02. Key elements of Technology Delivery and BM
Key Elements of Technology Delivery and Business Models for
Increasing Affordability of and Accessibility to Sustainable
Energy
Consultative Workshop on ‘Indonesia National Strategy to Increase Affordability of Sustainable Energy Options
and South - South Cooperation’
12-13 May 2014
Jakarta, Indonesia
Sustainable Energy Technology Options Suitable
for Indonesia
1.
2.
3.
4.
5.
6.
7.
Geothermal energy for heat and electricity application.
Bio-fuel based energy for transport, electricity and Industry
applications.
Biomass energy for heating and electricity applications.
Solar PV and solar thermal energy for electricity and heating
applications.
Small and micro-hydro power technologies for electricity
generation.
Wind energy for electricity generation.
Municipal solid waste / animal waste resource for electricity /
heating applications.
Key Drivers for Sustainable Energy Technology
Delivery
Island structure of the country favors decentralized sustainable energy
technologies over the centralized grid based model.
Indonesia is blessed with ample sustainable energy resource potential namely
geothermal, solar, biomass, wind, small hydro, etc.
Ensuring energy security and obligation to mitigate climate change.
Diminishing reserves of fossil fuels.
Overall electrification rate of 75%, with many regions having less than 60%
electrification.
Many islands are dependent on diesel-based power generation, which is
environmentally harmful and unsustainable in the long term.
Weak infrastructure links increase the cost of transportation of conventional
fuels.
Key Elements of Sustainable Energy Technology
Delivery
Government
Policy and Regulations
Institutional Framework
Technology
Delivery
Finance and Business
Models
End Consumer
Participation
Policy and Regulatory Framework for Technology
Delivery
Expand service network and increase visibility in the market.
Implement accreditation of service providers and technical standards for
equipments.
Introduce star rating system to promote energy efficient appliances.
Expand testing facilities.
Set up monitoring and verification systems.
Strengthen R & D for sustainable energy systems.
Set up enterprise development program.
Develop skills.
Improve mass communication networks.
Policy and Regulatory Framework for Technology
Delivery (Contd.)
Promote linkage with other government programs.
Develop ecosystem and supply chain.
Facilitate simplified procedures for obtaining various
clearances for setting up sustainable energy projects.
Simplify norms for availing duty / tax related
incentives offered by government.
Promote capacity building of the provincial / local
government in issuing permits and license related to
sustainable energy projects.
Institutional Framework
Private sector participation brings market-oriented delivery
mechanism and finance.
Provincial government / local government involvement is
necessary to identify the appropriate sustainable energy
technology option, and the area to be served.
Banks and financial institutions should be sensitized about the
importance of sustainable energy technology options.
Involvement of community is necessary for better management of
sustainable energy projects.
Involvement of NGOs ensures increased awareness and capacity
building of end consumers and community members.
Finance and Business Models
Finance for sustainable energy technologies can be arranged from various sources
such as:
Domestic public financing: Creates a specialize financial institution to
leverage the private capital necessary for sustainable energy.
International funding options: Harnessing funds from CDM and Joint
implementation fund, bilateral development assistance, etc.
Government procurement: Bulk purchase by government can reduce the cost
of sustainable energy technologies.
Priority sector lending: Inclusion of sustainable energy / RE in priority list
will increase the availability of credit to this sector.
Tax free green bonds: Raise low cost capital through tax-free bonds, and
thereon lend the proceeds at low interest rate to the sustainable energy
sector.
Business Models for Technology Delivery
Implementation of sustainable energy technology business models are driven by
various factors
Models
Strengths
Weaknesses
Community-driven Models
Superior local support
Revenue management may
pose problems.
Government Models
Broader range of consumers
O&M service may pose
problems.
Private models
Profit oriented, hence
commercially viable
End consumer may not bear the
cost.
Public–Private models
Sustainable, cost effective
services
End consumer can afford cost
since it is supported by public
funds.
End Consumer
End consumers should be made aware of the sustainable energy
technology and its application / importance in promoting same.
The upfront cost of the sustainable energy option should be reduced by
providing appropriately designed financing scheme to suit the economic
condition of the end consumers.
Simultaneously, the subsidies on fossil fuel should be reduced to create a
level playing field for sustainable energy options.
Increased income generating activities through sustainable energy options
enhances affordability.
Ownership transfer after repayment of the cost of sustainable energy
option.
Business Model: RE based Mini-grid Project under
Public-Private Partnership mode
All consumers of utility
Provincial / District Government
Surcharge
VEC
MEM / Provincial Govt.
