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Formulating Revolving Fund Scheme to Support Energy Efficiency Projects i n Indonesia

Formulating Revolving Fund Scheme to Support Energy Efficiency Projects i n Indonesia. D hani Setyawan. Promitheas Conference, Athens , O ctober 10, 2013. President’s Commitments to Reduce GHG Emissions in 2020. Background. PP No 70/2009 of ENERGY CONSERVATION

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Formulating Revolving Fund Scheme to Support Energy Efficiency Projects i n Indonesia

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  1. Formulating Revolving Fund Scheme to Support Energy Efficiency Projects in Indonesia Dhani Setyawan Promitheas Conference, Athens, October 10, 2013

  2. President’s Commitments to Reduce GHG Emissions in 2020

  3. Background PP No 70/2009 of ENERGY CONSERVATION “the central government and/or local government can provide facilities and incentives to energy users and producers of energy-efficient appliances that implement energy conservation program “

  4. Purpose & Methodology

  5. Lesson Learn...Thailand Energy Efficiency Revolving Fund Scheme Thailand has successfully implemented energy efficiency revolving fund scheme This funding get revenue from the excess of levies on fuel at 0.04 THB (USD 0.001) per liter THB 2 billion (USD 50 million per year) In order to distribute the funds, the Government of Thailand is involving 11 commercial banks, with maximum loan is restricted up to THB 50 million (USD 1.25 million) the government charging interest rate to banks 0.5%, The bank then lends it to the projects with interest not more than 4% per year. The loans can be utilized to financed projects i.e. (Vorasayan, 2012) : Purchasing and installing the energy efficient equipment projects; engineering design and supervision costs as well as cost savings guarantee for the ESCo; installation cost and operational cost of energy efficient appliances; Transportation costs, demolition costs, etc. ENCON Fund DEDE Revolving Fund Credit Lines of USD 2.5 – 10 m/bank Repayment + Interest (0.5%)) 11 Banks Loan (max. 7 year period) Repayment + Interest (max. 4%/year) additional other sources e.g. ESCO Fund EE/RE Developers

  6. Indonesia EERF - Goals

  7. Analysis - Indonesia EERF Scheme Government (MOF) Fund & Monev Technical Committee Coordination Indonesia Investment Agency(PIP) Loan (2% per year) Monitoring & evaluation Monitoring & evaluation Loan Energy Efficiency Projects Banks (7-9% per year)

  8. EERF Application Process Disbursement www.themegallery.com

  9. Formulating Indonesia EERF The funds (EERF)will be placed through the Indonesia Investment Agency (PIP)before it distribute to the designated Bank with interest rate around 2% per year; Further, Banks will lend the fund to the energy efficiency projects at a maximum interest rate of 7-9% per year, far below the corporations Prime Lending Rate (SBDK); The PIP will act as Fund Channeling,and the Bank will be the Executing Agency; Loans are given from the range between IDR 1 billion to 20 billion for financing small and medium-scale investments; The loan period can be provided with a range of 5 to 6 years including 1 year grace period (payback period up to 4-5 years) Monitoring and evaluation will be conducted by a technical commission from related line ministries 9

  10. Opportunities and Challenges The implementation of revolving fund scheme for energy efficiency in Indonesia is very potential to be executed, due to various forms of legislation and fund management mechanism has been established. However, there are several steps that need to be considered, namely: • Fund Preparations. The source of funds shall be determined in the initial stage. If the government set the source of fund from the state budget, it is necessary to set the legal basis under a constitution in order to accommodate the allocation budget. • Institutional Arrangements for Energy Efficiency Revolving Fund scheme. As defined in the chapter analysis, the revolving fund program can be implemented and managed by PIP. Therefore, it is necessary to establish a legal basis under constitution in order to give PIP the legitimacy to manage the energy efficiency revolving fund. • In-depth discussion with banks / financial institutions. Discussions with the banks / financial institutions are strongly needed, in order to get feedback on the revolving fund initiative policy. It is very urgent, since at the end, the banking sector is the one who run the policy. Inputs from the banks are strongly needed to capture ideas of ​​the best-suit revolving fund scheme.

  11. Thank You !

  12. COST AND BENEFIT ANALYSIS

  13. COST AND BENEFIT ANALYSIS

  14. Interest Rate • Lending rate is the total of Suku Bunga Dasar Kredit (SBDK)plus risk premium • SBDK comprises of: • Total of HargaPokok Dana untukKredit (HPDK) i.e. deposits, savings, etc, • Overheadcost (operational cost and taxes) • Profit margin • Ilustration: • HPDK = 5-6% • Overhead = 2-3% • Margin = 2% • Risk Premium = 1,5-2% Total Lending Rate = 10,5-13% 7,5% - 9%

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