 billion.31 These subsidies exacerbate the difficulty in promoting energy efficiency (EE) measures as well as development of renewable energy (RE) sources. It has been estimated that the combined sum of these subsidies could seed investments in various energy programs that would reduce energy consumption by 10 to 30 percent in households and commercial buildings, 25 percent in transportation sector, and 15 to 30 percent in industry.32 Indonesia is not only vulnerable to climate change but is also one of the largest emitters of carbon, with the country’s deforestation rates among the highest in the world.iii Yet, if rapid economic growth continues, energy demand will increase at the rate of seven percent per year which in turn will result in a fourfold increase in greenhouse gas (GHG) emission from the energy sector by the year 2030.34
Table 1: Electricity Generation by Source (% of total) 2002
2009
Renewables
14.9
13.3
Oil
23.8
22.8
Natural gas
21.7
22.1
39.6
41.8
Coal Source: International Energy Agency, 2009.
33
iii Deforestation in Indonesia is responsible for 85 percent of Indonesia’s GHG emissions, while globally deforestation accounts for only 20 percent of emissions.
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Green Investment Climate Country Profile - Indonesia
Another stark characteristic of Indonesia is that almost 70 million people (most of them in rural areas) still lack access to electricity. While the Government of Indonesia (GOI) has announced ambitious RE targets, in particular using solar to electrify rural areas, progress has been slow, with only 26 solar photovoltaic (PV) locations commissioned by PLN as of October 2012.35
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Green Infrastructure Finance
3. Green Policies and Incentives
E
conomic and infrastructure development of Indonesia is guided by the five-year Regional Long Term Development Plan and the twenty-five year National Long-Term Development Plan developed by the National Development Planning Agency (BAPPENAS), in coordination with other government agencies. In addition, sector ministries and coordinating bodies regularly produce strategic plans, master plans or roadmaps for investment in railroads, energy, ports, agriculture, etc.36 Recently, additional road maps and action plans have been produced for climate change, adaptation, and reduction in GHG emissions and deforestation.
Table 2: National Energy Policy Targets by 2025 ■■
Oil less than 20%
■■
Natural gas less than 30%
■■
Coal less than 33%
■■
Biofuel more than 5%
■■
Geothermal more than 5%
■■
Other RE more than 5%
■■
Liquefied coal more than 2%
Source: National Energy Policy, 2006.37
Indonesia’s Master Plan for Acceleration and Expansion of Indonesia Economic Development 20112025 (MP3EI) emerged from the Coordinating Ministry for Economic Affairs in 2011 as a focal point for accelerating economic growth and concentrating investment around key development corridors.38 The MP3EI intends to increase GDP to US$4.5 trillion (per capita income to US$15,000).39 The plan includes US$1 trillion in infrastructure development through a number of public-private partnership (PPP) tenders. This would mobilize almost US$700 billion in private financing and increase exposure to foreign capital and knowledge. In recognition of the importance of attracting foreign capital the GOI has already sent delegations to Republic of Korea, Japan, China, and the United States. As of August 2012, under the MP3EI master plan, as many as 135 projects had already begun, with a cumulative investments of more than Rp490 trillion (US$50 billion).iv The Energy Law No. 30 of 2007 provides more detailed principles for the utilization of energy resources and final energy use, security of supply, energy conservation, protection of the environment with regard to energy use, pricing of energy, and international cooperation.40 The Energy Law mandates the creation of a National Energy Council (DEN) that: (i) drafts the National Energy Policy (KEN); (ii) endorses the National Energy Master Plan (RUEN); (iii) declares measures to resolve conditions of energy crisis and energy emergency; and (iv) provides oversight for the implementation of cross-sector energy policies. Among other objectives, Indonesia’s KEN of 2006 aims to: (i) promote efficiency, conservation and environmental preservations; (ii) enhance the share of RE; (iii) increase energy access; (iv) improve energy security; and (iv) gradually adjust the price of energy toward an economic price.41 However, the implementation of the KEN requires mobilizing vast funds from the private sector. For example, iv Indonesian rupiah (Rp) exchange rate is approximately Rp9,633 =US$1.
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Green Investment Climate Country Profile - Indonesia
achieving the vision of 25/25 (by 2025 RE production to reach 25 percent) requires investment in geothermal power of about US$36 billion, with similar levels needed for solar energy, wind, biodiesel, and others.42 The KEN will be the basis for formulating the RUEN. The RUEN will be drafted by the Government and will be implemented by the Ministry of Energy and Mineral Resources (MEMR) after approval by the DEN. The provincial governments are required to formulate Provincial RUENs. Table 3: RE Resources and Installed Capacity Resources
Installed capacity (MW)
Ratio %
Hydro
75,670 MW
5,771
7.6
Geothermal
28,543 MW
1,228
4.3
770 MW
218
28.3
49,810 MW
1,618
3.3
Solar Energy
4.80 kWh/m /day
20
-
Wind Energy
3–6 m/s
1.87
-
Non fossil energy
Mini/Micro Hydro Biomass
2
Source: Directorate General of New and Renewable Energy, and Energy Conservation, 2012.43
Over the past decade, Indonesia has reformed its energy sector through a series of new laws, aimed at creating more transparent and favorable condition for reshaping its energy mix (although advanced reform of the electricity sector, which would have established competition in power generation, was rejected by the Constitutional Court in 2004): ■■
The Oil and Gas Law (Law No. 22/2001) transferred regulatory functions from state-owned Pertamina to the new regulatory bodies: (i) the National Upstream Oil and Gas Regulatory Agency (BP MIGAS); and (ii) the National Downstream Oil and Gas Regulatory Agency (BPH MIGAS). When BP MIGAS was dissolved in 2012, its functions were transferred to the MEMR, hence terminating Pertamina’s monopoly in upstream oil and gas activities.
■■
The Mineral and Coal Mining Law (Law No. 4/2009) established concessions based on permits from the central and regional governments.
■■
The Electricity Law (Law No. 30/2009) ended the monopoly of PLN in the business of supplying electricity to the public. Under the previous Electricity Law of 1985, PLN was the sole holder of Electricity Business Authority License and was responsible for providing electricity across throughout the country. It was also solely responsible for developing the electricity sector. Under the new Law, independent power producers (IPPs) will enter energy sales or power purchase agreements with PLN. Within this context, the selection of IPPs usually follows a competitive bidding process. The Electricity Law also allows electricity tariffs to be differentiated by region (to allow for different costs of supply). There is no ruling whether the PLN will implement tariff differentiation over its extensive power systems across Indonesia.
■■
The Geothermal Energy Law (Law No. 27/2003) states that the MEMR holds exclusive rights to establish policy, regulation, and licensing of geothermal exploration and exploitation, while licenses for geothermal resource development are granted by the Governor or Regent/May-
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Green Infrastructure Finance
or at the state level. The Law no longer recognizes Pertamina’s monopoly of the geothermal and introduces a structure where the geothermal business is undertaken trough tenders. All business entities may participate in bidding and the winner may obtain a business license. The process starts with the Directorate General of Mineral Coal and Geothermal within the MEMR identifying the potential geothermal work area, and conducting studies and assessments. Then the work area is offered for competitive bidding to prospective investors (public, private or cooperative entities). Winners are awarded the right to conduct exploration for up to three years (with a possible extension of two more years) within a maximum work area of 200,000ha. Upon completion of exploration, the awarded entity is required to complete a feasibility study within two years. Extendable 30-year exploitation rights are awarded during the operational stage. The Law, however, introduced terminology that classifies geothermal energy extraction as a “mining activity”, making it difficult for geothermal energy companies to conduct operations in forested areas where most hotspots are located. The Government recognizes this constraint and is in the process of revising the Law. ■■
The Forestry Law 41 of 1999 places two thirds of the country’s land under forest administration despite the fact that much of this land has been denuded. The law prohibits some economic activities in conservation forests, especially in watersheds. Watershed protection forests, hutanlindung, and conservation forests, hutankonservasi, are distinct terms in Bahasa Indonesia that are referred to in the legislation. However, these terms are often cause confused as their translations in many languages, including English, are very similar.44 The law allows for some activities to be licensed, as long as the main forest functions are not altered. Thus, while development in certain forest areas can be established, licenses for mining activities are often subject to controversy. For example, when some new “protection forest” areas were established in 2003, they overlapped with existing mining exploration licenses, making the activity illegal. Eventually, a Presidential decree (No. 41 of 2004) was needed to create a ‘grandfather’ exception for firms holding mining permits prior to the enactment of the 1999 Law.
The development of geothermal resources is a part of broader work to address climate change and is guided and coordinated by the 2007 National Action Plan Addressing Climate Change (NAP), the National Action Plan for Mitigation (RAN-GRK), and the Indonesian Climate Change Sectoral Roadmap.46 The NAP is supported by various Ministry-level policies and lists the short–term and long-term regulatory efforts to be implemented in reducing climate change. However, the NAP only lays out broad directions with little specificity.
Table 4: Target Sectors of RAN-GRK (reduction in GT) 26% CO2e
41% CO2e
Agriculture
0.008
0.011
Forestry and peat land
0.672
1.039
Energy and Transportation
0.038
0.056
Industry
0.001
0.005
Waste Management
0.048
0.078
Source: Ministry of National Development Planning, 2012.45
The Presidential Decree No. 61/2011, the Action Plan to Reduce GHG Emissions, commits Indonesia to limit its GHG emissions by 26 percent against the business-as-usual (BAU) baseline by 2020. This
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Green Investment Climate Country Profile - Indonesia
would be raised to 41 percent if international support is provided. This plan is designed to fulfill the Bali Agreement at the Conference of Parties (COP) 13, United Nations Framework Convention on Climate Change (UNFCCC) and the results of subsequent COPs 15 and 16 in Copenhagen and Cancun.v The Ministry of Finance (MOF) has studied the possibility of adopting a carbon tax (possibly followed by transition to emissions trading) of US$8 per ton of CO2 — the level that is considered sufficient to trigger some fuel switching and investment in EE.47 It is expected that US$15.72 billion in Table 5: FiT Rates (US$/kWh) RE investments over the next 15 years Mid Voltage Low Voltage will come from the private sector.49 The Small Hydro 0.06 0.10 Government, therefore, is exploring Biomass/Biogas 0.09 0.73 ways to attract private capital. To accelMunicipal solid waste: 0.10 0.14 erate development of RE resources, the zero-waste technology Government introduced feed-in tariffs Municipal solid waste: 0.08 0.12 (FiTs) in many sectors, with the geotherlandfill technology mal sector receiving the most supportive Source: Ministry of Energy and Mineral Resources, 2012.48 package of fiscal incentives, including an off-take guarantee and a favorable FiTs. In addition, solar PV off-grid systems are envisioned to: (i) increase rural electrification ratio to 95 percent in 2025; and (ii) stimulate rural community economic development toward a more sustainable path. Location-specific FiTs have also been introduced for mini-hydro. Table 6: FiT for Geothermal Standard Geothermal Price (US$/kWh) High Temperature (> 225°C)
Low/ Medium Temperature (≤ 225°C )
More than 55 MW
10.5
13.5
More than 20 up to 55 MW
11.5
15.0
More than 10 up to 20 MW
13.5
16.0
17.0
19.0
Capacity
Smaller than 10 MW Source: Think Geoenergy, 2013.
50
In late 2008, Indonesia announced an overhaul of its taxation system. This included easing taxes, which was later complemented by a tax holiday scheme for up to ten years, and a tax incentive program.52 Incentives apply to 128 different fields, including renewable resources and pioneer sectors. The key regulations
Table 7: Measures Reducing Taxable Base ■■
Accelerated depreciation
■■
Tax losses carry-forward
■■
Reduced taxes on dividends paid to foreigners
■■
5% tax credit
Source: Renewable Energy Policy Network for 21st Century, 2010.51
v For more details see Supplementary Materials 9.5.
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introduced by the MOF included: (i) regulation of tax and customs facility for RE resources utilization activities (PMK Number 21/PMK.011/2010); (ii) value added tax (VAT) for imports for geothermal exploration (PMK Number 24/PMK.011/2010); (iii) tax incentives for geothermal electricity (PMK Number 35/PMK.011/2010); and (iv) regulation of sales tax for biodiesel and bioethanol (PMK Number 156/PMK.011/2009). The Presidential Decree No. 43/1991 mandates relevant governmental ministries and agencies to issue coordinated GOI rulings and programs within their respective jurisdictions and regulatory roles to promote and encourage energy conservation.53 EE development is guided by three key pieces of legislation: ■■
■■
■■
The National Energy Conservation Master Plan (2005) — ( RIKEN) stipulates an energy intensity decrease by one percent per year to 2025.54 The National Energy Management Blueprint (2006) — (PEN) targets a 41 percent reduction in the total primary energy supply (TPES) by 2025 against BAU TPES case.56
Table 8: RIKEN-Energy Saving Potential ■■
Industry sector: 15% to 30%
■■
Commercial buildings: 25%
■■
Residential sector: 10% to 30%
Source: Asia-Pacific Economic Cooperation, 2011.55
The KEN aims to reduce energy elasticity to less than 1 by 2025.vi
Over the past decade, several fundamental policy changes have helped improve the policy environment for PPP projects.57 The most important of these is the Presidential Regulation No. 67 of 2005 on Cooperation between Government and Business Entity in Provision of Infrastructure and the Amendment, Presidential Regulation No. 13 of 2010.58 Nonetheless, the institutional structures for coordination of plans and strategies across the wide range of investment needs are not yet fully operational. Some inter-agency competition and the ongoing decentralization of responsibilities to the district level serve as barriers to full GOI alignment behind a single set of priorities, plans, and policies. Additionally, Indonesia’s economic policies favor resource depletion over sustainable use. Fiscal policies reward districts on resource revenue, not stewardship. These policies also subsidize fossil fuel consumption and under-value forests and fisheries. The over-consumption of fuel and electricity contribute to pollution and health impacts. Subsidies burden the budget, benefit higher income groups, and hinder the development of RE sources and investments in EE.
vi Presidential Regulation No.5/2006 regarding KEN.
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4. Green Programs and Institutions
T
he DEN is responsible for preparing the draft of the KEN for endorsement by parliament and enactment by the GOI. The DEN includes fifteen members — seven ministers and high-ranking governmental officials and eight members from the private sector — and is chaired by the President. The MEMR introduces targets for the development of RE, while the development of RE (along with coal, gas, and diesel) is also outlined by PLN’s General Planning on Electricity Power Plant (RUPTL). The RUPTL plans to focus the development on geothermal and hydro-energy. As per Ministerial Decree No. 31/2009, the PLN is required to purchase electricity generated from RE resources (including biomass and mini-hydro projects).
Table 9: Targets in Development of Renewable Energy (million BOE) Total Energy
2011
2012
2013
2014
2015
Biomass
2.52
10.06
20.13
40.25
74.21
Biomass waste (electricity)
8.84
9.46
11.01
15.64
22.55
Geothermal
19.49
21.31
22.24
35.38
66.69
Hydro Energy
39.75
46.06
48.56
50.52
57.27
- 0.0002 0.0004 0.0005
0.01
Sea/Ocean Energy Solar Energy
0.22
0.28
0.34
0.40
0.47
Other RE
0.01
0.07
0.12
0.17
0.47
-
-
-
-
-
New Energy (nuclear, etc.) Total
70.83
87.24 102.40 142.37 221.43
Source: Ministry of Energy and Mineral Resources, 2010.59
According to the Presidential Decree No. 4/2010, the Fast Track Program Phase II (FTP II, 72 projects, 6,920 MW total) seeks to increase installed capacity through tendering IPPs contracts and focuses on geothermal energy (73 percent of FTP II). Other components of the FTP II are hydro (eight percent) and coal (19 percent).61 For power not included in the FTP II, the geothermal requirement is stipulated as 2,014 MW. A Geothermal Fund was established in 2011 to: (i) finance data collection to improve information about prospective geothermal fields; and (ii) offer exploration loans for upstream drilling. However, the Fund is still in its infancy stage, as not all governance-related issues — including risk-sharing arrangements — have been sorted out. While investors are eligible to apply for exploration financing, disbursement of funds by the Indonesia Investment Agency is at a standstill.vii To mobilize climate finance, the Government Investment Unit (PIP) was established and now is developing guidelines and mechanism for project funding. The unit manages a clean-technology sovereign-wealth fund in partnership with the Qatar Investment Authority (QIA) and allocated US$170 million of initial financing with possible additional Rp1.4 trillion for mini-hydro.62 The PIP also hosts a mechanism to manage public and private investment in a low-carbon economy called the Indonesian Green Investment Fund (IGIF). However, the realization of the IGIF has not proceeded vii Key issues in developing geothermal projects include the need for: (i) more investor-friendly regulatory framework, (ii) clearer GOI policies and procedures; (iii) solving major issues involving land clearing, cost escalation and tariff adjustment, and (iv) better GOI guarantee program.
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as quickly or on the scale anticipated. Some believe that since the most of funding comes from the private sector, IGIF should be managed by a team with a private fund management background.62 The Indonesia Clean Energy Development (ICED) is a 4.5 year US$16.5 million program supported by United States Agency for International Development (USAID) to facilitate mini-hydro, biomass and EE projects in three provinces (Riau, North Sumatra and Aceh).63 It aims to facilitate a development of 120 MW of RE capacity.
Capacity, MWp
Figure 2: Road Map of PLN’s Solar PV Program The Solar PV Promotion Program, among 90 other key areas, targets promoting solar 80 80 80 75 75 home and centralized PV systems in iso70 70 70 lated systems running on diesel.64 The 60 60 50 program targets six tourist destination 50 islands (already in operation), 100 islands 40 30 with 20 MW of total installed capac30 20 ity (by 2012) and 1,000 rural locations/ 10 islands with 225 MW installed capacity 2 0 (by 2016).60 The urban lens of this pro2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year gram aims at decreasing the depenSource: Perusahaan Listrik Negara, 2012.60 dency on electricity supply from PLN, by developing off-grid and on-grid PV generation. The Energy Self-Sufficient Village Program was launched in 2007 and supported through MEMR to improve the rural energy supply based on locally available RE. The program covered 350 of 6,200 villages not supplied by electricity. A significant part of Indonesia’s total GHG emissions comes from changing land use, deforestation, peat conversion and fires. Therefore, Indonesia is acting to reverse these deteriorating effects. Indonesia embraces the concept of financial compensation for Reduced Emissions from Deforestation and Degradation (REDD+) and the Government is determining how REDD+ will operate under the leadership of a National REDD+ Agency, currently being established under the authority of the President. After Indonesia’s GHG reduction commitment at the G20 Summit in 2009, development partners have pledged financial support toward this goal. In a prominent initiative, in May 2010 Norway and Indonesia agreed on a billion dollar performance-based, policy-linked initiative for accelerating action on REDD+. The initiative has three phases: (i) preparation; (ii) transformation; and (iii) contributions for verified emission reduction. Phase 1 is underway with an initial grant of US$30 million — managed through United Nations Development Program (UNDP). In Phase 1, the President formed a Task Force for Preparation of the REDD+ Program (Presidential Decree No. 19/2010 and 25/2011). The Task Force, managed by the President’s Development Monitoring and Delivery Unit (UKP4), has developed a National REDD+ Strategy, selected Central Kalimantan as the first pilot province, and instituted a Moratorium on New Forest Licenses (Presidential Decree No. 10/2011).65
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The moratorium would halt new concessions for two-years for exploiting primary natural forests and peat lands. The intent would be to allow the Government to develop improved processes for land-use planning, create an integrated database and registration system, design a transparent license issuing process and build institutions necessary to achieve Indonesia’s emission reduction goals. But the moratorium has left open a few loopholes and has generated some degree of controversy. The moratorium covers about 66 million ha, of which, only about 22 million ha are newly protected forests.66 The remainder was protected to some degree under previous laws and rules. On the other hand, the moratorium does not cover 47 million ha of secondary and logged-over forests, which absorb carbon and promote biodiversity. Finally, the moratorium is weakened by a number of exemptions: (i) for pre-existing licenses and extensions; (ii) for ecosystem restoration permits; and (iii) for vital national development activities, including geothermal, oil and gas, electricity, and land for rice and sugar cane for food and energy security. The REDD+ Task Force has also established an Integrated Team to ensure consistent law enforcement in cooperation with the Attorney General’s Office, the National Police, and the Ministry of Forestry (MFOR). A key result, the Indicative Moratorium Map is a step toward the goal of a harmonized “One Map” — an integrated map for all forest and peat land areas nationwide.65 Formerly, sectoral ministries, including forestry, agriculture, mining and land agency, had their own maps and permitting processes. The One Map creates a platform for boosting coordination among the key ministries and agencies. The Demand Side Management (DSM) program was started by the PLN in 2002 with the aim to increase EE awareness as well as to reduce energy consumption through effective lighting solutions. The program began with replacing incandescent bulbs with compact fluorescent lamps (CFL) in residential buildings and quickly brought the sales of CFLs to about 20 million units (sales of CFL to poor households were subsidized by DSM program “Peduli”). Throughout the street lighting network, the DSM for Public Street Lighting (DSM PJU) replaced mercury lamps with high-pressure sodium lamps. The Program for Pollution Control Evaluation and Rating (PROPER), the first major public disclosure program in the developing world, targeted major industrial water polluters and used a fivecolor scale to grade their environmental performance. Launched in 1995, it released four rounds of evaluations to the media. In response to disclosures, firms, particularly those with poor compliance records, cut their emissions by about a third and pursued subsequent further reductions.67 The Central Statistical Agency through various governmental agencies collects energy consumption data, including energy intensity and energy saving potential in industry and commercial buildings. As of 2009, 292 industries and commercial buildings had reported. Additional data is voluntarily reported to the Clearing House
Table 10: Selected EE Programs ■■
Mandatory energy conservation of GOI office buildings
■■
EE steps by State-owned energy service company
■■
State PPP Program on Energy Conservation
■■
Energy Labeling (began in 1999)
■■
Energy Efficient Building Competition Award
Source: Ministry of Energy and Mineral Resources, 2012.68
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of Energy Conservation established with assistance from the Danish International Development Agency. Among the key institutions, the Public-Private Partnership Central Unit (P3CU) is dedicated to manage PPP implementation. P3CU formulates general PPP policy and provides guidance for project preparation, procurement, and implementation. The BAPPENAS annually issues the ‘PPP Book,’ which categorizes PPP projects as: (i) potential; (ii) priority; and (iii) ready for offer.69 The 2011 PPP Book had 79 PPP projects with a total project cost of US$53 billion. The Risk Management Unit in the MOF assesses the necessity for the GOI’s support of PPP projects. The National Committee for Accelerating Infrastructure Development coordinates inter-ministerial issues for infrastructure policy implementation. In consultation with the organizations and the above committee, the Government Contracting Agency (GCA) identifies, selects and prioritizes the PPP projects. The GCA tenders the projects and enters into a Cooperation Agreement with the project company.39
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5. Green Regulatory Framework
R
egulatory functions over low-emission technologies are currently embedded into the regulatory umbrella of the energy sector as a whole, with the Directorate General of Electricity and Energy Utilization (DGE & EU) primarily responsible for electricity sector policy and regulation.70 The governance structure of DGE & EU, however, does not fully provide an effective or independent regulatory function.
Figure 3: DGE & EU Structure
The Ministerial Regulation No. 02/2011 sets the terms under which PLN purchases geothermal power. While a ceiling price of US$0.097 (later changed to US$0.13) was established by the Government, PLN purchases geothermal power through a competitive bidding process from the lowest bidder.
Table 11: Minimum Obligations for Biofuel Use (% blend)
DIRECTORATE GENERAL OF ELECTRICITY AND ENERGY UTILISATION Secretariat of Directorate General
Directorate of Electricity Programme Supervision
Directorate of Electricity Business Supervision
Directorate of New and Renewable Energy and Energy Conservation
Directorate of Electricity Technology and Environment
Source: Ministry of Energy and Mineral Resources, 2012.74
Sector
2009
2010
2015
2020
2025
PSO transport
1
2.5
5
10
20
Non-PSO transport
1
3
7
10
20
2.5
5
10
15
20
0.25
1
10
15
20
1
3
5
10
15
Biodiesel
Industrial and commercial Electricity generation Ethanol PSO transport
Non-PSO transport 5 7 10 12 15 The Ministerial Regulation No. Industrial and commercial 5 7 10 12 15 32/2008 regarding the Supply, Use Straight vegetable oil fuel and Commerce of Biofuel as Other Fuel makes biofuel consumption Industry 1 3 5 10 mandatory from 2009. The matters Marine 1 3 5 10 regulated are: (i) the utilization Electricity generation 0.25 1 5 7 10 priority of biofuels; (ii) categoSource: International Institute for Sustainable Development, 2013.71 ries of biofuels; (iii) standards and specification of quality; (iv) setting of price; (v) commerce involving biofuels as other fuel; (vi) directives and oversight; and (vii) sanctions.
The Presidential Instruction No. 13/2011 regarding Saving Energy and Water instructs leaders within the economy to act in innovative ways to save energy and water within their institutional domain and/or in the domain of state owned enterprises and regional government-owned enterprises within their jurisdiction. The Presidential Instruction sets targets of electricity reductions of
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20 percent from average electricity use before the Instruction; fuel reductions of 10 percent and water use reductions of 10 percent. Indonesia has Minimum Energy Performance Standards for select electrical appliances based on the Indonesia National Standard (SNI) and Energy Performance Testing Standards. The SNIs apply to: (i) energy conservation on building envelopes (SNI 03-6389-2000); (ii) energy conservation on air circulation system for buildings (SNI 03-6390-2000); (iii) energy conservation lighting system for buildings (SNI 03-6197-2000); (iv) labeling on energy saving levels for households (SNI 04-6958-2003); and (v) biodiesel, bioethanol, and virgin biofuel. Recently, to facilitate further increase of private sector participation in infrastructure projects, some PPP regulations have been amended. The new regulations include the key Presidential Regulation No. 56/2011 (Cooperation between Government and Business Entity) and the Presidential Regulation No. 78/2010 (Infrastructure Guarantee for PPP Infrastructure Project through Infrastructure Guarantee Entity). The new regulations allow foreign legal entities to submit unsolicited proposals to the GOI. In December 2011, the Land Acquisition Bill was passed to clarify the procedures for the Government acquisition of land. The National Land Agency has an expert team to assess land values and to conduct consultation with land owners on compensation. Compensation is initially sourced from either the national or regional budget, though the winning bidder may be required to reimburse the Government for the expense.
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6. Investment Trends and Challenges
I
ndonesia was greatly affected by the 1990s Table 12: Credit Rating and Gini Index Asian financial crisis but used the lessons S&P’s Credit learned from the experience to outperform Rating (foreign Country currency) Gini Index its regional neighbors during the more recent China AA48.0 global financial crisis.73 Indonesia was one of Indonesia BB+ 36.8 only three G20 members to grow economically Philippines BB+ 45.8 in 2009. The GOI has promoted fiscally conserSingapore AAA 47.3 vative policies, resulting in a debt-to-GDP ratio Korea, Rep. of A+ 31.0 of less than 25 percent, a small current account Vietnam BB37.6 surplus, a fiscal deficit below two percent, and Sources: Standard and Poor’s, 2012; and World Bank, historically low rates of inflation. Fitch and 2012.72 Moody’s upgraded Indonesia’s credit rating to investment grade in 2011 and 2012, respectively. However, Standard and Poor’s (S&P’s) did not concur, cautioning that the new mining rules, weak infrastructure and the parliament’s failure to approve a rise in subsidized fuel prices (Asia’s lowest) could deter investors.74 Indonesia still struggles with inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. On the other hand, it has notably low inequality in family income distribution. Further, some sectors reported that state-owned Enterprises receive increased preference for GOI projects, making it harder for private enterprises to compete for access to markets, credit, and other business operations.75
Figure 4: Global Competitiveness Index Transition 1-2
1 Factor driven
2
Transition 2-3
Efficiency driven
3 Innovation driven
Institutions 7 Innovation
6
Infrastructure
5
Business sophistication
Macroeconomic environments
4 3 2
Health and primary education
1
Market size
Higher education and training
Technological readiness
Goods market efficiency
Financial market development Low market efficiency Indonesia
Efficiency-driven economies
Source: World Economic Forum, 2012.76
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Figure 5: Domestic Infrastructure Financing Needs Through 2014 150
150
56
94
100
USD Bn
Indonesia has a long history of PPP for infrastructure development. In the 1990s for example, the Government promoted IPPs, the “Operation Cooperation” program for telecom expansion, and PPP-based toll roads. However, as these were largely negotiated without competition, their success has been limited, in some cases resulting in disputes and contract renegotiation. Subsequent PPPs have achieved mixed results.
50
0
Total Infrastructure Financing Requirement
Government Budget for Infrastructure
Gap to be Addressed e. g. through PPP
Source: Ministry of Economic Affairs, 2012.57
Table 13: Investments in PPI - 2002 to 2010 (current US$ millions) Indonesia
Philippines
Vietnam
US$ Mil
%
No
%
US$ Mil
%
No
%
US$ Mil
%
No
%
Energy
16,262
43
41
20
17,558
38
64
31
4,508
54
45
57
Telecom
16,288
44
115
56
15,886
35
115
55
2,280
27
19
24
Transport
3,669
10
30
14
3,931
9
19
9
1,235
15
11
14
Water and sewerage
1,020
3
21
10
8,098
18
10
5
305
4
4
5
Total
37,239
207
45,473
208
8,328
79
Source: World Bank, 2010.
77
Indonesia’s real sector is still far from realizing its potential to be a major contributor to economic growth. Insufficient overall legal and institutional frameworks on PPP and a confusing division of roles between different governmental agencies are main contributors for the delay. Some contend that this may change soon, and the substantial gap in infrastructure investments (US$200 billion) can, at least partially, be filled with PPP projects (US$70 billion).78 18
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Figure 6: Major Business Environment Constraints Access to finances
47.9
Practices of the informal sector
13.7
Political instability
6.9
Electricity
6.5
Inadequately educated workforce
4.3
Transportation
4.3
Access to land
3.9
Business licenses and permits
3.3
Crime, theft and disorder
3.0
Corruption
1.6 0
10
20 30 Percent of Firms
Source: International Finance Corporation, 2009.79
40
50
Green Investment Climate Country Profile - Indonesia
To support PPP development, the Indonesian Infrastructure Guarantee Fund (IIGF), was established by MOF in December 2009 (a total of US$217 million was allocated). IIGF provides guarantees to financial obligations of the GCA. If the guarantee amount exceeds the IIGF’s capacity, MOF would co-guarantee. The Central Java 2 x 1,000 MW coal Power Plant Project, sponsored by J-Power Ltd, Itochu Corporation and PT Adaro Energy, is the first PPP guaranteed by IIGF.39 In addition to IIGF, various fiscal support instruments have been introduced for PPP development, including infrastructure financing facilities such as: (i) the Multi Infrastructure Facility (PT SMI, a non-bank financial institution wholly owned by MOF); and (ii) the Infrastructure Finance (PT IIF). The PT IIF, was established by the Asian Development Bank (ADB), the International Finance Corporation, German Investment Corporation and PT SMI, to provide equity and long-term debt financing to commercially viable infrastructure projects. The GOI continues to recognize and uphold property rights of foreign and domestic investors, providing policy stability for all long-term infrastructure projects, including RE investments.79 The 2007 Investment Law opened major sectors of the economy to foreign investment. The Investment Coordinating Board, the body responsible for issuing investment licenses to foreign entities, launched a National Single Window for Investment that will eventually allow foreign investors to apply for licenses and other services online, although consolidation procedures might take years.80 Nonetheless, judicial handling of investment disputes remains problematic. The court system often does not provide effective recourse for resolving property and contractual disputes. Judges are not bound by precedent and many laws are open to wide interpretations.viii Lack of clear land titles has plagued Indonesia for decades, adversely affecting RE investments, although the situation began improving with the new 2011 Land Law. Indonesia is currently on the United States Special 301 priority watch list for Intellectual Property Rights protectionand the International Intellectual Property
Figure 7: Top 21 Prospective Host Economies for 2012-2014 (Percentage of respondents selecting economy as a top destination) (x) = 2011 ranking 1 China (1) 2 United States (2) 3 India (3) 4 Indonesia (6) 5 Brazil (4) 6 Australia (8) 6 United Kingdom (13) 8 Germany (8) 8 Russian Federation (5) 8 Thailand (12) 11 Vietnam (11) 12 Mexico (10) 13 Japan (-) 14 Netherlands (-) 14 Poland (6) 14 South Africa (-) n Developed economies n Developing and transition economies
17 Korea, Republic of (-) 17 Sweden (-) 19 France (19) 19 Italy (-) 19 Malaysia (19) 10
20
40
60
Source: United Nations, 2012.81 viii For more details see Figure 6.
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Alliance estimates that 87 percent of business software is unlicensed, while retail and mall piracy rates are likely to be even higher.82 Macroeconomic and regulatory policy uncertainty is still considered by 60 percent of firms to be a major obstacle. Finance is deemed problematic — for the larger firms it is the cost of formal finance, for smaller firms it is access to it. Corruption is endemic across all sectors. Although Indonesia’s ranking improved in Transparency International’s Corruption Perceptions Index for 2011, corruption remains pervasive (38 percent of respondents reported corruption to be major or very severe obstacle) despite laws aimed to combat corruption and the establishment of an independent Corruption Eradication Commission.83 The burden of paying taxes is the heaviest in the region and entails 51 payments per year.83 Indonesia lags behind other ASEAN countries in the use of information and communications technology. Table 14: FDI (net BoP, current US$) Indonesia has signed investment protection agreements with 60 countries and is in As % of compliance with Trade-Related Investment Country 2002-2010 2010 GDP China 816.0 124.9 Measures. Indonesia’s average most 0.80 Indonesia 24.9 11.1 favored nation applied tariff is 7.6 percent, 1.57 Malaysia 46.9 9.2 3.29 while under the Free Trade Agreement Philippines 9.2 0.7 0.34 import duties from ASEAN countries are Korea, Rep. of -74.5 -19.4 -1.46 zero to five percent. In 2010, Indonesia Singapore 67.2 18.9 12.31 increased applied tariffs for various prodVietnam 38.5 7.1 6.83 ucts including energy efficient lights. Source: World Bank, 2010.84 Foreign direct investment (FDI) inflows to certain sectors are restricted (outlined in presidential decree 36/2010, also known as the Negative List). However, foreign capital investment, through the stock market, is not governed by the Negative List, while the single-presence policy, introduced in 2006, prevents any person or company from owning a controlling stake in more than one bank.85 Relatively relaxed investment rules, a growing middle class, and strong domestic demand combined with stable GDP growth, make Indonesia an attractive destination for FDI and among the top five destinations for doing business.86 In 2011, GOI officials verbally welcomed increased FDI focusing on participation in a large number of public private partnerships to develop Indonesia’s infrastructure. However, Indonesia’s FDI attraction index overall is still low compared to its FDI potential.86 Some remaining impediments include: ■■
Recently, the GOI requested that all contracts with mining companies be renegotiated and previously-agreed recoverable oil and gas production costs from some production sharing contracts were retroactively removed. The 2012 legislation limited foreign ownership in coal, minerals and metals to 51 percent, progressively divesting their holdings to Indonesian entities.
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■■
Some assert that the GOI has been too protective of private property rights when it comes to land acquisition in the public interest for roads, electrical transmission lines, pipelines, and other badly needed infrastructure projects.80
■■
Economic Nationalism, such as, a range of more domestically-focused or protectionist policy measures and uncertainty on legal and regulatory issues in some trade and investment areas.
Prior to 2012, private investment in RE has almost exclusively been in geothermal, mostly in capacity additions to existing assets. The primary driver to the development of Indonesia’s geothermal resources has been the pricing of electricity and a shifting regulatory environment. Development surged in the 1990s through purely public investment sustained by electricity prices between US$0.069/kWh and US$0.085/kWh, though the prices later declined to US$0.05/kWh. Figure 8: Private Investment in New or Additional RE Capacity (US$ million)
Figure 9: Breakdown of RE Investments (US$ million)
700
Hydro, Large (>50MW)
600
US$ million
500
449 32.5%
400 300 200
932,6 67.5%
100 0
2003
2004
2005
Source: World Bank, 2011.87
2006
2007 Year
2008
2009
2010
2011
Geothermal
Source: World Bank, 2011.87
Development of other RE technologies has been less impressive. Although many major international solar system manufacturers, including BP Solar, Kyocera, Shell Solar, Siemens, and Solarex, have established a domestic presence through subsidiaries and local distributors, the domestic market has not yet developed. Wind and hydro have not received much investment either, with the exception of the 10 MW Sukabumi wind farm and two hydro projects of less than 50 MW, including Daewoo’s PT Wampu. Since these technologies have not yet received strong policy support RE development will likely concentrate on geothermal.88 Indonesia has identified 9,076 MW of geothermal power potential to come from capacity expansion and new geothermal projects in 43 sites (including 4,520 MW in Sumatra at 17 sites, 3,635 MW in Java at 13 sites, 735 MW in Sulawesi at 4 sites). While Indonesia has been relatively passive in attracting Clean Development Mechanism (CDM) projects, the country has reached a number of bilateral agreements with other nations in relation to capacity building in order to cope with climate change mitigation. Indonesia also hosts a number of commercial projects in the voluntary emissions reduction market sphere including 12 REDD+ projects.89 In addition to Norway, many development partners, Multilateral Development Banks,
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and United Nations Agencies support the GOI’s REDD+ initiative through globally funded programs, including the Forest Carbon Partnership Facility, the Forest Investment Program, and the Forest Carbon Partnership Facility (FCPF) — a global partnership focused on REDD+ that provides assistance for countries to become ready for REDD+ and performance-based payments.90
Table 15: CDM Program Participation Number of registered projects
Total reduction, MtCO2e
CER/GDP
CERs/ Country Emission
2,363
8,190
11.1
7,821
Indonesia
81
554
3.5
4,383
Malaysia
110
193
4.7
5,350
Philippines
58
101
3.0
5,569
Singapore
2
39
0.9
5,051
70
543
2.1
3,792
149
136
21.6
16,233
Country China
Korea, Rep. of Vietnam
Source: United Nations, 2013.
91
The Forest Investment Program (FIP) provides scaled up financing for REDD+ efforts, including readiness reforms and public and private investments, identified through national strategies.92 United Nations-REDD, GEF (Global Environmental Facility), Australia, United Kingdom, Japan, United States, Germany and other development partners are contributing additional hundreds of millions of dollars through a range of programs, including policy analysis, technical assistance, and REDD+ demonstration activities.
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7. Concluding Remarks
I
ndonesia is well endowed with natural resources. It possesses the largest world reserves in geothermal energy. Abundant fossil fuels have provided a cheap and convenient source of energy, enabling strong economic growth over the last decade. With an increasing extraction pace, however, Indonesia is on track to fully deplete its oil reserves by 2030 and its natural gas by 2060.93 That prospect creates a significant opportunity to energize the development of the country’s RE potential, especially in geothermal, which currently presents a meager five percent of the country’s energy mix. While the GOI has clearly expressed a keen desire in becoming a leader in the climate arena, on-the ground progress beyond its deforestation initiatives has not been noteworthy. The prevalence of low-cost subsidies for transport and power has seriously impeded RE and EE development and made the country one of the poorest performers in the region on multiple indicators. Serious achievements in greening Indonesia’s economy hinge on the GOI’s ability to meet its ambitious targets in geothermal development as well as to reconcile an equally ambitious goal to conserve land and reduce deforestation. Similarly, Indonesia needs to improve EE through aggressive programs, reductions of electricity subsidies or a combination of the two. While a series of policy measures have recently re-ignited the push towards greener energy, the actions are uncoordinated and insufficient, and there is still substantial room for improvement. First, a more aggressive EE program could help improve industrial competitiveness and reduce the budgetary burden of subsidies.94 An EE program could specifically focus on high energy users and be implemented in conjunction with a gradual reduction of subsidies. Such a program could be designed to be cost-neutral to both end-users as well as the GOI budget. The enterprises implementing EE measures could partially offset increased per-unit energy cost with reduced usage. At the same time, some of the subsidy savings could be used to fund such a program. Second, the GOI could consider reviewing and realigning the overall incentive framework for RE development. The electricity market, largely dominated by fossil fuels, is transitioning to a more competitive structure, which will undoubtedly favor low-cost fossil fuels usage even more. Further restructuring by separating the functions between policy and regulation, generation and transmission, and distribution could be complemented by effective measures aimed at enhancing RE viability. Then, an effective balanced strategy would not only further open up the markets to cost competition and improve overall industrial competitiveness, but would also increase attractiveness and share of RE generation. Third, there is a need to resolve land ownership and acquisition issues. Many kinds of green technologies investments, particularly in large-scale power generation, will require that investors secure long-term contracts for land. In the past, unclear and inconsistent land ownership and acquisition policies have often led to disputes, undermining growth of private investment flows in infrastructure and constraining development of the country’s vast RE sources. There is some movement in
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this direction under the “One Map” and the REDD+ initiatives, but progress is slow and uncertainty may increase before long-term solutions are formed. In particular, the agenda to conserve forests, while highly commendable, might slowdown the progress of geothermal development.95 To realize the potential of green finance and green development and bring Indonesia closer to meeting its voluntary emission reduction target of 26 percent, it will be important for Indonesia to harmonize the mutually commendable goals of promoting geothermal development and protection of forest and carbon stocks. More could be done to clarify and streamline the licensing process in a way that facilitates appropriate, green investments. Fourth, the Government could accelerate programs to support the development of RE components of communal (isolated) grids in off-grid rural areas. Indonesia’s large un-electrified, off-grid market (over 70 million people have no access to electricity) presents a great potential for the development of RE technology, since many RE sources, like solar PV, are already cost competitive with polluting diesel generators — common in these un-electrified areas. While several programs (like 1,000 islands) are underway, there is scope for expanding the scale and accelerating the implementation pace.96 Additionally, information programs supported by series of incentives could provide RE isolated-grid and off-grid developers the boost needed in order to carve into this market. Fifth, there is a deficit of experienced domestic partners, knowledgeable bankers and governmental servants, especially in the areas of RE and EE. This deficit is often voiced among foreign investors, who can help transfer knowhow if given an opportunity. While measures to increase the flow of knowledge, skills and expertise in these areas will take time, in the short-term, some avenues could attract international private sector experience to accelerate this process. For example, accelerating the PPP program, relaxing the negative list, and allowing foreign investments in smaller scale RE development would be ways to increase the needed cross-fertilization.ix Finally, investors are concerned about the quality of the investment climate in Indonesia more than in any other country in the region.81 The technical suggestions above may help create the conditions for increasing FDI flows as well as boosting the prospects for green investments. However, improvement in the judicial system and further progress in improving transparency and reducing corruption are also critical.
ix Negative investment list currently prevents foreign investment in power plants with an installed capacity below 10 MW.
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8. Summary of Policy Instruments Below is a summary table of renewable energy, energy efficiency and market-based instruments for seven selected East Asia and Pacific countries. China
Korea, Rep. of
Indonesia
Philippines
Tax Incentives
●
●
●
Carbon Tax
●
Capital Subsidy/Grants - RE
●
●
Policy Distortions
●
Feed-in Tariff
●
●
Domestic
●
●
Foreign
●
●
●
●
Renewable Energy
Concessional Financing
Partial Risk Guarantee Renewable Portfolio Standard
Energy Efficiency & Green Tech
Market Based
Singapore
Vietnam
Malaysia
●
●
●
●
●
●
●
●
●
●
●
●
●
●
● ●
●
●
● ●
●
●
Tax Incentives
●
●
●
●
●
●
Capital subsidy/Grants - EE
●
●
●
●
●
●
Domestic
●
●
●
●
●
●
Foreign
●
●
●
●
●
●
Concessional Financing
Partial Risk Guarantee
●
Green Labeling
●
Awareness Campaigns
●
●
●
●
CDM
●
●
●
Carbon market
●
●
●
Cap-and-trade scheme
●
●
●
●
●
● Full implementation ● Limited scale and/or early stage implementation ● Existing barriers
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9. Annex Table of Contents 9.1 Policies, Objectives, and Targets...................................................................................................... 28 9.2 Financial and Economic Instruments............................................................................................... 32 9.3 Programs and Institutions................................................................................................................ 35 9.4 Regulatory Environment.................................................................................................................. 40 9.5 Supplementary Materials................................................................................................................. 41
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9.1 Policies, Objectives and Targets Overarching Policies • National Energy Policy (KEN) • Energy Law No. 30-2007 • National Energy Management Blue Print (PEN) • National Strategy for REDD+ • Action Plan to Reduce GHG Emissions
National Energy Policy (KEN) aims to: (i) promote EE, energy conservation and preservation of the environment; (ii) enhance the share of RE; (iii) increase energy access; and (iv) improve energy security.97 The KEN also aims to reduce energy elasticity and to increase the share of RE to approximately 25 percent of the national energy needs by 2025.x
Energy Law No. 30-2007 focuses on: (i) energy conservation and diversification; (ii) demand side management; and (iii) energy security.xi The Energy Law mandates the creation of a DEN. National Energy Management Blue Print (PEN) is created by the MEMR as a follow up to the Ministerial Decree No. 0983 K/16/MEM/2004. The blueprint has to be updated to meet current energy needs and remain relevant with the conditions. PEN 2005-2025 needs to be reviewed to conform to the Presidential Regulation No. 5/2006 on the KEN. PEN 2005-2025 covers the strategies needed to attain the national energy-mix targets of the KEN, although the roles of each stakeholder (Government, private, and public) are not defined clearly. National Strategy for Reduced Emissions from Deforestation and Degradation (REDD+) is an important document since Indonesia is a major emitter of GHG and most emissions are from land use change, deforestation, peat conversion and fires. Beyond the emissions, rapid deforestation, illegal logging, forest fires, and peat-land degradation also deplete Indonesia’s natural assets and revenue potential, undermine community livelihoods, and impose health costs on the poor. At the x Implementation of the policies did not occur. For the development of RE to grow significantly, vast funds from the private sector are needed, especially to reach a level where RE contributes 25 percent of the national energy needs. For example, the vision of 25/25 states that in 2025 geothermal energy production is expected to reach about 12,000 MW. Investment of US$36 billion is required to achieve these objectives. Development of solar energy, wind, biodiesel and others will require a similar level of investment. With limited government funding, most of these investments should be resourced by the private sector. xi Indonesia’s environmental law should be operationalized in the form of government regulations (which must pass through parliament approval), followed by more detailed implementing guidelines by Presidential Decree (if it involves more than one ministry) and Ministerial Decree (if it is more specific on the sector). Both Presidential and Ministerial Decrees do not need parliament approval. This situation has led to many overlaps and inconsistencies in the energy sector, especially in developing operational policies. Often it has taken a long time to formulate a complete set of implementing regulations. For example, the regulation of energy conservation, as mandated by the Energy Law in August 2007, was only established in November 2009 through Government Regulation No. 70/2009 on Energy Conservation.
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same time, timber, mining, pulp, and palm oil enterprises contribute billions of dollars annually in economic benefits. This illustrates the difficult development choices needed to shift to more sustainable forest management and land use practices. Since hosting the UNFCCC COP 13 in Bali in 2007, the GOI has prioritized the climate change agenda. In 2009, Indonesia committed to reduce emissions by 26 percent from BAU by 2020. The commitment is now codified in the RAN GRK, Presidential Decree No. 61/2011), which provides a basis for development planning and budgeting.98 Indonesia is taking advantage of many international climate finance options, but does not yet have a systematic framework for integrating these opportunities into the development agenda. Indonesia embraces the concept of financial compensation for REDD+ as a means of mitigating emissions and creating incentives for more sustainable forest management and governance. It successfully championed REDD+ in the Bali Action Plan of COP 13. Indonesia sees REDD+ as an opportunity to obtain financial and technological support to lead it economy in a sustainable path. The GOI is currently determining how REDD+ will operate, under the leadership of a National REDD+ Agency currently being established under the authority of the President. Over the last year, a task force with multi-agency representation has managed the participatory and consultative process of developing a National REDD+ Strategy, selecting Central Kalimantan as a pilot province and suspending new forest licensing for two years.
Action Plan to Reduce GHG Emissions focuses on Indonesia’s commitment to significantly limit its share of GHG emissions. This is reflected in its goal to minimize emissions by 26 percent in 2020. The target is will be elevated to 41 percent with international support. These goals were announced by President Yudhoyono at the G20 Pittsburgh Leaders’ Summit in September 2009. The Presidential Decree No. 61/2011 contains the Indonesia Action Plan to reduce GHG emissions. It was issued to fulfill the commitment to the Bali Agreement at the COP 13 UNFCCC, the COP 15 in Copenhagen, the COP 16 in Cancun, and the Indonesian commitment in the G20 Meeting in Pittsburgh.xii RAN-GRK will focus on forestry and peat land, agriculture, energy, transportation, and industry that will directly and indirectly will reduce GHG emissions. It will serve as guidance to ministries, institutions and regional government in planning, implementation, monitoring and evaluation of GHG emissions reduction. The coordinating Minister for the Economy will monitor the plan and the Minister of BAPPENAS will review it. The result of RAN-GRK must be reported by the Coordinating Minister for the Economy to the President, at least once a year. A copy is to be sent to the Coordinating Minister for the People’s Welfare and RAN-GRK should be included in the proposed state budget of 2013. In addition, the Medium-Term Development Planning of the Province should be based on the regional action plan-to reduce GHG emissions (RAD-GRK).
xii For more details see Supplementary Materials 9.5.
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Nine main activities must be carried out to reduce the GHG emission as designed by MEMR. This includes raising the total capacity of electricity generation from renewable sources until the year 2020 to 1,200 MW (2010-2014: 350 MW and 2014–2020: 850 MW), while lowering energy elasticity to less than 1. RAN/RAD-GRK in the energy sector will have priority over the RUPTL. It is questionable whether PLN has the capability to meet the renewable target within the RAN-GRK as with the roadmap of MEMR and DEN because the prices of diesel, oil and electricity remain subsidized. It is also unclear whether PLN could defend its commitment without any reduction of subsidy. Similarly, it is uncertain whether these energy conservation activities can be implemented with continued energy subsidies for electricity and fossil fuels.
Renewable Energy Policies • Fast Track Program (FTP) Phase II • Government Policy on Biofuel Usage • Ministerial Decree No. 31 2009
Fast Track Program (FTP) Phase II outlines concrete energy sector development goals. According to Presidential Decree No. 4/2010, the FTP Phase II (FTP II) requires power from geothermal projects amounting to 6,290 MW. A fund was established in 2011 to improve the information on areas which have geothermal potential and to provide exploration loans for upstream drilling. This was done to assist local governments in the tendering process and to assist the private sector during the early stages of geothermal development. In 2012, a total of Rp2 billion or US$217 million was initially allocated, with the possibility of providing additional funding in later years, if necessary. However, as of July 2012, the winning bidders for 72 geothermal projects were announced but no funds had yet been disbursed due to governance-related issues, including risk-sharing arrangements.xiii
Government Policy on Biofuel Usage was issued in 2006, which was declared as the National Biofuel Year. Although this policy was not fully implemented, trees were planted in many locations. Approximately 200 international companies registered with the Ministry Investment Coordinating Board. Only Medco Energy in Lampung, developed a cassava-based biofuel and that too was not produced at a factory scale. Currently the Directorate General of New and Renewable Energy, and Energy Conservation (DGNREC) is attempting to operate the biofuel program. The GOI and the crude palm oil producers are assessing whether biofuel from crude palm oil could be used for vehicles, electricity generation and industry. The overall environmental costs and benefits of biofuel development remain doubtful as in many cases oil palm is developed on formerly forested areas.
xiii Key issues in developing geothermal projects include the need for: (i) more investor-friendly regulatory framework; (ii) clearer government policies and procedures; (iii) solving major issues involving land cleaning, cost escalation and tariff adjustment; and (iv) better government guarantee program.
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Ministerial Decree No. 31 2009 covers: (i) the mandatory uptake and pre-determined purchase price for RE electricity up to 10 MW; (ii) the electricity power purchased agreement (PPA) from Renewable Generations less than 10 MW; and (iii) the price of electricity from RE sources for JavaBali.xiv There is a coefficient factor (F), determined by location of the purchase of the electricity, which is 1 for Java and Bali, 1.2 for Sumatera, 1.3 for Kalimantan, Sulawesi, NTB and NTT, and 1.5 for Maluku and Papua. PLN and developers are allowed to negotiate for clarification if the stated, provided they receive approval from the Minister of MEMR.
Energy Efficiency Policies • Presidential Instruction No. 2/2008 on Energy and Water Saving • Government Regulation No.70/2009 on Energy Efficiency (EE) • National Energy Conservation Master Plan (RIKEN)
Presidential Instruction No. 2/2008 on Energy and Water Saving instructs government offices to increase efficiency in their energy and water consumption and to establish task forces to monitor the implementation of energy and water efficiency policies.
Government Regulation No.70/2009 on Energy Efficiency (EE) obligates large energy consumers to conduct energy audits and designate an energy manager. It also covers application of EE labeling for home appliances.
National Energy Conservation Master Plan (RIKEN) is endorsed by the MEMR. It aims to decrease energy intensity of Indonesia by an average of one percent per year to 2025. RIKEN’s provisions are linked to the RUEN. Though each RIKEN has five-year validity, it can be revised every year.
xiv For more details see Supplementary Materials 9.5.
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9.2 Financial and Economic Instruments Fiscal Incentives and Direct Subsidies • Tax Incentives • Fast Track Program Phase II-related Incentives • Income Tax Facilities
Tax Incentives established by MOF with a goal to increase the attractiveness of investments in RE. The MOF has issued several regulations on fiscal incentives policy. These include: ■■
PMK Number 21/PMK.011/2010 regarding tax and customs facility for utilization of RE;
■■
PMK Number 24/PMK.011/2010 regarding VAT for imports for geothermal exploration funded by the GOI;
■■
PMK Number 35/PMK.011/2010 regarding tax incentives for geothermal producing electricity;
■■
PMK Number 156/PMK.011/2009 regarding sales tax for biodiesel and bioethanol paid by GOI; and
■■
Facilitating exemptions for sales tax for activities related to adaptation and mitigation for climate change.
Fast Track Program Phase II-related Incentives were issued by the MOF and include several regulations regarding fiscal incentives for the geothermal sector within FTP II Projects. These include: ■■
Import duty facility (exploration, construction and operation);
■■
Income tax facility (exploration, construction and operation);
■■
VAT facility (exploration, construction and operation);
■■
Exploration financing (exploration); and
■■
Off-take guarantee: Business viability PT PLN guarantees (operation).
For Non-FTP II RE Projects, off-take guarantees are not available. Instead, there is a Guarantee IIGF for PPP Projects (construction and operation). In addition, import duty exemption for machinery, goods and materials is also granted by the Government for two years from the date of issuance of the decision. This could be extended in accordance with the construction period as stated in the investment approval. This exemption would also be granted to developing the power generation industry.
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Income Tax Facilities is planned to encourage investments by developers. Hence, the GOI established a number of facilities. These include: ■■
Reductions of net income by 30 percent;
■■
Acceleration of depreciation and amortization;
■■
Income tax on dividends paid to foreigners equal to 10 percent;
■■
Compensation for losses of more than five years, but less than ten years; and
■■
Collection of income tax on goods in the form of machinery and equipment is exempt.
Financial Measures FiT for Hydro: FiT for Hydro < 10 MW No
FiT (Rp/kWh)
Capacity (MW)
Interconnected with
1.
656
Up to 10
Medium Voltage
2.
1,004
Up to 10
Low Voltage
Source: Directorate General of New and Renewable Energy, and Energy Conservation, 2012.43
FiT for Biomass: ■■
Based on Biomass and Biogas FiT for Biomass < 10 MW No
FiT (Rp/kWh)
Capacity (MW)
Interconnected with
1.
975
Up to 10
Medium Voltage
2.
7,325
Up to 10
Low Voltage
Source: Directorate General of New and Renewable Energy, and Energy Conservation, 2012.43
FiT for Waste: ■■
Based on municipal solid waste by using a zero waste technology FiT for Municipal Solid Waste (for Zero Waste Technology) No
FiT (Rp/kWh)
Capacity (MW)
Interconnected with
1.
1, 050
Up to 10
Medium Voltage
2.
1,398
Up to 10
Low Voltage
Source: Directorate General of New and Renewable Energy, and Energy Conservation, 2012.43
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■■
Based on municipal solid waste by using sanitary landfill technology FiT for Municipal Solid Waste (for Sanitary Landfil Technology) No
FiT (Rp/kWh)
Capacity (MW)
Interconnected with
1.
850
Up to 10
Medium Voltage
2.
1,198
Up to 10
Low Voltage
Source: Directorate General of New and Renewable Energy, and Energy Conservation, 2012.43
FiT for Geothermal energy regime is based on four categories: (i) smaller than 10 MW; (ii) 10 MW-20 MW; (iii) 20 MW to 55 MW; and (iv) more than 55 MW. FiT for Geothermal Standard Geothermal Price (US$/kWh) High Temperature (> 225°C)
Low/ Medium Temperature (≤ 225°C )
More than 55 MW
10.5
13.5
More than 20 up to 55 MW
11.5
15
More than 10 up to 20 MW
13.5
16
17
19
Capacity
Smaller than 10 MW Source: Think Geoenergy, 2013.
50
FiT for Solar PV and Wind are being prepared for electricity generated from wind and PV solar plants.
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9.3 Programs and Institutions Programs • Award Program (Energy Efficient Building Competition) • Demand Side Management (DSM) • DSM for Public Street Lighting (DSM PJU) • Program “Peduli” • Program “Terang” • Indonesia, Norway, and REDD+ • Licensing Moratorium and “One Map” • Indonesia Clean Energy Development (ICED) • Geothermal Plant in Sumatra
Award Program (Energy Efficient Building Competition) is a GOI initiative that promotes EE, energy conservation and technology innovation in building development. This competition has been conducted by DGE & EU since 2000 to recognize builders who have achieved improvements in EE, increased the awareness on energy management and in the development of EE innovation. Particular emphasis was placed on developing EE models for buildings that can be replicated throughout Indonesia. The winner of the competition becomes the representative for Indonesia in the ASEAN Energy Award “Best Practice Building Competition”. Demand Side Management (DSM) is a program with a purpose to increase the awareness of consumers toward EE as well as to reduce the energy requirements of residential buildings by replacing incandescent bulbs with CFL. PLN started the demand-side management in 2002 through a number of programs. The initial program involved working with two lamp manufacturers, Philips and Osram, in 2002. This encouraged the replacement of incandescent lamps with CFL resulting in a significant impact with most of the urban household and commercial buildings in the area converting to CFLs and other efficient type of lamps. Sales of CFL lamps in Indonesia, which previously were barely discernible, are now about 20 million units. CFL is also widely used in villages.
DSM for Public Street Lighting (DSM PJU) is a program promoting the replacement of mercury lamps by high-pressure sodium lamps throughout the street lighting network. Municipal governments embraced this program due the increase in the street lighting tariff introduced by PLN. This program is a collaborative work among DGE & EU, PLN, and lamp producers (Philips, Osram, GE lighting, Chiyoda, and Matsushita), and electricity consumers.
Program “Peduli” (better known as DSM Peduli) is a program intended for customers with capacities up to 450 volt-ampere. The program replaced 40 watt lamps with 8 watt CFLs in poor households. PLN subsidized Rp3,000 (US$0.30) per unit lamp, to a maximum of three lamps per household. The life of the CFL is projected to reach about three years with a one-year guarantee. This program The World Bank – AusAID
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started in March 2003, targeting to distribute 5,000,000 CFLs. The “PeduliTerang” program will not be continued because consumers are now sufficiently aware that they should use CFL bulbs to reduce their electricity bill.
Program “Terang” (better known as DSM Terang) is a this program intended to promote the awareness of EE to household customers at capacities below 900 VA. The program replaced 40 watt incandescent lamps with 8 watt CFLs in households, and provided a one-year guarantee for the respective CFL.
Indonesia, Norway, and REDD+ is an initiative where development partners have pledged financial support for Indonesia’s commitment to reduce GHG at the G20 Summit in 2009. In May 2010, Indonesia agreed with Norway on a billion dollar performance-based, policy-linked initiative for accelerating action on REDD+. The initiative has three phases: (i) preparation; (ii) transformation; and (iii) contributions for verified emission reduction. Phase 1 is underway with an initial grant of US$30 million (managed through UNDP). Norway’s support will continue over several years, based on continued performance toward agreed-upon aims. In Phase 1, the President formed a Task Force for Preparation of the REDD+ Program (Presidential Decree No. 19/2010 and 25/2011). The Task Force, managed by the President’s UKP4, has developed a National REDD+ Strategy.65 It selected Central Kalimantan as the first pilot province, and instituted a Moratorium on new licenses in natural primary forest and peat lands (Presidential Decree No. 10/2011). In addition to Norway, many development partners, the Multilateral Development Banks, and UN Agencies support the GOI’s REDD+ initiative through globally funded programs such as the FCPF and, the Forest Investment Program. The FCPF is a global partnership focused on providing assistance for countries to become ready for REDD+.90 The Forest Investment Program provides scaled up financing for REDD+ efforts, including readiness reforms. UN-REDD+, GEF, Australia, United Kingdom, Japan, United States, Germany and other development partners are contributing additional hundreds of millions of dollars through a range of programs for policy analysis, technical assistance, REDD+ demonstration activities.92
Licensing Moratorium and “One Map” are initiatives through which the GOI intends to use the two year period of the moratorium on new forest licenses (Presidential Decree No. 10/2011) to develop an integrated database and registration system and an accountable and transparent license issuance process. The REDD+ Task Force, in cooperation with the Attorney General’s Office, National Police and MFOR, has established an Integrated Team to ensure consistent law enforcement. The development of an Indicative Moratorium Map is a step toward the goal of a harmonized “One Map”, which will be an integrated map for all forest and peat land areas nationwide.65 Formerly, each sectoral ministry, including forestry, agriculture, mining and land agency, had their own map and permitting processes. This often resulted in overlap, mismanagement, and conflicts over rights. The map is revised every six months, which creates a platform for boosting coordination among the key ministries, the Geospatial Information Agency, and the REDD+ Task Force.