(Village Electricity
Committee)
(Implementing and monitoring agency)
VGF Based Competitive
Bidding
(Selection of entrepreneur
requiring minimum VGF Support)
IPP
(Choice of source of
generation / arranging
finance)
Dispute resolution
and assistance in
tariff collection
Power Generation
& Distribution
RST Cap
(Finalized and declared in
bid document)
Cash inflow through revenue collection
End Consumer
End Consumer
End Consumer
Implementation Arrangement
Agency / Authority
Responsibilities
Director General of New, Renewable Energy
and Energy Efficiency
Identification of area for implementation of
mini-grid projects.
Selection of IPP for implementation of mini-grid
project based on VGF based competitive
bidding.
Decision on the maximum tariff to be collected
from the end consumer.
Local / Regional Government
Identification of area and suitable technology
for mini-grid project.
Approvals and Licenses
Appointment of village electricity committee
(VEC)
IPP
Selection of technology and arranging finance
for project.
Conducting own survey and investigation to
ascertain cost of generation, revenue collection
and viability gap funding (VGF) requirement .
Implementation Arrangement
Agency / Authority
Responsibilities
IPP
Installation, commissioning and O&M of the
mini-grid plant, including tariff collection
from the end consumer up to the end of life
of the plant.
Transfer of asset to government after end
of BOT period.
Village Energy Committee (VEC)
Help in tariff collection
Dispute resolution
End Consumers
Adherence to the approved load and time
of use.
Regular payment of electricity charges as
per the MoU with the IPP.
Operation of Mini-grid Project in Case of
Extension of Grid at Project Site
Implementation Arrangement
Agency / Authority
Responsibilities
Director General of New, Renewable Energy
and Energy Efficiency
Determination of Feed-in Tariff on cost plus
basis for sale of electricity to PLN.
Allow the IPP to work as distribution franchisee
of PLN.
Provide financial assistance to PLN so as to
cover the gap between FIT and consumer retail
tariff.
PLN
Allow connectivity to the mini-grid plant.
Execute PPA and franchise agreement with the
IPP.
Regular payment of FIT and franchisee charges
to IPP.
IPP
Work as distribution franchisee of PLN.
Look after the generation, distribution and
tariff collection activities as earlier.
Tariff collection and payment to PLN.
Business Model: Large Scale Distribution of
Solar Home System with Private Participation
Government
Subsidy
Distribution,
installation and
O&M
Loans
Banks
Household
s
ESCO
Collateral and
EMI
Rent including
O&M cost
Implementation Arrangement
Agency / Authority
Responsibilities
Government (Ministry of Energy &
Mineral Resources)
Identification of area for implementation of projects.
Technical standards and specifications of SHS.
Partial subsidy disbursement to the commercial bank
depending on the project site.
Local / Regional Government
Selection of private entrepreneurs to work as ESCOs.
Coordination with MEM for selection of area for
project implementation.
ESCO
ESCOs will act as implementing agencies.
Will rope in the interested buyers.
Will submit application with collateral security to the
bank for loan.
Implementation Arrangement
Agency / Authority
Responsibilities
ESCO
Bank
Avail subsidy from government and pass on the same to the ESCO in
the form of capital grant or soft loan.
Sanction loan to the ESCO.
Release collateral guarantee after repayment of loan.
End Consumer
Pay regular rent to the ESCO.
Take custody of the SHS.
Take over the SHS on completion of agreed rent period.
Avail loan and subsidy, or soft loan from the Bank.
Bulk procurement of SHS and distribution to end consumers.
O&M services up to repayment period.
Collect rent from end consumer, which will take care of EMI of bank
and O&M costs.
Regular payment of EMI to the banks.
Thank you for your attention !
Increasing Affordability of and Accessibility to Sustainable
Energy
Consultative Workshop on ‘Indonesia National Strategy to Increase Affordability of Sustainable Energy Options
and South - South Cooperation’
12-13 May 2014
Jakarta, Indonesia
Sustainable Energy Technology Options Suitable
for Indonesia
1.
2.
3.
4.
5.
6.
7.
Geothermal energy for heat and electricity application.
Bio-fuel based energy for transport, electricity and Industry
applications.
Biomass energy for heating and electricity applications.
Solar PV and solar thermal energy for electricity and heating
applications.
Small and micro-hydro power technologies for electricity
generation.
Wind energy for electricity generation.
Municipal solid waste / animal waste resource for electricity /
heating applications.
Key Drivers for Sustainable Energy Technology
Delivery
Island structure of the country favors decentralized sustainable energy
technologies over the centralized grid based model.
