Developing a Guarantee Instrument to Catalyze Renewable Energy Investments in Indonesia

This research paper by the Climate Policy Initiative, produced in collaboration with PT Sarana Multi Infrastruktur (Persero), examines the potential for a guarantee instrument to attract private capital for renewable energy in Indonesia. It identifies a significant investment gap and explores how credit guarantees can mitigate specific risks to help the country reach its 2025 clean energy targets.

• Indonesia requires an estimated USD 125 billion in investment by 2025 to meet its clean energy mix targets, which aim to increase the share of renewables from 5% to 23%.
• Guarantee instruments can address three specific investment barriers: the security gap for small developers with insufficient balance sheets, the risk-return profile of projects (when the guarantor's risk assessment is lower than the lender's), and access to long-term funding from local banks.
• Despite ten organizations offering 13 guarantee products in the Indonesian market, none specifically cover the renewable energy sector, and these instruments face competition from other sectors and countries.
• The implementation of a credit guarantee for renewable energy in Indonesia faces four primary challenges: competition with lower-cost shareholder or corporate guarantees, the requirement for "first demand" features by financial institutions, limited involvement in recovery proceedings during defaults, and a general lack of awareness among financial institutions.
• This analysis is part of a broader research program to explore a green investment bank model in Indonesia, which uses public capital to identify and address investment barriers through activities like concessional lending and risk mitigation.

APA

Climate Policy Initiative (2019). Developing a Guarantee Instrument to Catalyze Renewable Energy Investments in Indonesia. https://www.climatepolicyinitiative.org/publication/developing-a-guarantee-instrument-to-catalyze-renewable-energy-investments-in-indonesia/

Chicago

Climate Policy Initiative. Developing a Guarantee Instrument to Catalyze Renewable Energy Investments in Indonesia. 2019. https://www.climatepolicyinitiative.org/publication/developing-a-guarantee-instrument-to-catalyze-renewable-energy-investments-in-indonesia/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Developing a Guarantee Instrument to Catalyze Renewable Energy Investments in Indonesia |date=3 June 2019 |url=https://www.climatepolicyinitiative.org/publication/developing-a-guarantee-instrument-to-catalyze-renewable-energy-investments-in-indonesia/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2019developing, author = {{Climate Policy Initiative}}, title = {{Developing a Guarantee Instrument to Catalyze Renewable Energy Investments in Indonesia}}, institution = {Climate Policy Initiative}, year = {2019}, month = jun, url = {https://www.climatepolicyinitiative.org/publication/developing-a-guarantee-instrument-to-catalyze-renewable-energy-investments-in-indonesia/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }