Developing a Guarantee Instrument to Catalyze Renewable Energy Investment in Indonesia

The report identifies significant barriers to renewable energy investment in Indonesia, including high upfront capital requirements and a lack of long-term debt financing from local banks. While ten organizations provide 13 guarantee products in the Indonesian market, none specifically target the renewable energy sector. The analysis argues that a tailored credit guarantee, potentially developed by PT SMI, could address security gaps for small developers and improve the risk-return profile of projects. However, implementation faces challenges such as competition from lower-cost corporate guarantees and the 'first demand' requirements of financial institutions.

• Indonesia requires an estimated USD 125 billion in investment by 2025 to meet its clean energy mix targets, but private investment remains insufficient.
• Several systemic barriers hinder private investment in Indonesian renewables, including unfavorable policies that skew risk-return profiles, high upfront capital costs, and a lack of long-term debt financing because local banks rely on short-term deposits.
• The current guarantee landscape in Indonesia consists of ten providers offering 13 products, but there is a total absence of instruments specifically focused on the renewable energy sector.
• A dedicated credit guarantee for renewable energy could catalyze the market by bridging the security gap for small developers with insufficient balance sheets and improving project risk profiles to attract local bank funding.
• PT Sarana Multi Infrastruktur (SMI) is well-positioned to develop these instruments due to its AAA local credit rating, ability to raise low-cost funds, and access to international development finance partners.
• Effective implementation of a guarantee instrument in Indonesia faces four primary challenges: competition from cheaper shareholder/corporate guarantees, the 'first demand' reimbursement requirements of banks, limited guarantor involvement in recovery proceedings during defaults, and low awareness among financial institutions.

APA

Rakhmadi, R., & Sudirman, M. (n.d.). Developing a Guarantee Instrument to Catalyze Renewable Energy Investment in Indonesia. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2019/05/Developing-a-Guarantee-Instrument-to-Catalyze-Renewable-Energy-Investment-in-Indonesia.pdf

Chicago

Rakhmadi, Randy, and Melisa Sudirman. Developing a Guarantee Instrument to Catalyze Renewable Energy Investment in Indonesia. Climate Policy Initiative, n.d. https://www.climatepolicyinitiative.org/wp-content/uploads/2019/05/Developing-a-Guarantee-Instrument-to-Catalyze-Renewable-Energy-Investment-in-Indonesia.pdf.

Wikipedia

{{cite report |last1=Rakhmadi |first1=Randy |last2=Sudirman |first2=Melisa |title=Developing a Guarantee Instrument to Catalyze Renewable Energy Investment in Indonesia |publisher=Climate Policy Initiative |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2019/05/Developing-a-Guarantee-Instrument-to-Catalyze-Renewable-Energy-Investment-in-Indonesia.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rakhmadinddeveloping, author = {Rakhmadi, Randy and Sudirman, Melisa}, title = {{Developing a Guarantee Instrument to Catalyze Renewable Energy Investment in Indonesia}}, institution = {Climate Policy Initiative}, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2019/05/Developing-a-Guarantee-Instrument-to-Catalyze-Renewable-Energy-Investment-in-Indonesia.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }