USAID Indonesia Clean Energy Development Programs

Business Opportunity In Small Scale Renewable Energy Development

(Hydro, Biogas and Biomass)

ADB Asia Clean Energy Forum Manila, June 8, 2012

Topics Overview of Indonesias clean energy opportunities and constraints Overview of USAID Indonesia Clean Energy Portfolio Overview of USAID Indonesia Clean Energy Programs Development (ICED) ICED approach in project assistance ICED Inventory & Pipeline of renewable energy projects Financing consideration in renewable project development

Republic of Indonesia 17,500 islands, 33 provinces, 246 million people

Indonesia has opportunities and challenges in developing CE Projects

Indonesia Condition Abundance of renewable energy resources (rivers, ag. waste, Solar etc) Electricity shortages, unserved communities Rising cost of oil, natural gas and coal Government targets for RE, EE and GHG emissions reduction CE Development Opportunities Attractive feed in tariff rate PLN as the single buyer Standardize and clear Power Purchase Agreement (PPA) terms and condition Reduces subsidy to PLN by reducing use of diesel Banks, FIs and private equity financing

USAID Project Approach Assist in improveing policy framework at national and regional level Standardize PPAs & other agreements Link financing sources with high quality projects and companies Show case success stories, share lessons learned

CE Development Challenges Lack of Project Financing Undercapitalized developers sponsors with limited track record; Limited operating projects as examples Limited domestic capability in equipment and services

GOI Priorities in Energy Sector

Energy Security : Dependence on fossil fuels in national energy supply High growth of energy demand (7%/year) and electricity demand (9%/year) Limited access to energy: electrification ratio in 2011 is still around 73%.

GOI Key Policies

Energy Diversification to increase renewable energy share in the National Energy Mix from 5% in 2011 to 17% in 2025. Energy Law No. 30-2007 emphasis on new and renewable energy. Electricity Law No. 30-2009 allows greater involvement of private sectors (Independent Power Producers or IPPs). Feed-in tariffs for small renewable energy IPPs and excess power (<10 MW) and set PLNs obligation as buyer New vision of 25/25 25% renewable energy in 2025 RAN-GRK Presidential Regulation 61/2011 on National Action Plan to Reduce GHG Emission (NAP GHG Emission).

Reduce carbon emissions from energy sector to meet GOI commitment of 26%

GOI Priorities Increase renewable energy share in the National Energy Mix from 5% in 2011 to 17% in 2025. Increase electrification ratio from 73% in 2011 to 95% in 2025

USAID Activities Development of renewable energy sector (under 10 MW) through: Facilitate project implementation: Resource mapping in three geographic focus area (Aceh, North Sumatra, Riau) using GIS technology Technical assistance to small scale project developers in project implementation Match-making between project developers, investors and financiers Build local capacity: Support local governments programs on renewable energy development Capacity building for financial institutions on project assessment for investment decision Enabling environment: Gap analysis on current GOI policies and incentives Support PLN in PPA standardization Support improvement of coordination at local level (i.e. through energy working group)

USAID Indonesia Comprehensive Partnership GCC/Clean Energy Portfolio

Programs
CDCP - Private Financing Advisory Network (PFAN)*) Indonesia Clean Energy Development (ICED) Grant - Capacity for Indonesian Reduction of Carbon in Land use Energy (CIRCLE) Grant - Climate Change Mitigation (to be awarded) University Partnership - Geothermal Education Capacity Building Program TBD Energy Program/Credit Guarantee

Period of Implementation
2010-2011 2011-2014 2011-2014 2012-2014

Implementing Partner

Total Planned Budget

$700K $16 million $1.4 million $1.1 million

ECO Asia/Winrock Tetra Tech ES. Winrock Intl. TBD University of Southern California & ITB (with support from Star Energy) TBD

2011-2014

$640K

TBD

$2.2 million

Note: *) completed in June 2011; results: facilitated 4 projects (2 hydropowers, 2 biomass) to financial closure with total capacity 77 MW and financing leveraged $88 million.

USAID Programs ICED

Key Deliverables by September 2014 120 MW clean energy generated 4 million tons CO2-e emissions from energy sector avoided 1.2 million people get access to clean energy 20 clean energy projects installed $120 million public and private funding leveraged 20 institutions strengthened

CIRCLE

3 Palm Oil Mill Effluent (POME) methane capture to power projects installed Feasibility study for another 8 POME-methane capture projects Promote sustainable certification practices in palm oil industries
Strengthen ITB Master Degree program for Geothermal Engineering Help produce 40 graduates per year Provide scholarship to 10 students Initiate link between geothermal industries and education program

University Partnership Geothermal Education Capacity Building

Clean Energy Project Sites

Legends: ICED Project Sites CIRCLE Project Sites University Partnership

ICED offers a variety of services to stakeholders:

Stakeholders
Governments / Public
National Provincial Regional (Kabupaten) Communities

ICED Services
Clean Energy Project Dev. Assistance Facility
CE Project feasibility On-grid / Off-grid RE Project dev. Energy efficiency Project dev.

