Financing Transformational Change
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The document outlines Indonesia's strategy for financing transformative climate change projects through public-private partnerships and funding mechanisms. It establishes the Indonesia Green Investment fund that will co-invest with private investors in joint investment companies supporting renewable energy and other climate projects. Examples provided include a feed-in tariff program that pays an avoided cost rate premium to independent power producers to scale up renewable energy, with various entities and insurance programs in place to manage risks and ensure payments. The government also plans to gradually reduce electricity subsidies to free up funds for infrastructure and renewable energy development.
Financing Transformational Change
- 1. Financing Transformational Change Ministry of Finance for Secretary of Commerce Visit MINISTRY OF FINANCE OF THE REPUBLIC OF INDONESIA 1
- 2. Private Public Partnership and Funding Mechanism PT Indonesia Green • International climate finance Investment • Budget allocations • Institutional investors Invests • Bi- and multilateral aid Co-invests Indonesia Green Private Investors PPPs Investment Joint-Investment Companies Fund Equity, Debt, Guarantees, Equity Concessional climate finance Regulations/ Fiscal Incentives Government Projects Tax revenue 2
- 3. Example: Feed-in-tariff to scale renewable energy Example C: Feed-in-tariff programme for renewable energy Pay Electricity electricity Consumers bills Pays Pays avoided Passes through premium Debt cost rate premium payment Provider Independent Int. Sponsor Power PLN PT IGI G2GIGIF climate Equity producer finance Provider Passes through premium payment Risk Insurance MIGA/IFC (private & Public) Insures against political risks 3
- 4. GOVERNMENT EFFORTS TO REDUCE ELECTRICITY SUBSIDY 1. Government will gradually reduce the subsidy for electricity. Efforts 2. Electricity subsidy will be given to small and poor costumers through implementation of tariff to increase efficiency. 3. Other customers will gradually be charged an economic tariff. 4. This will increase competitiveness and provide a stimulus for economic recovery. 5. Energy diversification and increase of electricity tariff are the main factors in reduction of subsidy 6. Funds freed by the reduction of subsidies will be allocated to electricity infrastructure, research and development of new and renewable energy. 4