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The use of transition finance will be a cornerstone element needed to drive Southeast Asia's shift from fossil fuels to a sustainable energy future. However, the role, definition, and implementation of transition finance remain complex.  This month, SIPET Connect kicks off a "Transition Finance Series" of deep interviews to explore the essential role of financial instruments in advancing the energy transition across Southeast Asia. Each month, for the next five months, we will feature an interview with an expert practitioner, to probe their views on the topic, solicit their suggestions for successful finance strategies, and ask for their candid views on what works, and—frankly—what is holding up progress in the area of transition finance.

This month, we kick off the Transition Finance Series with Putra Adhiguna, a co-founder of the Energy Shift Institute and former Asia Technology Research Lead at the Institute for Energy Economics and Financial Analysis (IEEFA.)  Putra brings nearly two decades of leadership experience at the intersection of energy, finance, and policy in Southeast Asia. He has been instrumental in shaping discussions on energy transition strategies in Indonesia and the region. His insights have been featured in prominent outlets such as Straits Times, Bloomberg, and The Wall Street Journal, underscoring his influence in the field. A trusted advisor to corporations, financial institutions, and public officials, Putra combines a deep understanding of Indonesia’s energy landscape with regional expertise, making him uniquely positioned to address the critical role of transition finance in driving Southeast Asia’s sustainable energy future.

In this first installment, Putra talks with Peter du Pont, Senior Advisor to SIPET and Co-CEO of Asia Clean Energy Partners.  He shares his perspectives on the unique challenges and opportunities for transition finance in Southeast Asia—highlighting the distinction between green finance and transition finance, the need for setting pragmatic near-term targets for decarbonization, and strategies for advancing energy transitions in Indonesia and the region.

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SIPET: Could you introduce the Energy Shift Institute and its focus?

Putra: The Energy Shift Institute is a non-profit think tank dedicated to advancing the energy transition in Southeast Asia. When we set up the Institute, we identified a significant gap in the public discourse: technical experts often have deep knowledge of energy systems but lack the freedom to challenge norms, while activist voices may lack the depth needed to tread the complex subjects.

Our role is to bridge this gap by offering investment-focused, pragmatic discussions that resonate with policymakers and investors. We’re grounded in the realities of the region, focusing on practical solutions that combine technology, policy, and finance to make meaningful progress in the energy transition.

SIPET Connect: Why is finance such a strategic focus for the Institute?

Putra: Southeast Asia's energy transition won’t happen without large-scale capital mobilization, but this is a tricky space to navigate. My co-founder specializes in financial regulation and policies, and together we’ve worked to understand the complexities of aligning capital allocation with decarbonization goals.

Transition finance, in particular, sits at the intersection of emerging technology and riskier investment. It's about more than just funding; it’s about managing technological risk, aligning strategies, and ensuring long-term viability. For example, while green finance might be used to fund straight-forward or proven decarbonization projects, such as renewable energy technologies, transition finance typically involves nuanced investments, like supporting heavy industries in decarbonizing incrementally.

Additionally, Southeast Asia is influenced by East Asia’s economic frameworks, which don’t always align perfectly with local needs, adding another layer of complexity. Ensuring that Southeast Asia’s actual needs are catered to is essential or we risk stalling the energy transition in this region.

SIPET Connect: How would you define “transition finance” in the context of Southeast Asia’s energy landscape, and how does it differ from “green” or “sustainable” finance?

Putra: Transition finance is about supporting emission-intensive companies and sectors in their gradual shift toward sustainability. Unlike green finance, which has clear-cut criteria for funding solar or wind projects, transition finance deals with the “grey area.” It includes funding for industries such as cement or steel that can’t immediately decarbonize but are working towards it.

This is critical in Southeast Asia, where manufacturing, energy production, and other high-emission industries play a significant role in the economy. Transition finance provides support for pathways that improve emissions intensity while ensuring economic resilience. The tricky element to transition finance is figuring out which technology or company is genuinely working towards decarbonization, and therefore, deserving of this pool of capital. 

SIPET Connect: What are the biggest challenges in advancing the use of transition finance in Southeast Asia?

