Study For Indonesia Energy Transition Financing Framework and Financial Risk Management

The study aims to inform the development orientation of financing framework that supports clean energy development including recommendations to optimize financing through Indonesia's Blue Book and Green Book, along with required de-risking instruments. The result shows that despite significant RE financing gap of the energy transition towards the net Zero Emissions target, existing financing mechanisms: particularly sovereign loans are still constrained by limited project readiness, high environmental and social (E&S) risks, and fiscal space considerations. The analysis shows that sovereign-backed loans for non commercial and public interest projects such as grids and transmission, as well as energy storage, should be backed by interventions to support project readiness. In addition, commercially viable projects should be geared towards non-sovereign financing and project finance, supported by appropriate de-risking instruments. The study also highlights the need to optimize alignment between national planning documents and financing eligibility, which reduces the effectiveness of development financing in supporting the energy transition.