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Leveling the playing field for renewables investments
In the same way that collective climate actions are needed to step up the game in pushing for sustainable solutions around the globe, a collaborative mechanism is necessary to both increase and entice renewable energy investments.
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Power check: Technicians inspect rooftop solar panels on Aug. 2, 2023 at Claro Hotel Makassar in the South Sulawesi provincial capital. The Energy and Mineral Resources Ministry says solar energy facilities in the country have produced 95 megawatts, or just 0.3 percent of their potential. (Antara/Arnas Padda)
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uly 2023 is projected to be the hottest month ever recorded, according to the United Nations’ World Meteorological Organization. The UN secretary-general has stated we are entering an era of "global boiling", emphasizing the urgent need for collective climate actions. Governments, communities, academia and more importantly, the private sector, need to step up their game and invest in sustainable solutions.
Among these solutions, renewable energy has emerged as a ray of hope. A report by the UN’s Intergovernmental Panel on Climate Change (IPCC) acknowledges the huge potential of renewable energy to support global efforts in mitigating climate change. Solar power, with the potential to reduce 4.25 billion metric tons of carbon emissions yearly by 2030, leads the clean energy transition.
According to a report by the International Renewable Energy Agency (IRENA), solar photovoltaics (solar PV) and wind energy are forecast to dominate global electricity production by 2050, contributing up to 70 percent with a total projection of 8,519 gigawatts (GW). The condition is similar in Indonesia, where solar accounts for 3,295 GW out of a potential 3,686 GW from renewable energy sources.
However, Indonesia has tapped only 0.3 percent in renewable energy utilization. Why?
The main challenge is in the investment gap between renewable energy and fossil fuels. The IRENA report reveals that between 2015 and 2022, fossil fuels far overshadowed investment in renewables by nearly three times the amount, leading to unfair competition and increased installation costs for renewable energy. This is partly associated with limited public funds for renewables, mainly in developing countries and emerging economies like Indonesia.
Responding to the condition, a performance-based payment mechanism for solar PV rooftop installation was introduced in the MTRE3 program, established in collaboration between the Energy and Mineral Resources Ministry and UNDP Indonesia, and funded by Global Environment Facility. Upon its completion in December 2022 with the assistance of Indonesia Environment Fund (IEF), the program has made remarkable strides in promoting solar PV rooftop installation.
Similar to the results-based payment for REDD+, its counterpart in the forestry sector, the MTRE3’s performance-based mechanism is pretty straightforward.