Putra: The lack of commonly accepted understanding of transition finance – including regulatory policies and frameworks such as sustainable finance taxonomies – is a major hurdle in advancing its use. Transition finance is still an evolving concept.   Without clarity, investors are concerned about greenwashing which has financial and reputational implications. This uncertainty affects confidence and complicates project evaluations, although such projects may get along just fine with regular financing.

A key challenge is that some transition technologies are still too risky today from investment perspective. Until these technologies can prove its worth -both technically and economically- certain transition finance applications may be hard to scale.

Transition finance is often perceived as “less green,” but given its importance, defining its use in a credible manner is essential for its growth.

SIPET Connect: What innovative financing mechanisms do you see as most effective for Southeast Asia’s energy transition?

Putra: Early-stage capital is crucial, particularly for niche projects that larger institutions might overlook. For instance, SEACEF[1] has funded small-scale solar and battery-swapping projects for EVs, which address untapped opportunities in the market.

Distributed renewable generation, like rooftop solar and industrial park-level systems, is another promising area. Distributed energy business models often bypass some of the regulatory challenges tied to state utilities, making them attractive to private investors and easier to scale in fragmented markets like Southeast Asia.

SIPET Connect: Yes, indeed.  It does seem that many project developers in the area of clean energy are working outside the regulated utility space. What trends do you see in that area?

Putra: In Indonesia, developers are increasingly focusing on distributed renewable generation, like rooftop solar and industrial parks with independent energy permits. These types of projects provide a more nimble space for growth while sidestepping some of the complex challenges tied to the wider state utilities..

We’re also seeing innovation in urban energy systems, such as EV battery-swapping stations. While these projects still face challenges, their decentralized nature makes them a vital part of Southeast Asia’s transition strategy.

SIPET Connect: How can these mechanisms be scaled across sectors effectively?

Putra: Scaling requires both standardization and regional collaboration. Clear guidelines on what constitutes a "transition pathway" help investors evaluate projects consistently. Defining what transition means will need to consider sector-specific situation and based on science and economics, not on ambiguous preferences.

SIPET Connect: How do you balance financial, social, political, and climate goals in financing the energy transition?

Putra: It’s not easy. Climate goals often take precedence, but we can’t ignore the social and political dimensions, such as job creation and community impacts. A good balance often comes through a mix of concessional finance, which reduces risk for private investors with grants to address broader socioeconomic concerns.

For example, industrial decarbonization in Indonesia could include workforce retraining programs alongside the generation of emissions reductions. These initiatives ensure that the benefits of transition finance extend beyond just the environment.

SIPET Connect: Are there examples of concessional finance programs that have successfully accelerated clean energy projects?

Putra: Concessional finance has been instrumental in Southeast Asia, including some solar development projects in Thailand.

There are funds that also target early-stage projects, providing the funding needed to de-risk smaller developers and innovative solutions like battery-swapping for EVs.

The challenge, however, is scalability. These programs need clear long-term strategies to attract follow-on investments and ensure lasting impact. They’re great for kickstarting projects, but without alignment with commercial models, they risk becoming one-off solutions.

SIPET Connect: What lessons can be learned from these concessional finance initiatives? And how can they reduce risks for private investors?

Putra: De-risking is key. Mechanisms like guarantees and first-loss provisions help address private investors’ concerns, particularly in emerging markets. However, these programs must be tailored to local contexts—what works in Vietnam’s solar market might not apply in Indonesia.There are valid concerns that blended finance may have oversold how much private capital that it can actually mobilize, but there are some signs pointing in the right direction.

Flexibility and strong stakeholder engagement are also critical. Programs that adapt to local needs are more likely to succeed in building trust and encouraging private sector participation.

SIPET Connect: What advice would you give to project developers seeking to access transition finance?

Putra: Understand emerging financing frameworks, like those from ICMA[2] or the Climate Bonds Initiative, as they’re shaping the expectations for transition finance. Having a clear, actionable plan with measurable near-term targets is critical—investors want to see results, not just intentions.

Also, it is important for project developers and entrepreneurs to stay adaptable. This space is evolving rapidly, and developers who can respond to changing market dynamics will be better positioned to attract funding.

SIPET Connect: Are you optimistic or pessimistic about the prospects for scaling transition finance in the short term?

Putra: I’m cautiously optimistic. Transition finance isn’t a cure-all—it needs clear definitions and well-designed projects to succeed. Without these, there’s a risk of undermining its credibility.

The key is focusing on near-term targets. Long-term commitments are great, but without measurable progress in the next three to five years, they’ll fall flat. Transition finance needs to deliver real impact to build trust and maintain momentum.

SIPET Connect: Can you share exciting projects or research areas the Energy Shift Institute is working on?

Putra: We’re looking at supply chains for critical minerals, like decarbonizing nickel smelting in Indonesia. Producing “green nickel” for EV batteries is a big challenge, but it’s essential for global decarbonization.

We’re also examining the possibility of transitioning the coal sector in Indonesia. The global narrative that coal is being phased out may have little relevance at market level where major coal producers keep on pushing their production limits. Our research focuses on identifying the pressure points that can drive meaningful change in the sector.

Last but not least, we’re continuing our work in empowering investor voices, by ensuring they are informed of risks and opportunities in emerging technologies and weighing in on important developments in transition finance in the region.

SIPET Connect: Finally, Indonesia recently announced bold energy transition plans at the G20 Summit. What’s your take on these commitments?

Putra:  Indonesia’s pledge to phase out fossil fuels in 15 years and add 75 GW of renewables is a huge positive signal, but it’s not without implementation challenges. And right now, Indonesia needs to demonstrate it can be relied on by taking real and meaningful action towards fulfilling the President’s bold plan. Bolder short-term commitments is also key.

The RUPTL[3], Indonesia’s power sector roadmap, has been difficult to rely upon in the past, which raises the urgency to increase its credibility. Labeling the projects listed with their order of priorities can be a good start to build investors’ trust and draw their focus.

Financing will be critical. Redirecting subsidies and securing international support will be necessary to make these commitments a reality. Still, these announcements show that Indonesia recognizes the importance of transitioning—and that’s a step in the right direction.

[1] The Southeast Asia Clean Energy Facility

[2] International Capital Market Association

[3] Rencana Usaha Penyediaan Tenaga Listrik

The SIPET Editorial Team recently caught up with Mr. Roble Velasco-Rosenheim on the sidelines of the inaugural event of the Southeast Asia Corporate Decarbonization Exchange (CDx) in Bangkok during 1-2 October 2024.  He is the Director of Partnerships and APAC Markets at the International Tracking Standard Foundation (I-TRACK Foundation), and founder of SuSca Group. With more than a decade of experience in clean energy across Asia, Mr. Velasco-Rosenheim has been pivotal in helping organizations to source and get credits for renewable electricity, and to improve their emissions reporting. His insights into Renewable Energy Credits (RECs) highlighted both the potential they provide, and the challenges they present, for corporate decarbonization. 

Reasons for Purchasing Carbon Offsets 

We asked Mr. Velasco-Rosenheim about the main drivers and conditions for companies to seek carbon offsets (or carbon credits). He explained that companies often turn to carbon credits when they have minimized direct emissions as much as possible. Carbon credits allow organizations to offset emissions that remain after implementing efficiency measures or shifting to renewable sources. These credits, often based on future projections, fund projects such as forest conservation and renewable energy initiatives, aiming to neutralize emissions in Scope 1 and Scope 3 categories. This is especially relevant for sectors like transportation and industry, where certain emissions are difficult to abate. Through carbon credits, companies can claim carbon neutrality, providing flexibility in their sustainability strategies by balancing out unavoidable emissions. 

However, Mr. Velasco-Rosenheim noted that there can be a few drawbacks to the use of carbon credits. Since they are frequently based on projected (ex ante) reductions, their actual environmental benefits can sometimes be uncertain. Moreover, they do not directly impact a company’s operational emissions, making their role more about offsetting rather than actively reducing emissions from within the organization. 

The Role of RECs in Renewable Energy Adoption 

On the other hand, RECs are primarily aimed at Scope 2 emissions, providing companies with verifiable proof that they are using renewable electricity. RECs certify that one megawatt-hour (MWh) of renewable energy has been produced and added to the grid. Velasco-Rosenheim pointed out that many companies use RECs to demonstrate their commitment to renewable energy, which is increasingly required by sustainability reporting frameworks such as RE100 and the Carbon Disclosure Project (CDP). Companies that purchase RECs, whether bundled with physical energy purchases or as standalone instruments, can claim reductions in their Scope 2 emissions. This is essential for organizations that have set renewable energy targets as part of their decarbonization efforts. 

