Ministry of Energy and Mineral Resources and UK PACT (UK Partnering for Accelerated Climate Transitions) Launch Energy Efficiency Project Risk Mitigation Study Results

Jakarta, September 13, 2024 - The Directorate General of New Renewable Energy and Energy Conservation (EBTKE) of the Ministry of Energy and Mineral Resources (ESDM), in collaboration with Ecoxyztem Venture Builder and consortium partner Enertec, launched a study related to the Energy Savings Insurance (ESI) instrument as one of the solutions to increase investor confidence, especially in financing small-scale energy efficiency projects. The study was funded by the British Embassy in Jakarta through the UK PACT (UK Partnering for Accelerated Climate Transitions) Energy Efficiency MENTARI program and launched in Jakarta on September 12, 2024. The study confirms that Energy Savings Insurance (ESI) can significantly reduce the risk of energy efficiency projects, making them more viable and attractive to investors and developing the proof of concept and strategic partnerships essential for future replication of ESI.

ESI is an insurance designed to guarantee the performance of energy efficiency equipment installed by energy-saving companies (ESCOs) in building owners' facilities. If the energy savings promised in the contract are not achieved, the insurance company will make the difference and provide financial security to the building owner. The funds from this insurance can be used to repay the loan to the lender. Although ESCO projects are generally small in scale, the potential is enormous, with many projects across various sectors.

According to a recent survey conducted during the Forum Group Discussion "Public-Private Dialogue on Unlocking Financing for Energy Efficiency: De-Risking Instruments and Opportunities for Energy Savings Insurance in Indonesia," in collaboration with OECD-CEFIM, on May 30, 2024, about 46.3% and 33.3% of stakeholders indicated that ESI has the potential or strong potential to facilitate the expansion of the energy efficiency market in Indonesia. Among the critical energy efficiency market players - the insurance industry, financial institutions, and technology providers or ESCOs - only the insurance industry still needs to be convinced of the potential benefits of ESI.

Hendra Iswahyudi, Director of Energy Conservation, Directorate General of EBTKE, Ministry of Energy and Mineral Resources, said, "This ESI feasibility study is not only a strategic step in accelerating the adoption of energy efficiency technologies across the country, but also provides financial certainty for building owners and ESCOs. This ensures that the risk of energy savings failure is minimized, which in turn increases confidence in the efficiency business model. This ESI feasibility study will contribute significantly to our national goal of reducing carbon emissions, while strengthening Indonesia's future energy security."

"The UK Government continues to support the Indonesian Government in its efforts to reduce greenhouse gas emissions, one of which is through the Energy Efficiency MENTARI program. As the UK and Indonesia celebrate 75 years of diplomatic relations this year, this collaboration reflects our shared commitment to a greener and more sustainable planet for all of us," said Amanda McLoughlin, UK Development Director for Indonesia.

The Energy Efficiency MENTARI program, run by the Ecoxyztem-Enertec consortium since 2022, focuses on supporting the Ministry of Energy and Mineral Resources in improving the capability of financial institutions to apply ESI instruments while catalyzing the development of energy-saving projects in Indonesia by providing capacity building, certification, and networking opportunities, including developing a study on the potential of ESI in Indonesia.

"We hope that the results of this study can provide a detailed analysis of how ESI can be adapted to the energy efficiency business model in Indonesia and how ESI can be applied in the Indonesian market. The analysis we can conclude is that ESI can help mitigate risks in energy efficiency projects, particularly those related to project design and lack of risk sharing," explained Jonathan Davy, CEO of Ecoxyztem Venture Builder.

Establishing a multi-stakeholder ecosystem involving the Government, technology providers, ESCOs, financial institutions, and the private sector is necessary to accelerate the implementation of ESI in Indonesia. This ecosystem will strengthen cooperation in improving energy efficiency and the implementation of ESI schemes while opening up opportunities for more significant innovation and investment in green technology. To complement the study results and strengthen Indonesia's energy efficiency ecosystem, a digital platform called SEETRUM (Society of Energy Efficiency Trust Movement) has also been developed and launched as a comprehensive resource center containing talent pools, collaboration opportunities, and energy efficiency capacity-building programs.

"The presence of SEETRUM also supports one of our goals to raise awareness among the younger generation about the energy efficiency industry. In addition, we also actively organize capacity building events that are always attended by more than 100 participants every month, as well as energy auditor training and certification which has resulted in 12 certified Energy Auditors," said Mada Ayu Habsari, Managing Director of Enertec Mitra Solusi.

The launch event was capped off with a panel discussion session involving energy efficiency experts from EBTKE, Enertec Mitra Solusi, and Synergy Efficiency Solutions. They provided in-depth insights into the implications of the study results and the steps that need to be taken to drive widespread adoption of energy efficiency technologies and practices across Indonesia.