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The moratorium has also generated some controversy. Experts note concerns about the area and status of land covered by the moratorium, and the amount of stored carbon.69 Geographic analysis indicates that the moratorium covers about 66 million ha, but only about 22 million ha of them are newly protected (7 million ha of primary forests, 11 million ha of peat lands and 4 million ha other areas). The rest was protected in some form under previous laws and rules. The moratorium does not cover 47 million ha of secondary and logged-over forests, which harbor both carbon and biodiversity. Forest protection advocates are concerned about exclusion of these key forest areas, as well as several important exemptions provided for pre-existing licenses and extensions, ecosystem restoration permits, and vital national development activities, including geothermal, oil and gas, electricity, and land for rice and sugar cane for food and energy security. Even so, some business interests do not favor the moratorium and expect that reduced licensing will reduce economic activity. Environmentally sound and economically viable land swaps could mitigate the need for broad exceptions, while allowing development activities to proceed.
Indonesia Clean Energy Development (ICED) represents a four and a half-year US$16.5 million program supported by USAID to facilitate development of RE projects on mini-hydro and biomass in three provinces (Riau, North Sumatra and Aceh) as well as a few EE projects. The target is to develop RE power plants up to a total capacity of120 MW. Geothermal Plants in Sumatra and Sulawesi islands are energy infrastructure development projects. The World Bank lent approximately US$300 million to support the construction of geothermal site. This is in addition to anticipated US$500 million of loans from the ADB for three geothermal power plants with a total capacity of 165 MW.
Institutions • Ministry of Energy and Mineral Resources (MEMR) • Directorate General of New and Renewable Energy, and Energy Conservation (DGNREC) • National Energy Council (DEN) • Perusahaan Listrik Negara (PLN) • Government Investment Unit (PIP) • Indonesian Climate Change Trust Fund (ICCTF)
Ministry of Energy and Mineral Resources (MEMR) main policies aimed at emission reductions are: (i) energy conservation which will create efficiency in energy utilization in the demand side, including the industry, transport, household, GOI and commercial sectors; and (ii) energy diversification on the supply side which will increase the share of new and RE in the national energy mix. This includes new types of energy such as liquefied coal, coal-bed methane, gasified coal, and nuclear and hydrogen power. In 2012, MEMR introduced targets in the development of RE.
Directorate General of New and Renewable Energy, and Energy Conservation (DGNREC) is led by the MEMR that through DGNREC prepared a roadmap to support its RE and EE goals.
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National Energy Council (DEN) directives on the use of renewable and low-carbon energy focus on the following: ■■
Low carbon energy sources and RE including hydro, geothermal, solar, wind, biomass, ocean and nuclear energy (very low carbon energy source);
■■
Efficient technologies and practices such as cogeneration (50 percent reduction), combined cycle gas turbine (30 percent reduction), supercritical boiler (15 percent reduced), and integrated gasification combined cycle (coal gasification);
■■
Demand side management such as more efficient use of energy through the labeling of appliances, EE in the industry, transportation, and building sectors; and
■■
Carbon capture and storage that will reduce carbon emissions by 80-90 percent.
Perusahaan Listrik Negara (PLN) is an Indonesian government-owned corporation. RUPTL outlines the development of coal, gas, and diesel as well as RE. The GOI plans to focus on geothermal energy (110 MW to 220 MW) and hydro-energy. Government policy requires PLN to purchase electricity generated from RE resources (Ministerial Decree No. 31/2009). The PLN is currently preparing the standardized PPP Agreements for biomass and mini-hydro projects. PLN has recommended preparation of a standard feasibility study format to speed up the negotiation process between PLN and developers.
Government Investment Unit (PIP) is based on the Principle and Guidance for Foreign Loan 20062009 and also the Government’s Medium and Long-term National Development Plan. The PIP has been established within the MOF in order to mobilize financing to address climate change. The PIP manages the sovereign wealth fund in partnership with the private sector. According to Government Regulation 1/2008, the PIP may undertake portfolio investment as well as direct investment and is currently supporting clean energy infrastructure projects. The PIP on-lends loans from international financial institutions to project contractors with a handling fee surcharge. Repayments to PIP are considered non-tax state income. The PIP has established a clean technology fund in collaboration with the QIA to fund Government activities related to low-carbon development. For this purpose, the Government has allocated Rp1.5 trillion (US$170 million) of initial financing, with the approval of the Government Budget Oversight Committee. In 2011, PIP possessed funds to support geothermal exploration activities amounting to Rp1.2 trillion. However, it appears that the fund has not been used due to lack of proper guidelines. This year the fund has increased to Rp2.03 trillion. The funds can be used by the regional government/developer for geothermal exploration. In addition, the PIP also operates a fund of Rp1.4 trillion to support mini-hydro development.
Indonesian Climate Change Trust Fund (ICCTF) was established in 2009 by the Government to expand and modify green financing instruments. The fund can invest in activities that do not
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generate direct financial revenues. The ICCTF will also co-finance investments to adapt and mitigate climate change. The activities must be in accordance with Government policies on climate change. Grants from the governments of the United Kingdom, Australia, and Sweden constituted US$11.2 million. Though the ICCTF remains in the inception phase, it had already funded three pilot projects by 2010-2011. These were on: (i) sustainable peat land management, in partnership with the Ministry of Agriculture; (ii) energy conservation in both steel and paper and pulp industries; and (iii) public awareness on adaptation for fishermen and farmers, with assistance from Indoensian Institute of Science, Agency for Assessment and Application of Technology, and Agency for Meteorology, Climatology, and Geophysics. In the future, ICCTF will be involved in distributing grants, CSR and loans. ICCTF is involved in the selection process to create a green bank from the four existing government-owned banks, using the Camel rating analysis. The initial role is to act as a payment agent and gradually it will take over the appraisal function. Although the secretariat of ICCTF remains in BAPPENAS, one of the state-owned banks will be appointed to implement green banking.
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9.4 Regulatory Environment • Indonesia National Standards (SNI) • Energy Effciency Standards
Indonesia National Standards (SNI) include: ■■
SNI Biodiesel;
■■
SNI Bioethanol;
■■
SNI virgin biofuel;
■■
Draft-SNI Biodigester type Fixed Dome; and
■■
Fuel Specification (concerning biofuel content).
Energy Effciency Standards established by the Government, through MEMR, with an aim of creating a program for standardization of electronic appliances, including energy-saving appliances. The program aims to develop various standards and requirements on energy saving for all electronic appliances. Through this program, it is expected that electronic companies will develop more energy-saving appliances, which would be competitive in the market. The GOI’s role in this program is to facilitate a consensus for standardization on EE. The following are some of the standards on EE and energy conservation that have been developed: ■■
SNI 03-6389-2000: Energy conservation on building envelope;
■■
SNI 03-6390-2000: Energy conservation on air circulation system for buildings;
■■
SNI 03-6196-2000: Energy audit producer for buildings;
■■
SNI 03-6197-2000: Energy conservation lighting system for buildings; and
■■
SNI 04-6958-2003: Labeling on energy saving levels for households.
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9.5 Supplementary Materials Obtained PPAs in Mini-hydro Projects Table 16: List of Mini-hydro Projects IPP
Cumulative
Number
Installed Capacity (kW)
Number
Installed Capacity (kW)
67
398,371
-
-
7
21,095
7
21,095
Constructions
10
71,868
17
92,963
PPA
19
137,900
36
230,863
ESDM Permits
15
68,210
51
299,073
Proposal
16
99,658
67
398,731
Indonesia (East)
48
162,770
-
-
8
26,340
8
26,340
19
62,600
27
88,940
5
12,550
32
101,490
12
49,980
44
151,470
Proposal
4
11,300
48
162,770
Jawa Bali
68
214,119
-
-
8
2,055
8
2,055
Constructions
12
26,210
20
28,265
PPA
10
38,570
30
68,835
ESDM Permits
27
109,434
57
176,269
Proposal
11
37,850
68
214,119
183
775,620
-
-
Total Operations
23
49,490
23
49,490
Total Constructions
41
160,678
64
210,168
Total PPA
34
189,020
98
399,188
Total ESDM Permits
54
227,624
152
626,812
31
148,808
183
775,620
Minister Indonesia (West) Operations
Operations Constructions PPA ESDM Permits
Operations
Total Indonesia
Total Proposal Source: Perusahaan Listrik Negara, 2012.
99
The World Bank â&#x20AC;&#x201C; AusAID
41
Gas 24%
Green Infrastructure Finance
Primary Energy Mix Target The figure below shows the energy sector targets of 25 percent from new and RE source; 32 percent from coal; 20 percent from gas; and 23 percent from oil. With increased use of bio-fuel supply and improved public access to such energy, GHG emissions and oil dependency are expected to decrease. As a result, it is hoped that energy elasticity can be lowered to 1. Figure 10: Domestic Policy Direction PRESIDENTIAL DECREE 5/2006
BAU
NRE 4%
Gas 24% Oil 47%Gas 24%
NRE 3% Gas 21%
Oil 47%
Coal 34%
Bioenergy 5%
Oil 20%
3298 Million SBM
2419 Million SBM
NRE Coal Gas
5% 24% 24%
Oil
47% 2010
NRE 17%
Oil 20%
Gas 30%
Coal 33%
3200 Million SBM
3,1%
2785 Million SBM
32% Coal 30%
41,7% 20%
The World Bank â&#x20AC;&#x201C; AusAID
Coal 32%
33%
2020 2025
Source: Directorate General of New and Renewable Energy, and Energy Conservation, 2012.43
42
Gas 20%
25% NRE
20,6%
2015
Oil 23%
17%
34,6%
1649 Million SBM
Note: 1 TOE = 7,33 SBM
NRE 25%
20% Gas 23% Oil
ENERGY DIVERSIFICATIONS
1081 Million SBM
VISION 25/25
Bioenergy 8,9%
Green Investment Climate Country Profile - Indonesia
Share of Global Emissions in Indonesia The figure below shows that in 2005, Indonesiaâ&#x20AC;&#x2122;s share of global emissions reached five percent. If RAN-GRK is not implemented, this share will increase to 5.2 percent by 2030.
Figure 11: Share of Global Emissions
Source: National Development Planning Agency, 2012.45
The World Bank â&#x20AC;&#x201C; AusAID
43
Green Infrastructure Finance
PLN Plan for Geothermal Project Development Table 17: Geothermal Projects Development Plan According to PERMEN ESDM 01/2012 Number of Projects
Total Capacity (MW)
PIC
PLTP PLN (Exploration and Funding)
1
20
PLN
PLTP PLN (HILIR) - PGE (HULU)
4
300
PLN, PGE
PLTP IPP - CONSTRUCTION / FC SELESAI
2
170
Developer
Development Model
Problems Tulehu Hululais, S. Penuh, Kotamobagu (Technical and Permits problem) Patuha Unit 1, Ulubelu 3 & 4 Lumut Balai, Lahendong 5 & 6, Karaha Bodas 1, Kamojang 5 (F/C Delay)
PLTP EXTENSION (READY FOR IMPLEMENTATION)
8
1,115
Developer, PLN
W. Windu (Permits,Technical, and Pricing) Sarulla 1 (Joc) Dieng 2 & 3 (Pricing) Patuha 2 & 3 (Technical) Cibuni (Legal Internal Dev) Karaha Bodas 2 & 3, Kamoiang 6 (Permits)
PLTP WKP EXISTING RFP/ EXPLORATION NOT BEEN CONDUCTED
3
395
Developer
T. Perahu Ii (Technical and Pricing) I.argopuro (Permits and Technical) Sarulla Ii (Technical)
Source: National Development Planning Agency, 2011.100
44
The World Bank â&#x20AC;&#x201C; AusAID
Green Investment Climate Country Profile - Indonesia
10. References
Adapted from: Renewable Energy and Energy Efficiency Partnership Clean Energy Portal. “Country Profile: Indonesia.” Accessed July 29, 2013. http://www.reegle.info/policy-and-regulatory-overviews/ID.