However, he also highlighted some limitations. Unbundled RECs, which are not tied to actual energy purchases, may not directly contribute to new renewable projects, raising questions about their additionality. While RECs do verify renewable energy consumption, they do not necessarily incentivize the construction of new renewable capacity, making them less impactful in some cases. 

Mr. Velasco-Rosenheim explained that “RECs, by definition, are not designed to prove additionality. They are, first and foremost, a tracking instrument. The real challenge lies in ensuring that these credits do not just shift existing capacity but actually contribute to new renewable energy development.” 

Key Differences Between RECs and Carbon Credits 

Mr. Velasco-Rosenheim underscored the differences between these two mechanisms. Carbon credits are measured in tons of CO2 equivalent, focusing on offsetting a broad range of emissions, including direct (Scope 1) and indirect (Scope 3) emissions throughout the supply chain. In contrast, RECs measure renewable energy in terms of MWh and are specifically designed to address Scope 2 emissions from purchased electricity. Furthermore, while RECs are verified ex post, meaning they confirm renewable energy production after it has occurred, carbon credits often rely on ex ante projections, making them more speculative in nature. 

Challenges and Considerations 

Mr. Velasco-Rosenheim also discussed hot-button issues such as additionality, transparency, and pricing volatility. Additionality remains a key point of debate, with some arguing that companies should prioritize credits and RECs that directly support new renewable energy projects. Furthermore, ensuring transparency in carbon credit validation is crucial, especially given the reliance on future projections. He noted that pricing for both RECs and carbon credits can vary widely across regions, complicating the market and impacting how companies invest in these instruments. Additionally, as voluntary markets evolve, there is an ongoing discussion about the potential role of regulation in enhancing transparency and accountability. 

Ultimately, Mr. Velasco-Rosenheim emphasized that while both RECs and carbon credits are valuable tools, their use should be carefully tailored to align with a company’s broader sustainability goals. By choosing the right mix of these instruments, organizations can enhance their transparency, drive investment in clean energy, and contribute meaningfully to the energy transition. 

Mr. Velasco-Rosenheim emphasized, “We are at a critical juncture. Companies can no longer rely on superficial measures to demonstrate their commitment to sustainability. The real test will be whether they are willing to invest in the long-term solutions that truly reduce emissions and drive the clean energy transition forward.” 

Peter du Pont is the Co-Founder and Co-CEO and Ayesa Lemence is Communications and Outreach Manager for Asia Clean Energy Partners.

Common-use transmission assets are those that provide widespread benefits across a market area, rather than serving only the countries or jurisdictions hosting the infrastructure.

In ASEAN, several potential common-use transmission projects could progress with the support of development banks, aligned with efforts to develop a multilateral power trade (MPT) market. There are several initial conclusions that ASEAN can draw regarding common use assets, including lesson learned from other regions employing this concept:

Advancing Infrastructure: Given its potential for optimal cost allocation, the regional common-use asset concept should be examined by ASEAN stakeholders as a way to accelerate ASEAN Power Grid (APG) infrastructure development and to unlock MPT opportunities.

Identifying Assets: In the absence of regional market structures, a region-wide technical study is essential to assess how interconnections can benefit multiple countries. The AIMS process could be tasked with this analysis.

Regional Market Benefits: Regional market structures would provide mechanisms for identifying common-use project benefits while allocating costs fairly for new assets.

Collaborative Financing: It’s critical to work with development finance institutions (DFIs) and partners to create a financing model tailored to the region’s needs, including for common use assets.

Agreement on Cost Allocation: For the common-use asset model to succeed, participating countries must agree on cost allocation and recovery methods, potentially through a standardized wheeling charge methodology.

Authors: Nadhilah Shani, Marcel Nicky Arianto, Akbar Dwi Wahyono, Beni Suryadi, Putri Apilia Maharani

Purpose - The paper systematically examines the capacity building needs of energy and climate stakeholders in the Association of Southeast Asian Nations (ASEAN). It looks at conditions and opportunities for improvements in institutional, organisational, technological, innovation and financing capacities. This paper provides a guide to concrete capacity building programs and implementations to accelerate the implementation of National Determined Contributions (NDCs) and low-carbon energy transition in the ASEAN region.

