Energy Sector

Overview

The energy sector is the second largest contributor to Indonesia’s greenhouse gas (GHG) emissions. This sector must be prioritised to achieve the country’s nationally determined contribution (NDC) ambitions. In Indonesia’s country programme document (CPD) as published by the GCF, national strategies for sustainable development focus on increasing renewable energy, and focusing on energy conservation and energy efficiency. Currently, a large gap can be seen in financing the energy sector, estimated in the magnitude of billions of dollars, to achieve the country’s emission reduction targets. These ambitions need a substantial uptake in investments, which can be supported by GCF funding for projects’ development and implementation.

Sector-Specific GCF Eligibility

The first step to begin preparing for a project’s funding proposal, is determining whether the project proponents have sufficient knowledge, resources, and tools at disposal. An eligibility survey tool has been developed in the form of a self-assessment questionnaire that can be taken on the following page: Link. The survey includes information on the priority sectors in Indonesia, which include the energy sector.

Sector Expertise

For a successful funding proposal, it is necessary that appropriate professional experience of the underlying technologies in the energy sector is included. To strengthen the proposal and increase chances of succeeding in obtaining funding from the GCF, as well as to be able to answer technical questions as they arise, assistance and support from experts in the field of project are needed. A potential pool of experts that may support your proposal is provided in form of a Knowledge Expert Pool at GCF Knowledge Platform on the Indonesian NDA website. By searching for certain expertise (e.g. energy), experts with the respective expertise can be identified. Identifies experts can be directly contacted via the platform: LinkFor a successful funding proposal, it is necessary that appropriate professional experience of the underlying technologies in the energy sector is included. To strengthen the proposal and increase chances of succeeding in obtaining funding from the GCF, as well as to be able to answer technical questions as they arise, assistance and support from experts in the field of project are needed. A potential pool of experts that may support your proposal is provided in form of a Knowledge Expert Pool at GCF Knowledge Platform on the Indonesian NDA website. By searching for certain expertise (e.g. energy), experts with the respective expertise can be identified. Identifies experts can be directly contacted via the platform: Link

Sector-Specific Considerations

Alignment to sector specific aspects, policies and regulations

A project in the energy sector must be aligned to the latest energy-related policies and regulations from Indonesia, and ideally, the concept/proposal would build onto the country’s strategies and ambitions in the energy sector. Alignment can be ensured by reviewing Indonesia’s latest NDC submission, and by reviewing the country’s most up-to-date country programme document (CPD) as published by the GCF. Additional documents that shape the country’s strategies, particularly in regard to the energy sector, include but are not limited to:

• National long-term development plan (2005-2025)
• National medium-term development plan (2020-2024)
• Long-term strategy for low carbon and climate resilience 2050
• National electricity plan (2024-2060)
• National energy policy (2014)
• National electricity supply business plan (2019-2028)
• National energy grand plan (2017)
• Electricity supply business plan (2016-2025)
• Relevant ministerial strategic plans

The Indonesian ministries directly linked to the energy sector, including its linkage to transportation, include but are not limited to:

• Ministry of Energy and Mineral Resources (Kementerian Energi dan Sumber Daya Mineral - ESDM)
• Ministry of Transportation (Kementerian Perhubungan)
• Ministry of National Development Planning (Badan Perencanaan Pembangunan Nasional - BAPPENAS)

Indonesia’s NDC lists target areas of focus to reduce the energy sector’s emissions. These include improving efficiency in households, industries, transportation and commercial sectors, increasing the share of different types of renewable energy, and replacing polluting fuels with cleaner ones including gas. These goals not only contribute to the country’s mitigation ambitions, but improve the adaptation abilities of Indonesia.

The current Indonesian strategic plans are summarised as listed below. If the project concept falls under any of them, and project proponents have the capacity and skills to develop a proposal for the project concept, it is encouraged to get in touch with the relevant line ministry for additional support:

• New or additional renewable energy or clean energy
• Energy efficiency, conservation or diversification
• Education and awareness about energy efficiency

Concept and Proposal development

Indonesian GCF priorities are listed in the CPD of Indonesia (find on: Link), and they fall in-line with Indonesia’s strategy, with additional focus on low-emission transport, and improved energy security. For more information on the GCF’s focus areas and investment framework, the practical guide can be reviewed on: Link. In the practical guide, the detailed steps needed to prepare and submit a concept note and funding proposal are included. Additionally, Indonesia-specific GCF investment criteria can be found in the CPD (see pages 48-50).

GCF Guidance

The GCF has published sector-specific documents that draw out pathways leading to transformative change within these sectors, with some of these sectors falling under the scope of energy. By familiarising oneself with the priorities and the focus areas of the GCF, the project’s alignment with the GCF’s climate goals is ensured, and the project work is aligned with the paradigm shift pathways for transformational contributions to both national and international climate ambitions. Additionally, barriers expected to hinder the progress in each of the listed sectors are presented in the guides, which can help to better understand and anticipate the challenges possibly awaiting as project development progresses.

The documents as published by GCF can be reviewed for the detailed actions to bring the country onto each of the paradigm shift pathways (link). The following table lists out some of the potential barriers for each of the listed energy sub-sectors, as relevant to the Indonesian context.

In the case a project is eligible to use the simple application process (see: practical guide page #), the sectoral information within the SAP technical guidelines can be used. The relevant sectors include: Renewable energy, transport, and energy efficiency for industry and appliances (links). These guides discuss paradigm shifts, but they also list out indicators for impact measurement, and examples. In the case a project is eligible to use the simple application process (see: practical guide page #), the sectoral information within the SAP technical guidelines can be used. The relevant sectors include: Renewable energy, transport, and energy efficiency for industry and appliances (links). These guides discuss paradigm shifts, but they also list out indicators for impact measurement, and examples.

Technical Considerations

When developing project concepts for the energy sector, some technical aspects should be considered to ensure accurate estimation of the project’s mitigation potential, and to successfully obtain funding. Some of the key aspects to take into consideration are elaborated in the following points:

• Data Availability: Due to the diversity of energy-intensive industries, transportation vehicles and other applications and some of the private businesses’ competitive nature, it may be difficult to obtain accurate data. To accurately define baseline and project emissions, energy use from different types of fuel must be accounted for, as well as the appliances’ efficiency levels. Additionally, baseline scenarios should reflect current policies and expected industry trends, with considerations to existing energy performance standards
• Project Boundaries:Defining project boundaries is critical to ensure that only the processes or equipment linked to the specific project are included in the calculations
• Technology Performance:Different technologies and especially new ones can present high uncertainty in terms of performance and risk of failure. Careful assessments must take place to provide clarifications on potential impacts and risks. In the case of transportation projects, the baseline should consider the vehicles’ expected efficiency improvement over time. And for the project, the performance of technology should consider road conditions, speed, and battery life when applicable
• Rebound Effects and Leakage: Energy efficiency measures may lead to increased demand for energy, known as rebound effects, which must be considered in the calculations. At the same time, some activities like replacement of equipment can cause emissions to shift elsewhere, or to leak. Therefore, when estimating mitigation potentials, such indirect impacts must be accounted for• Rebound Effects and Leakage: Energy efficiency measures may lead to increased demand for energy, known as rebound effects, which must be considered in the calculations. At the same time, some activities like replacement of equipment can cause emissions to shift elsewhere, or to leak. Therefore, when estimating mitigation potentials, such indirect impacts must be accounted for
• Calculations: In any instance where calculations are performed to provide project-related estimations, clear and detailed explanations of all calculation methods, assumptions, and data used is crucial. Additionally, conservative numbers should be used to avoid overestimations

GCF Project Examples

As success stories, the documents of some of the projects that have successfully received GCF funding in or including Indonesia, and are currently undergoing implementation in the energy sector can be reviewed. These examples include (all with links): As success stories, the documents of some of the projects that have successfully received GCF funding in or including Indonesia, and are currently undergoing implementation in the energy sector can be reviewed. These examples include (all with links):

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