1
Smitsonian Institution National Museum of Natural History. “Global Volcanism Program: Indonesia.” Accessed July 29, 2013. http://www.volcano.si.edu/search_results.cfm.
Asia-Pacific Economic Cooperation. “Survey of Biomass Resource Assessments.” Accessed July 29, 2013. http://www.nrel.gov/docs/fy09osti/43710.pdf.
World Bank Data Bank. “GDP (current US$).” Accessed July 21, 2013. http://data.worldbank. org/indicator/NY.GDP.MKTP.CD.
World Bank Data Bank. “Population, total.” Accessed July 21, 2013. http://data.worldbank.org/ indicator/SP.POP.TOTL.
World Bank Data Bank. “Urban population (% of total).” Accessed July 21, 2013. http://data. worldbank.org/indicator/SP.URB.TOTL.IN.ZS.
International Monetary Fund. “World Economic Outlook Database 2011.” Accessed July 21, 2013. https://www.imf.org/external/pubs/ft/weo/2011/01/weodata/weoselco.aspx?g=2001&sg=All+countries.
Economist Intelligence Unit. “EIU Country Data.” Accessed July 21, 2013. http://www.eiu.com/ site_info.asp?info_name=EIUcountryData&=entr.
World Bank Data Bank. “Inflation, consumer prices (annual %).” Accessed July 21, 2013. http:// data.worldbank.org/indicator/FP.CPI.TOTL.ZG.
Central Intelligence Agency. “GDP Composition by Sector.” Accessed July 21, 2013. https:// www.cia.gov/library/publications/the-world-factbook/fields/2012.html#rp.
2
3
4
5
6
7
8
9
International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https:// www.iea.org/stats/.
10
Adapted from: International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https:// www.iea.org/stats/.
11
U.S. Energy Information Administration. “Countries Data.” Accessed July 21, 2013. http://www. eia.gov/countries/data.cfm.
World Bank. “Winds of Change: East Asia’s Sustainable Energy Future.” Accessed July 23, 2013. http://siteresources.worldbank.org/INTEASTASIAPACIFIC/Resources/226262-1271320774648/ windsofchange_fullreport.pdf.
World Bank Data Bank. “Energy imports, net (% of energy use).” Accessed July 23, 2013. http://data.worldbank.org/indicator/EG.IMP.CONS.ZS.
The World Bank – AusAID
45
Green Infrastructure Finance
Adapted from: Indriyanto, Asclepias R., Nasrullah Salim, Fabby Tumiwa, Tri Mumpuni et al. “Electricity Governance in Indonesia: Assessment Report.” World Resources Institute, 2007. Accessed July 23, 2013. http://pdf.wri.org/egi_report_indonesia.pdf.
12
International Energy Agency. “Access to Electricity 2011.” Accessed July 21, 2013. http://www. worldenergyoutlook.org/resources/energydevelopment/accesstoelectricity/.
World Bank Data Bank. “Access to electricity (% of population).” Accessed July 23, 2013. http://data.worldbank.org/indicator/EG.ELC.ACCS.ZS.
13
World Bank Data Bank. “Electric power transmission and distribution losses (% of output).” Accessed July 21, 2013. http://data.worldbank.org/indicator/EG.ELC.LOSS.ZS.
Adapted from: Asia-Pacific Economic Cooperation. “Energy Overview 2012.” Accessed July 23, 2013. http:// publications.apec.org/publication-detail.php?pub_id=1432.
14
Energdata. “Energy intensity of GDP at constant purchasing power parities.” Accessed July 21, 2013. http://yearbook.enerdata.net/energy-intensity-GDP-by-region.html. Adapted from: International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https:// www.iea.org/stats/.
15
Intergovernmental Panel on Climate Change. “Revised 1996 Intergovernmental Panel on Climate Change’s National Guidelines.” Accessed August 1, 2013. http://www.ipcc-nggip.iges. or.jp/public/gl/invs1.html.
Adapted from: Energy Market Authority of Singapore. “Singapore Energy Statistics, 2012.” Accessed July 21, 2013. http://www.ema.gov.sg/media/files/publications/EMA_SES_2012_Final.pdf.
16
Maurer, Luiz T., and Luiz A. Barroso. Electricity Auctions: An Overview of Efficient Practices. Washington D.C.: International Bank for Reconstruction and Development/ World Bank, 2011. Accessed July 23, 2013. http://www.ifc.org/wps/wcm/connect/8a92fa004aabaa73977bd79e0dc67fc6/Electricity+and+Demand+Side+Auctions.pdf?MOD=AJPERES.
Perusahaan Listrik Negara. “Indonesian Electricity Tariff.” Accessed July 23, 2013. http://www. pln.co.id/eng/?p=534.
Lee, Seung-Hoon. “Electricity in Korea.” Asia-Pacific Economic Cooperation, 2011. Accessed July 23, 2013. http://mddb.apec.org/Documents/2011/SOM/SYM/11_som_sym1_009.pdf.
Wu, Yanrui, Xunpeng Shi, Fukunari Kimura et al. Energy Market Integration in East Asia: Theories, Electricity Sector and Subsidies. Jakarta: Economic Research Institute for ASEAN and Eastern Asia, 2012. Accessed July 23, 2013. http://www.eria.org/RPR-2011-17.pdf.
Adapted from: Organization for Economic Co-operation and Development. “Energy Statistics of Non-OECD Countries (2012).” Accessed July 23, 2013. http://www.oecd-ilibrary.org/energy/energy-statistics-of-non-oecd-countries_19962851-en.
17
46
The World Bank – AusAID
Green Investment Climate Country Profile - Indonesia
U.S. Energy Information Administration. “Countries Data.” Accessed July 21, 2013. http://www. eia.gov/countries/data.cfm.
Adapted from: International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https:// www.iea.org/stats/.
18
Organization for Economic Co-operation and Development. “Energy Statistics of Non-OECD Countries (2012).” Accessed July 23, 2013. http://www.oecd-ilibrary.org/energy/energy-statistics-of-non-oecd-countries_19962851-en.
Organization for Economic Co-operation and Development. “Energy Statistics of Non-OECD Countries (2012).” Accessed July 23, 2013. http://www.oecd-ilibrary.org/energy/energy-statistics-of-non-oecd-countries_19962851-en.
19
Standard & Poor’s Rating Services. “Sovereigns Rating List.” Accessed July 21, 2013. http:// www.standardandpoors.com/ratings/sovereigns/ratings-list/en/us.
20
World Bank. “Doing Business Economy Rankings.” Accessed July 21, 2013. http://www.doingbusiness.org/rankings.
21
Transparency International. “Corruption Perceptions Index 2011.” Accessed July 21, 2013. http://www.transparency.org/cpi2011/results.
22
Adapted from: World Bank Data Bank. “Foreign direct investment, net inflows (% of GDP).” Accessed July 23, 2013. http://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS.
23
World Bank Data Bank. “Foreign direct investment, net outflows (% of GDP).” Accessed July 23, 2013. http://data.worldbank.org/indicator/BM.KLT.DINV.GD.ZS.
World Bank. “Private Participation in Infrastructure Database - Sector Data Snapshot.” Accessed July 21, 2013. http://ppi.worldbank.org/explore/ppi_exploreSector.aspx?sectorID=2.
24
World Bank Data Bank. “Lending interest rate (%).” Accessed July 23, 2013. http://data.worldbank.org/indicator/FR.INR.LEND.
25
World Bank Data Bank. “Interest rate spread (lending rate minus deposit rate, %).” Accessed July 23, 2013. http://data.worldbank.org/indicator/FR.INR.LNDP.
26
World Bank Data Bank. “Liquid assets to deposits and short term funding (%).” Accessed July 23, 2013. http://data.worldbank.org/indicator/GFDD.SI.06.
27
REEGLE. “Energy profile: Indonesia.” Accessed July 30, 2013. http://www.reegle.info/countries/ indonesia-energy-profile/ID.
28
International Energy Agency. “Share of total primary energy supply (2009): Indonesia.” Accessed August 30, 2013. http://www.iea.org/stats/pdf_graphs/IDTPESPI.pdf.
29
Asian Development Bank. “Country Assistance Program Evaluation for Indonesia 2005.” Accessed August 6, 2013. http://www.oecd.org/derec/adb/36066275.pdf.
30
The World Bank – AusAID
47
Green Infrastructure Finance
Adapted from: International Monetary Fund. “Indonesia: Fiscal and Financial Sectors.” Accessed July 31, 2013. http://dsbb.imf.org/Pages/SDDS/CtyCtgList.aspx?ctycode=IDN.
31
Republic of Indonesia Ministry of Finance. “News and Press Release.” Accessed July 31, 2013. http://www.depkeu.go.id/eng/.
Republic of Indonesia Ministry of Environment. “National Action Plan 2007.” Accessed July 31, 2013. http://www.uncsd2012.org/rio20/content/documents/Indonesia%20National%20Action%20Plan%20Addressing%20Climate%20Change.pdf.
32
International Energy Agency. “Indonesia: Electricity generation by fuel.” Accessed July 30, 2013. http://www.iea.org/stats/graphresults.asp?COUNTRY_CODE=ID.
33
Adapted from: Bellman, Eric, and Made Sentana. “Indonesian Economy Expands.” The Wall Street Journal, 2012. Accessed July 31, 2013. http://online.wsj.com/article/SB10000872396390443792604577572 152026260404.html.
34
Republic of Indonesia Ministry of Finance. “Climate Change and Fiscal Policy Issues: 2009 Initiatives.” Accessed July 31, 2013. http://www.esmap.org/sites/esmap.org/files/BKF%202009%20 CC%20Booklet%20-%20English%20-%20Final.pdf.
Adapted from: Jäger-Waldau, Arnulf. “PV Status Report 2012.” European Commission Joint Research Centre. Accessed July 31, 2013. http://re.jrc.ec.europa.eu/refsys/pdf/PV%20reports/PVReport-2012Part1.pdf.
35
Prastawa, Andhika. “Solar Energy in Indonesia: Potentials, Plan and Framework.” Perusahaan Listrik Negara, 2012 . Accessed July 31, 2013. http://www.giz.de/Themen/de/dokumente/2012-en-solar-energy-in-indonesia-potential-plans-and-framework.pdf.
Sofyan, Moch. “PLN Solar Power Development Plan: Target and Experiences.” Perusahaan Listrik Negara, 2011. Accessed July 31, 2013. http://indonesien.ahk.de/fileadmin/ahk_indonesien/ PAST_EVENTS/RENERGY2011/WEDNESDAY/SOLAR/3_-_PLN_PV_PLAN_GIZ.pdf.
Adapted from: Alisyahbana, Armida S. “Indonesia’s Government Master Plan for Energy Related Infrastructure Development.” Republic of Indonesia National Development Planning Agency, 2012. “Data and Information.” Accessed July 31, 2013. https://www.bappenas.go.id/get-file-server/ node/11427/.
36
Australia Indonesia Partnership. “National Railway Master Plan 2010.” Accessed July 31, 2013. http://www.indii.co.id/upload_file/201009211514190.NATIONAL%20RAILWAY%20MASTER%20 PLAN%20-%20CONSOLIDATED%20BACKGROUND%20PAPERS.pdf.
SMEC Australia. “Draft, National Port Master Plan.” Accessed July 31, 2013. http://www.indii. co.id/upload_file/201205101637410.Draft%20National%20Port%20Master%20Plan%20Decree_ENG.pdf. Republic of Indonesia National Energy Policy. “Presidential Regulation No. 5/2006.” Accessed July 31, 2013. http://faolex.fao.org/docs/pdf/ins64284.pdf.
37
48
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Green Investment Climate Country Profile - Indonesia
Republic of Indonesia Coordinating Ministry for Economic Affairs. “Indonesia’s Master Plan for Acceleration and Expansion of Indonesia Economic Development 2011-2025.” Accessed July 31, 2013. http://www.ekon.go.id/media/filemanager/2011/05/27/p/d/pdf_mp3ei.pdf.
38
Economic Research Institute for ASEAN and Eastern Asia. “Country Profile: Indonesia.” Accessed July 31, 2013. http://www.eria.org/projects/PPP_in_Indonesia_ERIAsummary_January_2012.pdf.
39
Asia-Pacific Economic Cooperation. “Energy Overview 2011.” Accessed July 31, 2013. http:// publications.apec.org/publication-detail.php?pub_id=1291.
40
Republic of Indonesia National Energy Council. “Indonesia’s National Energy Policy of 2006 .” Accessed July 31, 2013. http://www.den.go.id/#.