Design/methodology/approach - This paper proposes a comprehensive capacity-building framework, drawing on transition management theory and the interactive systems framework for capacity building. The assessment is based on interviews with representatives of the ministry responsible for energy policy and the ministry responsible for climate policy in each ASEAN country, as well as a survey among a broader set of Southeast Asian energy and climate experts from academia, think tanks and international development partners.

Findings - The paper identifies the priority areas for capacity building for each ASEAN country and the region as a whole. Each country has a unique set of needs and priorities. At the regional level, the widest capacity gaps were observed in institutional capacity, technical capacity, human resources capacity, financing capacity and the capacity to develop policy and legislation. Specific gaps for capacity building are discussed in delivering strategic areas of energy transition, such as electrification of transportation, development of the green supply chain, deploying renewable energy, energy efficiency, strengthening finance and investment and reducing dependencies on fossil fuels.

Originality/value - This paper helps fill the gap for detailed capacity needs analysis and facilitates long-term plans/strategies and their implementation. The insights help to increase ASEAN energy and climate stakeholders’ understanding of the interaction between energy and climate, therefore enhanced capability in developing more effective action maps and intervention points in achieving NDCs and sustainable development goals.

Authors: Emi Minghui Gui, Indra Overland, Beni Suryadi, Zulfikar Yurnaidi

Discover how policy and regulatory reforms can unlock the potential of solar and wind power in Indonesia, Thailand, Vietnam, and the Philippines. This new report assesses the barriers hindering renewable energy development in Southeast Asia and proposes practical solutions to accelerate the transition to clean energy. Learn about the essential steps to design de-risking mechanisms, enhance planning certainty, and revise power purchase agreements to incentivize flexibility. Explore the proposed strategies for phasing out coal and gas power in a just and equitable manner, including the "Retire, Reserve, Repurpose" approach.

This report provides a brief overview of ASEAN’s power sector landscape in 2023, tracks energy transition development in the past five years, presents several scenarios on decarbonisation for ASEAN, documents policy changes in the past year and emerging discourses in ASEAN energy transition. This report presents strategies to fine-tuning policies to reduce dependence on fossil fuels and start the systemic shift necessary for a clean power sector transition, providing strategic guidance for policymakers, researchers and energy practitioners in the region.

This research, conducted by E3G in collaboration with IESR, aims to delve into the political economy of electric vehicle (EV) development in Indonesia. By analyzing the underlying political dynamics, the study seeks to identify barriers and opportunities for accelerating the transition to EVs. The research builds upon the understanding that political economy factors, rather than solely technical or economic constraints, often hinder significant policy changes. By examining the complex interplay of interests, power dynamics, and institutional factors, this study provides valuable insights for policymakers, industry stakeholders, and civil society to support the effective implementation of EV policies in Indonesia.

Indonesia stands at a critical juncture in its energy transition journey. The IETO 2025 report provides a comprehensive analysis of the country’s progress, challenges, and opportunities in the face of a rapidly changing global energy landscape.

Despite government commitments, Indonesia has made limited progress in renewable energy adoption and decarbonization. The continued reliance on coal hinders the transition to a low-carbon future. However, global trends in renewable energy and declining costs present a window of opportunity for Indonesia to leverage its abundant solar, geothermal, and bioenergy resources.

To accelerate the transition, several key challenges must be addressed. These include strengthening policy and regulatory frameworks, mobilizing financing, fostering innovation and technology transfer, ensuring a just transition, and strengthening international cooperation.

By addressing these challenges and seizing the opportunities, Indonesia can pave the way for a sustainable and prosperous future. The IETO 2025 report serves as a crucial tool for policymakers, businesses, and civil society to understand the complexities of the energy transition and to make informed decisions.

Authors: Martha Jesica Solomasi Mendrofa, Ilham Rizqian Fahreza Surya, Alvin Putra Sisdwinugraha, Farid Wijaya, Rahmi Puspita Sari, Putra Maswan, Muhammad Dhifan Nabighdazweda, Shahnaz Nur Firdausi, Anindita Hapsari, Pintoko Aji, Raditya Wiranegara, Faris Adnan Padhilah, His Muhammad Bintang, Julius Christian