Key Elements of Technology Delivery and Business Models for
Increasing Affordability of and Accessibility to Sustainable
Energy
Consultative Workshop on ‘Indonesia National Strategy to Increase Affordability of Sustainable Energy Options
and South - South Cooperation’
12-13 May 2014 Jakarta, Indonesia
Sustainable Energy Technology Options Suitable
for Indonesia
1.
Geothermal energy for heat and electricity application.
2.
Bio-fuel based energy for transport, electricity and Industry
applications.
3.
Biomass energy for heating and electricity applications.
4.
Solar PV and solar thermal energy for electricity and heating
applications.
5.
Small and micro-hydro power technologies for electricity
generation.
6.
Wind energy for electricity generation.
7.
Municipal solid waste / animal waste resource for electricity /
Key Drivers for Sustainable Energy Technology
Delivery
Island structure of the country favors decentralized sustainable energy
technologies over the centralized grid based model.
Indonesia is blessed with ample sustainable energy resource potential namely
geothermal, solar, biomass, wind, small hydro, etc.
Ensuring energy security and obligation to mitigate climate change.
Diminishing reserves of fossil fuels.
Overall electrification rate of 75%, with many regions having less than 60%
electrification.
Many islands are dependent on diesel-based power generation, which is
environmentally harmful and unsustainable in the long term.
Weak infrastructure links increase the cost of transportation of conventional
Key Elements of Sustainable Energy Technology
Delivery
Government
Policy and Regulations
Institutional Framework
Finance and Business
Models
End Consumer
Participation
Policy and Regulatory Framework for Technology
Delivery
Expand service network and increase visibility in the market.
Implement accreditation of service providers and technical standards for
equipments.
Introduce star rating system to promote energy efficient appliances.
Expand testing facilities.
Set up monitoring and verification systems.
Strengthen R & D for sustainable energy systems.
Set up enterprise development program.
Develop skills.
Policy and Regulatory Framework for Technology
Delivery (Contd.)
Promote linkage with other government programs.
Develop ecosystem and supply chain.
Facilitate simplified procedures for obtaining various
clearances for setting up sustainable energy projects.
Simplify norms for availing duty / tax related
incentives offered by government.
Promote capacity building of the provincial / local
Institutional Framework
Private sector participation brings market-oriented delivery
mechanism and finance.
Provincial government / local government involvement is
necessary to identify the appropriate sustainable energy
technology option, and the area to be served.
Banks and financial institutions should be sensitized about the
importance of sustainable energy technology options.
Involvement of community is necessary for better management of
sustainable energy projects.
Involvement of NGOs ensures increased awareness and capacity
Finance and Business Models
Finance for sustainable energy technologies can be arranged from various sources
such as:
Domestic public financing: Creates a specialize financial institution to
leverage the private capital necessary for sustainable energy.
International funding options: Harnessing funds from CDM and Joint
implementation fund, bilateral development assistance, etc.
Government procurement: Bulk purchase by government can reduce the cost
of sustainable energy technologies.
Priority sector lending: Inclusion of sustainable energy / RE in priority list
will increase the availability of credit to this sector.
Tax free green bonds: Raise low cost capital through tax-free bonds, and
Business Models for Technology Delivery
Models Strengths Weaknesses
Community-driven Models Superior local support Revenue management may pose problems.
Government Models Broader range of consumers O&M service may pose problems.
Private models Profit oriented, hence commercially viable
End consumer may not bear the cost.
Public–Private models Sustainable, cost effective services
End consumer can afford cost since it is supported by public funds.
End Consumer
End consumers should be made aware of the sustainable energy
technology and its application / importance in promoting same.
The upfront cost of the sustainable energy option should be reduced by
providing appropriately designed financing scheme to suit the economic
condition of the end consumers.
Simultaneously, the subsidies on fossil fuel should be reduced to create a
level playing field for sustainable energy options.
Increased income generating activities through sustainable energy options
enhances affordability.
Ownership transfer after repayment of the cost of sustainable energy
Business Model: RE based Mini-grid Project under
Public-Private Partnership mode
MEM / Provincial Govt.
(Implementing and monitoring agency)
VGF Based Competitive Bidding
(Selection of entrepreneur requiring minimum VGF Support)
IPP
(Choice of source of generation / arranging
finance)
Power Generation & Distribution
End Consumer End Consumer End Consumer
VEC
(Village Electricity Committee)
RST Cap
(Finalized and declared in bid document)
Provincial / District Government All consumers of utility
Surcharge
Cash inflow through revenue collection
Dispute resolution and assistance in
Implementation Arrangement
Agency / Authority
Responsibilities
Director General of New, Renewable Energy
and Energy Efficiency
Identification of area for implementation of mini-grid projects.
Selection of IPP for implementation of mini-grid project based on VGF based competitive
bidding.
Decision on the maximum tariff to be collected from the end consumer.
Local / Regional Government
Identification of area and suitable technologyfor mini-grid project. Approvals and Licenses
Appointment of village electricity committee (VEC)
IPP
Selection of technology and arranging financefor project.
Implementation Arrangement
Agency / Authority
Responsibilities
IPP Installation, commissioning and O&M of the mini-grid plant, including tariff collection from the end consumer up to the end of life of the plant.
Transfer of asset to government after end of BOT period.
Village Energy Committee (VEC)
Help in tariff collection Dispute resolution
End Consumers
Adherence to the approved load and timeof use.
Implementation Arrangement
Agency / Authority
Responsibilities
Director General of New, Renewable Energy
and Energy Efficiency
Determination of Feed-in Tariff on cost plus basis for sale of electricity to PLN.
Allow the IPP to work as distribution franchisee of PLN.
Provide financial assistance to PLN so as to cover the gap between FIT and consumer retail tariff.
PLN
Allow connectivity to the mini-grid plant. Execute PPA and franchise agreement with the IPP.
Regular payment of FIT and franchisee charges to IPP.
IPP
Work as distribution franchisee of PLN. Look after the generation, distribution and tariff collection activities as earlier.
Business Model: Large Scale Distribution of
Solar Home System with Private Participation
Government
Banks
ESCO
Household
s
Subsidy
Loans
Collateral and
EMI
Distribution,
installation and
O&M
Implementation Arrangement
Agency / Authority
Responsibilities
Government (Ministry of Energy &
Mineral Resources)
Identification of area for implementation of projects. Technical standards and specifications of SHS. Partial subsidy disbursement to the commercial bank
depending on the project site.
Local / Regional Government
Selection of private entrepreneurs to work as ESCOs. Coordination with MEM for selection of area for project implementation.
ESCO
ESCOs will act as implementing agencies. Will rope in the interested buyers.
Implementation Arrangement
Agency / Authority
Responsibilities
ESCO Avail loan and subsidy, or soft loan from the Bank.
Bulk procurement of SHS and distribution to end consumers. O&M services up to repayment period.
Collect rent from end consumer, which will take care of EMI of bank and O&M costs.
Regular payment of EMI to the banks.
Bank
Avail subsidy from government and pass on the same to the ESCO inthe form of capital grant or soft loan. Sanction loan to the ESCO.
Release collateral guarantee after repayment of loan.
End Consumer
Pay regular rent to the ESCO. Take custody of the SHS.