41
Adapted from: Balia, Lobo. “Toward Low Carbon Energy System: Indonesia’s Perspective.” Republic of Indonesia Ministry of Energy and Mineral Resources. Accessed July 31, 2013. http://www.unep.org/ climatechange/mitigation/sean-cc/Portals/141/doc_resources/4th_Regional_Network_meeting/ S3_Country%20lessons%20sharing%20Indonesia_Lolo%20Balia.pdf.
42
Haeni, Jeffrey H., Collin Green, Edi Setianto, and Irman Boyle. “Indonesia Energy Assessment.” United States Agency for International Development, 2008. Accessed July 31, 2013. http://indonesia.usaid.gov/en/home. Republic of Indonesia Directorate of New and Renewable Energy, and Energy Conservation. “Publications.” Accessed August 6, 2013. http://www.esdm.go.id/directorate-general-of-new-energy-renewable-and-energy-conservation.html.
43
Resosudarmo, Budy P. The Politics and Economics of Indonesia’s Natural Resources. Singapore: Institute of Southeast Asian Studies, 2005.
44
Republic of Indonesia Ministry of National Development Planning. “National Action Plan for Mitigation.” Accessed August 1, 2013. http://www.bappenas.go.id/.
45
Federal Republic of Germany and Republic of Indonesia Cooperation Program. “Policy Advice for Environmental and Climate Change.” Accessed August 1, 2013. http://www.paklim.org/ about/climate-change-in-indonesia/.
46
Republic of Indonesia Ministry of Finance. “Economic and fiscal policy strategies for climate change mitigation in Indonesia.” Accessed August 1, 2013. http://www.fiskal.depkeu.go.id/ webbkf/siaranpers/siaranpdf%5CGreen%20Paper%20Final.pdf.
47
Adapted from: Azahari, Hasrul L. “Indonesia’s Feed-in Tariff for Renewable Energy.” Republic of Indonesia Ministry of Energy and Mineral Resources, 2012. Accessed August 1, 2013. http://energy-indonesia.com/03dge/Hasrul%20L.%20Azahari.pdf.
48
Bloomberg. “Currency chart IDR-USD exchange rate.” Accessed August 30, 2013. http://www. bloomberg.com/quote/USDIDR:CUR. Fadillah, Rangga D. “RI needs Rp 134.6 trillion.” The Jakarta Post, 2011. Accessed August 1, 2013. http://www.thejakartapost.com/news/2011/07/14/ri-needs-rp-1346-trillion-develop-renewable-resources.html.
49
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Green Infrastructure Finance
Think Geoenergy. “Indonesia announces new feed-in-tariffs for geothermal.” Accessed August 26, 2013. http://thinkgeoenergy.com/archives/15167.
50
Renewable Energy Policy Network for 21st Century. “Renewables Global Status Report 2010.” Accessed August 1, 2013. http://www.ren21.net/Portals/0/documents/activities/gsr/REN21_ GSR_2010_full_revised%20Sept2010.pdf.
51
Adapted from: Ali, Muklis. “Indonesia offers tax incentives for renewable energy.” Reuters, 2010. Accessed August 1, 2013. http://uk.reuters.com/article/2010/02/12/indonesia-energy-incentive-idUKJAK37652420100212.
52
Indonesia Investment Coordination Board. “Ministry of Finance Decree No. 130/ PMK.011/2011.” Accessed August 1, 2013. http://www.bkpm.go.id/mobile/content/news. php?i=1001&l=1&m=40.
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53
World Resources Institute. “National Energy Conservation Plan.” Accessed August 1, 2013. http://projects.wri.org/sd-pams-database/indonesia/national-energy-conservation-plan-riken.
54
Asia-Pacific Economic Cooperation. “Compendium of Energy Efficiency Policies of APEC Economies.” Accessed August 1, 2013. http://aperc.ieej.or.jp/file/2012/12/28/Compendium_2011.pdf.
55
Republic of Indonesia Ministry of Energy and Mineral Resources. “National Energy Management Blueprint.” Accessed August 1, 2013. http://www.esdm.go.id/batubara/doc_download/714-blue-print-pengelolaan-energi-nasional-pen.html+blueprint+pengelolaan+energi+nasional+indonesia&cd=1&hl=en&ct=clnk&gl=us.
56
Republic of Indonesia Ministry of Economic Affairs. “Public-Private Partnership (PPP) Investor’s Guide.” Accessed August 1, 2013. http://www.indii.co.id/upload_file/201005111816180.PPP%20 guide_eng_single_page_LR.pdf.
57
Republic of Indonesia Directorate for Public Private Partnership Development. “Infrastructure PPP in Indonesia.” Accessed August 1, 2013. http://www.unescap.org/ttdw/ppp/PPP09_Bkk/indonesia_bappenas_ppps09.pdf.
58
Republic of Indonesia Ministry of Energy and Mineral Resources. “Indonesia Energy Outlook 2010.” Accessed August 1, 2013. http://www.esdm.go.id/publikasi/indonesia-energy-outlook/ cat_view/58-publikasi/332-indonesia-energy-outlook/339-ringkasan-eksekutif.html.
59
Perusahaan Listrik Negara. “The Role of PLN in Promoting Solar PV in Indonesia.” Accessed August 1, 2013. http://indonesien.ahk.de/fileadmin/ahk_indonesien/Bilder/Business_Development/GISED-2012/PLN.pdf.
60
Republic of Indonesia Ministry of Finance. “Fiscal Policies to Support Renewable Energy Implementation.” Accessed August 1, 2013. http://energy-indonesia.com/03dge/05.pdf.
61
50
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Green Investment Climate Country Profile - Indonesia
Australia Aid. “Indonesia- Australia Forest Carbon Partnership-Independent Progress Report.” Accessed August 1, 2013. http://www.ausaid.gov.au/countries/eastasia/indonesia/Documents/ iafcp-ipr.pdf.
62
United States Agency for International Development. “Indonesia Clean Energy Development.” Accessed August 1, 2013. http://indonesia.usaid.gov/en/USAID/Activity/291/Indonesia_Clean_ Energy_Development_ICED.
63
Sjachdirin, Moch. “Solar PV promotion Program.” Republic of Indonesia Directorate of New Renewable Energy and Energy Conservation, 2012. Accessed August 1, 2013. http://indonesien. ahk.de/fileadmin/ahk_indonesien/Bilder/Business_Development/GISED-2012/Ministry_of_Energy_and_Mineral_Resources.pdf.
64
Indonesian REDD+ Task Force. “National REDD+ Strategy.” Accessed August 2, 2013. http:// www.satgasreddplus.org/en/.
65
Murdiyarso, Daniel, Sonya Dewi, Deborah Lawrence, and Frances Seymour. “Indonesia’s forest moratorium: A stepping stone to better forest governance?.” Center for International Forestry Research, 2011. Accessed August 2, 2013. http://www.cifor.org/publications/pdf_files/WPapers/ WP-76Murdiyarso.pdf.
66
Republic of Indonesia Ministry of Environment. “PROPER.” Accessed August 2, 2013. http:// proper.menlh.go.id/portal/.
67
Asia-Pacific Economic Cooperation. “Peer Review on Energy Efficiency in Indonesia.” Accessed August 2, 2013. http://www.ewg.apec.org/documents/EWG43_12-b%20PREE%20Indonesia%20 report%20_20120213.pdf.
68
Indra, Bastary Pandji. “PPP Policy and Regulation in Indonesia.” Republic of Indonesia National Development Planning Agency, 2011. Accessed August 2, 2013. http://www.oecd.org/gov/regulatory-policy/47377646.pdf.
69
Republic of Indonesia Ministry of Energy and Mineral Resources. “Directorate General of Electricity and Energy Utilization.” Accessed August 2, 2013. http://www.esdm.go.id/index-en.html.
70
Charles, Chris, Ivetta Gerasimchuk, Richard Bridle, Tom Moerenhout et al. “Biofuels - At What Cost?.” International Institute for Sustainable Development, 2013. Accessed August 2, 2013. http://www.iisd.org/gsi/sites/default/files/biofuels_subsidies_eu_review.pdf.
71
Adapted from: Standard and Poor’s. “Asia.” Accessed August 2, 2013. http://www.standardandpoors.com/ratings/en/ap/.
72
World Bank Data Bank. “Gini Index.” Accessed August 2, 2013. http://data.worldbank.org/indicator/SI.POV.GINI.
The Economist. “Asian Financial Crises, Ten Years On.” Accessed August 2, 2013. http://www. economist.com/node/9432495.
73
Bigg, Matthew, and Rieka Rahadiana. “S&P says to keep Indonesia rating below investment grade.” Reuters, 2012. Accessed August 2, 2013. http://www.reuters.com/article/2012/04/23/indonesia-economy-investment-idUSL3E8FN27920120423.
74
The World Bank – AusAID
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Green Infrastructure Finance
International Finance Cooperation. “Enterprise Surveys: Indonesia 2009.” Accessed August 2, 2013. http://www.enterprisesurveys.org/Data/ExploreEconomies/2009/indonesia.
75
Schwab, Klaus. “Global Competitiveness Index.” World Economic Forum, 2012. Accessed July 23, 2013. http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf.
76
World Bank. “Private Participation in Infrastructure Project Database.” Accessed July 23, 2013. http://ppi.worldbank.org/explore/ppi_exploreRegion.aspx?regionID=2.
77
Adapted from: Bartolome, Clarisse Ann, and Sinar Harapan. “PPP Infrastructure in Indonesia.” Strategic Asia, 2011. Accessed August 2, 2013. http://www.strategic-asia.com/india/60articles.html.
78
Charles, Chris, Ivetta Gerasimchuk, Richard Bridle, Tom Moerenhout et al. “Biofuels - At What Cost?.” International Institute for Sustainable Development, 2013. Accessed August 2, 2013. http://www.iisd.org/gsi/sites/default/files/biofuels_subsidies_eu_review.pdf. World Bank. “Doing Business 2012.” Accessed August 2, 2013. http://www.doingbusiness.org/~/ media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB12-FullReport.pdf.
79
U.S. Department of State. “2012 Investment Climate Statement - Indonesia.” Accessed August 2, 2013. http://www.state.gov/e/eb/rls/othr/ics/2012/191999.htm.
80
United Nations Conference on Trade and Development. “World Investment Report 2012.” Accessed July 22, 2013. http://www.unctad-docs.org/files/UNCTAD-WIR2012-Full-en.pdf.
81
Adapted from: Office of the U.S. Trade Representative. “Special 301 Report on Intellectual Property Rights.” Accessed August 2, 2013. http://www.ustr.gov/about-us/press-office/press-releases/2012/april/ ustr-releases-annual-special-301-report-intellectual.
82
International Intellectual Property Alliance. “Indonesia: Special Report 2012.” Accessed August 2, 2013. http://www.iipa.com/rbc/2012/2012SPEC301INDONESIA.PDF.
United States Agency for International Development. “Indonesia: Trade and Investment.” Accessed August 2, 2013. http://indonesia.usaid.gov/en/home.
83
Adapted from: World Bank Data Bank. “Foreign direct investment, net inflows (BoP, current US$).” Accessed July 23, 2013. http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD.
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World Bank Data Bank. “GDP (current US$).” Accessed July 21, 2013. http://data.worldbank. org/indicator/NY.GDP.MKTP.CD.
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Green Investment Climate Country Profile - Indonesia
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I
n July 2012, the Green Infrastructure Finance Framework Report was published to address the constraints in financing green infrastructure and to develop a new PPP-based approach to accelerate investments in lowemission technologies. The approach calls for assessing the â&#x20AC;&#x153;Green Investment Climateâ&#x20AC;? of a given country in order to develop country-specific recommendations for policy and incentive programs as well as other measures which can be introduced in order to further promote green growth in an economy. This report includes one of the first Green Investment Country Profiles completed for the East Asia and Pacific Region as part of bringing the approach closer to operational status. The initial countries include China, Philippines, Vietnam, Malaysia, Indonesia, Singapore and South Korea. The assessment involves not only the green policy and incentives environment, but also the countryâ&#x20AC;&#x2122;s overall natural resource endowment of fossil and renewable energy, its industrial development strategy in addition to general business indicators and other considerations, such as electricity prices, the capacity of the financial sector to mobilize long-term domestic financing, as well as their overall regulatory and legal capacity to implement PPPs. The country profiles provide a general understanding of the attractiveness, prevailing trends, strengths, and other aspects affecting the ability of the country to leverage its green growth potential.
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