Indonesia Needs US$ 1.4 Trillion Capital Injection to Overcome Energy Transition

energy transition

As the host of the G20 event, Indonesia is also committed to shifting to cleaner energy. However, to finance the energy transition, Indonesia needs a large capital injection.

The government’s commitment to switch to cleaner energy is not only a measure to protect the environment but also a means of utilizing energy sources by end-user communities. This is expected to be able to maximize economic potential and human resource development.

Director-General of Electricity, Rida Mulyana, said that efforts to increase access to energy will be able to boost people’s welfare up to the level of end-users.

“Transition to sustainable energy is one of the themes in Indonesia’s G20 Presidency and also emphasizes energy accessibility as a prerequisite for improving people’s welfare, especially in remote and outermost islands,” said Rida at the G20 Webinar Series, Thursday (28/4).

According to Rida, multi-stakeholder cooperation will be the right way to achieve this goal. This step is in line with the handling of energy system decarbonization as a solution to climate change mitigation. “This is a huge challenge for the world and needs to be tackled collectively by all countries,” he added.

“Developing countries in Africa and Asia are central locations for limited access to energy. There are at least 14 countries that suffer from not having electricity access and clean cooking,” said Head of the Human Resources, Energy and Mineral Resources Development Agency Prahoro Yulianto Nurtjahyo.

To overcome this problem, continued Prahoro, it is necessary to require a large capital injection from investors. “Globally we need an investment of around US$ 30 – US$ 35 billion per year for (handling) electricity access and US$ 5 – 7 billion per year for access to clean cooking. In total, at least we need an investment injection of US $ 1.4 trillion per year until 2030 for these two issues,” he explained.

Pressure in Developing Countries

The problem landscape and diverse energy systems are a challenge for developing countries and emerging economies. For this reason, the increase and expansion of energy access in these countries must adapt to the conditions and circumstances, challenges, and the capacity of the specified region. “Every policy, program, and action effectiveness must be carried out through innovative business models and financing instruments,” said Prahoro.

The need for the adoption of innovative technology options is also necessary while taking into account the diversity of local energy sources. “This technological innovation must be supported by a better business environment and climate to create more opportunities, engage relevant stakeholders, and take advantage of the advantages of public-private partnerships,” he added.

He emphasized that the achievement of achieving sustainable energy access must be in line with the achievement of a just and equitable energy transition.

This new standard is expected to support emerging markets and developing countries, including least developed countries, to increase the level of development and meet socio-economic needs.

Furthermore, it can create other beneficial economic opportunities for sustainable growth, including decent work and quality livelihoods.

According to Prahoro, the G20 Forum is expected to have great potential to become a key factor in encouraging the achievement of energy access in action this decade.

Viable economic growth and promising market prospects should be combined with innovations in business, technology, and finance to stimulate further investment and international partnerships in sustainable energy access.