Study For Indonesia Energy Transition Financing Framework and Financial Risk Management

Thailand’s growing reliance on liquefied natural gas (LNG) imports has become a defining feature of its energy trajectory, driven by compounding supply- and demand-side dynamics. This policy brief examines how rising LNG demand, expanding LNG infrastructure and deeper integration with global LNG markets are exerting mounting pressure on Thailand’s energy security, economic resilience and decarbonisation objectives. It sets out a strategic framework and policy recommendations to help Thailand redefine the role of LNG, and gas more broadly, within its energy landscape and advance a more secure transition pathway.

This study, conducted up to December 1st 2024, addresses the challenges of financing energy efficiency (EE) projects in Indonesia, focusing on perceived high risks, low profitability, and limited awareness of energy savings as a business case. It highlights a lack of market demand for EE, small transaction sizes, and insufficient evaluation capacities among local financial institutions (LFIs) as key barriers. These challenges hinder the implementation of EE measures, which could otherwise reduce electricity demand, save costs, and help achieve Indonesia’s climate commitments. The study’s purpose is to evaluate global and local EE financing mechanisms, identify best practices, and provide actionable recommendations for Indonesia.

Global energy-transition investment reached a record USD 2.4 trillion in 2024, but most funding still flows to advanced economies and China, leaving many emerging markets behind. Renewables drew USD 807 billion, yet growth slowed sharply. The report warns investment remains below 1.5°C needs and calls for more concessional, impact-focused finance.

This study analyzes electricity subsidy policy in Indonesia in relation to energy resilience, green energy transition, and fiscal sustainability. The study uses three main simulations (BAU and LTES) to evaluate the impact of subsidies on electricity tariffs, fiscal needs, and macroeconomic indicators until 2045. The results show that the current electricity subsidy, while supporting affordability for low-income households, has not yet encouraged productive use of electricity and, in fact, burdens the State Budget (APBN). Transitioning to renewable energy (LTES) can reduce the need for subsidies by up to 42% by 2045.

This joint report by ERIA, ADB, and METI examines the evolving role of transition finance, technology, and policy in supporting the decarbonisation of Southeast Asia’s emissions-intensive sectors such as power and heavy industry – the so-called ‘high emissions’ and ‘hard-to-abate’ sectors, respectively. These sectors are highlighted in high-level roadmaps that identify key investment areas for a pragmatic energy transition.