Private
Project Developers Companies / Project Owners Banks / Financial Institution

ICED

Grants
Community Based CE Projects Innovation application of CE Activities knowledge sharing

PLN
PLN Headquarter PLN Regional Office

Clean Energy Information Exchange

CE financing networks CE project database and GIS Capacity building & awareness

ICED project takes a project implementation driven approach to increase investment and utilization of clean energy.
Viable CE Projects

Increase awareness of Clean Energy

Advise project developers

ICED

Address policy issues

Build capacity of banks

Currently, ICED is assisting to 22 renewable energy projects and 1 energy efficiency project:
ICED identified 95 CE Projects in Indonesia (mainly N Sumatera, Riau and Aceh) representing estimated 539 MW equivalent; Approximately 52% of identified projects are Mini Hydro Power Plant where mostly located in North Sumatera; Average size of mini hydro power plant and biomass power plant is 3 to10 MW, while biogas power projects are below 3 MW; Average Investment for mini hydro power plant is in a range of US$ 1,500 to US$ 1,000 per Kilowatt install; Whilst for Biomass Power Plant is in a range of US$ 900 US$ 1,500/kW and Biogas Power Plant is in a range of US$2400-2700/kW Average project development cycle is less than 1 year for biomass/biogas, 2-3 years for mini hydro power projects

ICED Project Inventory categorizes CE projects into 5 stages of development

ICED PROJECT INVENTORY
1

Potential

Project identified from secondary data (PLN, BPS, local government) No study has been done No sponsor identified
Project identified from primary data Some interest showed from project sponsor to developed CE Projects; Preliminary Assessment has been done (Pre-feasibility Study) Final Feasibility Study has been done; Process of acquiring permits is started; Process of acquiring PPA is started PPA and permits are completed Financing is established Start construction process

Planned

Under Development

Financial Closure

Operating

Construction completed Projects installed and commissioned Energy produced/saved, GHG emissions reduced

ICED Project Inventory (Number of Projects)

42

ICED Project Inventory (In Megawatt Equivalent)

343
161

175 28 1 24 134 24 93

18
16

44 12 3 12
2 4

14 17
14 3 25

7 1 Biogas

2 4

34

Biomass

Hydro

Biogas

Biomass

Hydro

Potential Planned

Under Development Financial Closure

Operating

Planned Under Development

Financial Closure Operating

ICED Project Inventory by Province (Number of Projects)

42 1

ICED Identified Projects Location by District (Kabupaten)

25 2

28 0
37 15

14

9 8

0
4 4

1 Biogas

Biomass

Hydro

Aceh North Sumatera

Riau Rest of Indonesia

ICED supports viable CE projects to create replicable models for future development
Work with multiple partners with vested interest in successful project development (project developers, banks, industries, PLN, local government) to create ICED portfolio. Provide critical pre-financing technical assistance and transfer analytical tools to decision makers to ensure viability of projects. Integrate CE projects in order to meet energy and system planning, GHG emissions reduction, rural access, and private financing objectives.

Create commercial project development models, including standard agreements, that can be applied and replicated throughout Indonesia.

Findings and future needs in financing for Clean Energy Projects:

ICED Findings
CE projects moving from CDM to commercial financing models; Sufficient financing available, but not the right financing products; Developers and banks/FIs do not fully identify, mitigate and allocate risks in developing, constructing and operating projects Private equity sources looking for holding companies, not individual projects Developer/sponsor equity tied up in prefinancing studies and/or financing first project

Future Needs
Increase familiarity with non-recourse, and limited recourse project financing Remove limitations on commercial bank lending; Build capacity in stakeholders to better assess viability of CE projects, in particular risks; Channel donor development funding to complement commercial financing (e.g., reduced interest rates, longer term) Build inventory of financeable projects and developer/sponsors Additional incentives in tax treatment, infrastructure (e.g., transmission interconnection)

For more information, please contact:

Aurelia Micko, USAID/Indonesia Environment Office Deputy Director, amicko@usaid.gov Retno Setianingsih, USAID/Indonesia Environment Office, Energy Specialist, rsetianingsih@usaid.gov

TERIMA KASIH