Exploring viable energy efficiency business models in Indonesia

This report by the Climate Policy Initiative analyzes the barriers facing energy efficiency business models in Indonesia and proposes three improved models to scale up Energy Service Companies (ESCOs). It identifies financial risk, lack of awareness, and regulatory instability as primary hurdles to achieving Indonesia's target of 17% energy savings by 2025.

• Energy efficiency projects are viewed as unattractive by owners and investors due to a lack of knowledge among financial institution risk managers and a lack of benchmarking data for building owners, which creates uncertainty regarding investment returns.
• ESCOs struggle to bridge the gap between clients and investors because of a lack of confidence stemming from previous underperformance of energy savings, which led to payment defaults.
• Financial risk is the most significant barrier to energy efficiency projects, specifically regarding economic and financial risks, financial resource availability, and regulatory risks.
• Traditional shared savings and guaranteed savings models have failed in Indonesia; the shared savings model is hindered by the small size of both ESCOs and clients who struggle to access bank finance, while the guaranteed savings model is hampered by clients' lack of trust in ESCO capabilities.
• The 'Service or device business model' is proposed to lower investment costs by offering subscription or purchase options and providing technical guarantees to minimize risk for both clients and ESCOs.
• The 'Leasing and purchase business model' reduces bank default risk by using the ESCO as the borrower (paid by the client via leasing) or by providing a monetary guarantee to the client when the client is the borrower.
• The 'Quality energy service business model' targets large energy-intensive companies through a partnership with a utility company (such as PLN), using an escrow account as collateral to protect the bank from payment defaults.
• None of the proposed business models can eliminate regulatory risk, which requires stable government policies and support from the Ministry of Energy and Mineral Resources (MEMR) and the Financial Services Authority (OJK).
• Indonesia's national energy plan (RUEN) targets a 17% reduction in energy consumption compared to the 2015 baseline by 2025, with the industrial sector identified as having the largest energy-saving potential.

APA

Wijaya, M. E., Zeki, M., & Siagian, A. P. (2021). Exploring viable energy efficiency business models in Indonesia. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/11/Exploring-viable-energy-efficiency-business-models-in-Indonesia.pdf

Chicago

Wijaya, Muhammad Ery, Muhammad Zeki, and Albertus Prabu Siagian. Exploring viable energy efficiency business models in Indonesia. Climate Policy Initiative, 2021. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/11/Exploring-viable-energy-efficiency-business-models-in-Indonesia.pdf.

Wikipedia

{{cite report |last1=Wijaya |first1=Muhammad Ery |last2=Zeki |first2=Muhammad |last3=Siagian |first3=Albertus Prabu |title=Exploring viable energy efficiency business models in Indonesia |publisher=Climate Policy Initiative |date=November 2021 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2021/11/Exploring-viable-energy-efficiency-business-models-in-Indonesia.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{wijaya2021exploring, author = {Wijaya, Muhammad Ery and Zeki, Muhammad and Siagian, Albertus Prabu}, title = {{Exploring viable energy efficiency business models in Indonesia}}, institution = {Climate Policy Initiative}, year = {2021}, month = nov, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2021/11/Exploring-viable-energy-efficiency-business-models-in-Indonesia.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }