Enhancing Decentralized Renewable Energy Investment to Achieve Indonesia’s Nationally Determined Contribution

Authors :
Muhammad Ery Wijaya, Alke Haesra and Brurce Mecca

Decentralized renewable energy (DRE) is a possible solution to accelerate electrification in underdeveloped areas. It is also in line with Indonesia’s National Energy Policy target to achieve a contribution of 23% of renewable energy towards the energy mix by 2025 and the National Determined Contribution (NDC). However, there is a 98% gap in investment per year towards improving Indonesia’s energy system through government funding (CPI, 2018). Therefore, it is a requisite for the Government of Indonesia to attract other sources of finance, particularly from private players, to meet the national clean energy and electrification targets.


However, there are multiple barriers that make the sector unattractive to private investors, including:

  1. Regulatory constraints that hinder new projects
  2. Unattractive small-scale and decentralized renewable energy projects for private investment
  3. Lack of access to innovative financing
  4. Lack of financial instruments for project or financial risk mitigation

This paper highlights the DRE opportunity in Indonesia, several key barriers for private investment, and the potential paths to address these barriers, but further research is required. Particularly to identify suitable locations to pilot the suggested business models supported by the tailored financial instruments, understand the region-specific barriers to implementation, proof-test the feasibility and replicability of the models, and conduct impact analysis of these solutions. CPI, through its future work, intends to continue to work and delve deeper to actualize these potential solutions.

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