Synthesis Study on the Effectiveness of Energy Efficiency Financing Mechanisms to Support the Energy Transition in Indonesia

This study, conducted up to December 1st 2024, addresses the challenges of financing energy efficiency (EE) projects in Indonesia, focusing on perceived high risks, low profitability, and limited awareness of energy savings as a business case. It highlights a lack of market demand for EE, small transaction sizes, and insufficient evaluation capacities among local financial institutions (LFIs) as key barriers. These challenges hinder the implementation of EE measures, which could otherwise reduce electricity demand, save costs, and help achieve Indonesia’s climate commitments. The study’s purpose is to evaluate global and local EE financing mechanisms, identify best practices, and provide actionable recommendations for Indonesia. By developing financing models like Energy Performance Contracting (EPC) and promoting Energy Service Companies (ESCOs), the study aims to overcome investment barriers and drive EE adoption. These efforts support the government’s goals of reducing reliance on fossil fuels, achieving emission reduction targets. Intended stakeholders include government agencies (e.g., MEMR, BAPPENAS), LFIs, private sector actors, and ESCOs. Other relevant parties are industry associations, consumers, and international development partners, who play crucial roles in financing, implementing, and promoting energy efficiency measures to meet Indonesia’s energy transition goals. This study collected its final data on December 1st 2024. Future developments related to this topic beyond the aforementioned cutoff date, was beyond the scope of the report.