Jakarta – The Supreme Audit Agency (BPK) has found severe obstacles in funding new renewable energy (NRE) infrastructure projects, hampered energy transition and electricity infrastructure development in Indonesia. In the BPK report disclosed in the Overview of Semester Audit Results (IHPS) I/2024, it is stated that the readiness of funding from the Energy Transition Mechanism (ETM) and Just Energy Transition Partnership (JETP) schemes is still far from expectations, making it difficult to achieve clean energy targets and the national energy mix.
According to the IHPS I/2024 report, PT PLN (Persero) experienced significant obstacles in budget realization to develop electricity from renewable energy. Of the total investment allocation of Rp230.2 trillion planned in the Company’s Work Plan and Budget (RKAP) for the period 2021 to the first semester of 2023, the realisation only reached IDR138.2 trillion or around 60.03 per cent. This amount only fulfils about 28.39 per cent of the investment needs projected in the Electricity Supply Business Plan (RUPTL).
“This limitation greatly impacts PLN’s ability to build NRE plants and can trigger electricity deficits in various regions,” said BPK in its report on Monday, October 28.
One of the main causes of this budget limitation is the unpreparedness of the structured funding scheme in ETM and JETP. BPK highlighted that although the ETM is designed to attract clean energy investment, a steering committee has yet to be established to oversee its implementation. Meanwhile, the JETP governance structure has also yet to be established, which, according to BPK, makes the energy transition process towards NRE less efficient.
To improve this condition, BPK recommends the Minister of Energy and Mineral Resources (ESDM), Bahlil Lahadalia, to immediately coordinate with relevant ministries, including the Coordinating Ministry for Maritime Affairs and Investment, the Ministry of Finance, and the Ministry of State-Owned Enterprises (BUMN). BPK encourages the establishment of a funding steering committee for ETM and the development of a governance structure that supports the JETP scheme, in addition to identifying a more detailed financing portion.
TKDN policy hampers renewable energy projects
In addition to funding constraints, BPK highlighted the Domestic Component Level (TKDN) policy, which hampers EBT development projects. According to BPK, the TKDN policy, which requires domestic production components in energy infrastructure projects, must be supported by adequate domestic production capacity, resulting in delays in project realisation.
BPK noted that international financial institutions such as the Asian Development Bank (ADB), World Bank, Japan International Cooperation Agency (JICA), and German development bank KfW Bankengruppe considered the TKDN policy inconsistent with their financing requirements. This condition can potentially hamper foreign funding, resulting in delays in the project’s Commercial Operation Date (COD) and cost increases due to penalties and government guarantee claims.
“This TKDN policy increases the risk of cancelling foreign funding and increasing project costs, especially when the project is delayed or does not reach the target on schedule,” BPK explained.
To overcome these obstacles, BPK recommended that the Minister of Energy and Mineral Resources immediately evaluate the TKDN policy, together with the Coordinating Ministry for Maritime Affairs and Investment and the Ministry of Industry.
“Electricity infrastructure development still relies on foreign funding, but on the other hand, there are domestic policies that hinder the entry of funding,” said BPK in its recommendations.
BPK hopes that the new government can immediately clarify the funding scheme and formulate supporting policies more adaptive to the demands of clean energy investment. BPK concluded that without fundamental improvements in funding governance and supporting policies, clean energy infrastructure development in Indonesia would be challenging to develop according to the targets set by the government. (Hartatik)
