Indonesia Clean Energy Development

Abstract

As a major subcontractor to the USAID-funded Indonesia Clean Energy Development (ICED) Project, Deloitte Consulting LLP is helping Indonesia make progress towards achieving low-carbon development and Greenhouse gas emissions reduction goals through improved environments for renewable energy (primarily biomass, biogas, and small hydro), industrial energy efficiency, and clean transport.

In direct support of the ICED Project, Deloitte Consulting LLP is implementing activities in the general areas of renewable energy policy, regulatory assessments, project development and finance, and capacity building. In this regard, Deloitte’s major contributions to the project include identifying gaps and providing recommendations to the Ministry of Energy and Mineral Resources for improving and implementing energy policies and regulations in support of clean energy development, conducting comparative analyses of effective fiscal incentives and subsidies used in other emerging market countries to facilitate investments in clean energy development by the private sector, assisting the state-owned electric utility (PLN) in revising its standard Power Purchase Agreement for small renewable energy projects in an effort to facilitate greater project implementation by the private sector, supporting the development of a renewable energy resource inventory/geographic information system (GIS) database for use by interested developers of clean energy projects, performing due diligence reviews of promising renewable energy and industrial energy efficiency projects for potential lenders and investors, and providing project development support and transaction structuring assistance to private developers of promising projects.

The Challenge

Many challenges and bureaucratic impediments confront potential developers of renewable energy and industrial energy efficiency projects in Indonesia today. Some of these hurdles include:

• Lack of a clearly defined legal and regulatory framework that supports the development of small renewable energy and industrial energy efficiency projects
• Lengthy and difficult two-stage review process to obtain a Power Purchase Agreement with guaranteed feed in tariff from the state-owned electric utility PLN
• Lack of project development and contract management experience on the part of local developers of promising clean energy projects
• Reluctance of local banks to review and provide financing for clean energy projects

How We Helped

Deloitte Consulting LLP is helping to provide policy support and technical assistance to various governmental stakeholders at the national, provincial, and kabuten levels regarding planning, design, and implementation of clean energy programs and low-emissions development strategies. In addition, we are providing drafting assistance in the preparation of revised PPAs to encourage investments in clean energy projects including small hydro, biomass power, biogas power, and solar PV technologies. We are also providing targeted technical assistance to clean energy project developers and industries contemplating major energy efficiency retrofits. Finally, we are providing risk management and mitigation support to both developers and lenders alike to facilitate renewable energy project financings.

Solution

Deloitte’s technical assistance team members have been active in providing the following specific activities intended to promote new investments in clean energy projects:

• Renewable energy policy development and water resource management support to the Directorate General of New, Renewable Energy and Energy Conservation (EBTKE) and the Ministry of Energy and Mineral Resources (MEMR)
• Leading practices review and preparation of a Draft Power Purchase Agreement for small hydro projects at the request of Perusahaan Listrik Negara (PLN), Indonesia’s state-owned electricity company
• Transaction and deal structuring assistance to local clean energy project developers
• Preparation of feasibility studies, value engineering reviews, and project financing memos in support of promising clean energy and industrial energy efficiency projects
• Assistance in matching promising projects with financing sources including additional equity from green capital funds, long-term debt at attractive terms, and co-financing
• Evaluation of potential Social Corporate Responsibility (CSR) funds from selected major corporate and parastatal entities
• Identification of carbon emissions offset financing alternatives for local developers
• Capacity building and training for local bank credit committees on risk mitigation and the conduct of due diligence reviews for promising clean energy project opportunities
• In-house training for local bank and financial institution staffs on new technologies such as biomass, biogas, and solar PV

As used in this document, “Deloitte” means Deloitte Consulting LLP, which provides strategy, operations, technology, and human capital consulting services, Deloitte Financial Advisory Services LLP, which provides financial advisory services, and Deloitte & Touche LLP which provides governance and risk oversight and reporting advisory services. These entities are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.