2024 Sep 25

CPI launches Indonesia Power Sector Finance Dashboard, uncovers significant RE investment gap

Vientiane, 26 September 2024 – The Indonesia Power Sector Finance Dashboard, launched by Climate Policy Initiative (CPI) at the 24th ASEAN Energy Business Forum (AEBF-24), reveals that the annual average of power sector finance flows in Indonesia (2019-2021) is only at USD 5.8 billion, less than 30% of the USD 19.4 billion needed annually to meet the country’s climate targets as per its Enhanced NDC. While the financing gap is significant, further breakdown of investments in fossil fuel versus renewable energy also points to opportunities to more strategically shift investment flows towards a low-carbon future for Indonesia.

Developed through rigorous data triangulation that aggregates various official datasets, this dashboard addresses prevalent issues surrounding the lack of transparency, organization and accessibility of power sector investment data in Indonesia. The interactive features of the dashboard also allow users to view the investment flows based on the sources, thematic uses, and sectoral allocation so that pertinent government and industry stakeholders can identify entry points, financing gaps, and opportunities for new investments.

Key takeaways from the investment trend analysis include:
• The annual average of renewable energy (RE) investments is at USD 2.2 billion. This pales in comparison with the required RE investment of approximately $9.1 bn per year. It is also considerably lower than the annual average of fossil fuel investments at USD 3.7 billion

• An overwhelming share of fossil fuel investments is from private financial institutions (84% international and 10% domestic). While this suggests an encouraging sign of declinining appetite from public investors that dominated fossil fuel investments in 2016-2018, it also shows a worrying trend of large contribution from private financial institutions, especially foreign capital from China (around USD 2.2 billion per year) and South Korea (around 0.8 billion per year).

• Fossil fuel investments are almost evenly split between coal (51%) and gas power plants (49%). However, upon estimating the project costs of coal-fired power plants not yet captured in the 2019-2021 investment data, actual coal investment during that period was likely larger, with around $2.8 bn of unreported investment in captive coal plants.

• Investments in RE are mainly from international sources (58%) and concentrated in baseload RE power plants (61% in hydropower and 22% in geothermal). More investment flows are needed to develop variable RE power plants (solar and wind).

“We need visibility on whether green policies adequately accelerate green investments. Current data shows that total investment in fossil fuel power plants are almost twice the size of that in renewable energy power plants. There is a tremendous opportunity to rethink and shift those investment flows, especially from international private financial institutions as the largest contributor. By leveraging the comprehensive investment data in our dashboard, policy and investment can be optimized to build a secure, competitive, and low-carbon future for Indonesia,,” remarked Tiza Mafira, Director of CPI Indonesia.

The Dashboard also includes a deep dive into investments that flow through state-owned electricity firm PLN, to show how those investments particularly impact Indonesia’s energy market and energy transition journey. Download the full report and explore the data here.

Link to the dashboard: https://www.climatepolicyinitiative.org/dataviz/indonesia-power-
sector-finance-dashboard/