Indonesia is blessed with ample sustainable energy resource potential namely
geothermal, solar, biomass, wind, small hydro, etc.
Ensuring energy security and obligation to mitigate climate change.
Diminishing reserves of fossil fuels.
Overall electrification rate of 75%, with many regions having less than 60%
electrification.
Many islands are dependent on diesel-based power generation, which is
environmentally harmful and unsustainable in the long term.
Weak infrastructure links increase the cost of transportation of conventional
fuels.
Key Elements of Sustainable Energy Technology
Delivery
Government
Policy and Regulations
Institutional Framework
Technology
Delivery
Finance and Business
Models
End Consumer
Participation
Policy and Regulatory Framework for Technology
Delivery
Expand service network and increase visibility in the market.
Implement accreditation of service providers and technical standards for
equipments.
Introduce star rating system to promote energy efficient appliances.
Expand testing facilities.
Set up monitoring and verification systems.
Strengthen R & D for sustainable energy systems.
Set up enterprise development program.
Develop skills.
Improve mass communication networks.
Policy and Regulatory Framework for Technology
Delivery (Contd.)
Promote linkage with other government programs.
Develop ecosystem and supply chain.
Facilitate simplified procedures for obtaining various
clearances for setting up sustainable energy projects.
Simplify norms for availing duty / tax related
incentives offered by government.
Promote capacity building of the provincial / local
government in issuing permits and license related to
sustainable energy projects.
Institutional Framework
Private sector participation brings market-oriented delivery
mechanism and finance.
Provincial government / local government involvement is
necessary to identify the appropriate sustainable energy
technology option, and the area to be served.
Banks and financial institutions should be sensitized about the
importance of sustainable energy technology options.
Involvement of community is necessary for better management of
sustainable energy projects.
Involvement of NGOs ensures increased awareness and capacity
building of end consumers and community members.
Finance and Business Models
Finance for sustainable energy technologies can be arranged from various sources
such as:
Domestic public financing: Creates a specialize financial institution to
leverage the private capital necessary for sustainable energy.
International funding options: Harnessing funds from CDM and Joint
implementation fund, bilateral development assistance, etc.
Government procurement: Bulk purchase by government can reduce the cost
of sustainable energy technologies.
Priority sector lending: Inclusion of sustainable energy / RE in priority list
will increase the availability of credit to this sector.
Tax free green bonds: Raise low cost capital through tax-free bonds, and
thereon lend the proceeds at low interest rate to the sustainable energy
sector.
Business Models for Technology Delivery
Implementation of sustainable energy technology business models are driven by
various factors
Models
Strengths
Weaknesses
Community-driven Models
Superior local support
Revenue management may
pose problems.
Government Models
Broader range of consumers
O&M service may pose
problems.
Private models
Profit oriented, hence
commercially viable
End consumer may not bear the
cost.
Public–Private models
Sustainable, cost effective
services
End consumer can afford cost
since it is supported by public
funds.
End Consumer
End consumers should be made aware of the sustainable energy
technology and its application / importance in promoting same.
The upfront cost of the sustainable energy option should be reduced by
providing appropriately designed financing scheme to suit the economic
condition of the end consumers.
Simultaneously, the subsidies on fossil fuel should be reduced to create a
level playing field for sustainable energy options.
Increased income generating activities through sustainable energy options
enhances affordability.
Ownership transfer after repayment of the cost of sustainable energy
option.
Business Model: RE based Mini-grid Project under
Public-Private Partnership mode
All consumers of utility
Provincial / District Government
Surcharge
VEC
MEM / Provincial Govt.
(Village Electricity
Committee)
(Implementing and monitoring agency)
VGF Based Competitive
Bidding
(Selection of entrepreneur
requiring minimum VGF Support)
IPP
(Choice of source of
generation / arranging
finance)
Dispute resolution
and assistance in
tariff collection
Power Generation
& Distribution
RST Cap
(Finalized and declared in
bid document)
Cash inflow through revenue collection
End Consumer
End Consumer
End Consumer
Implementation Arrangement
Agency / Authority
Responsibilities
Director General of New, Renewable Energy
and Energy Efficiency
Identification of area for implementation of
mini-grid projects.
Selection of IPP for implementation of mini-grid
project based on VGF based competitive
bidding.
Decision on the maximum tariff to be collected
from the end consumer.
Local / Regional Government
Identification of area and suitable technology
for mini-grid project.
Approvals and Licenses
Appointment of village electricity committee
(VEC)
IPP
Selection of technology and arranging finance
for project.
Conducting own survey and investigation to
ascertain cost of generation, revenue collection
and viability gap funding (VGF) requirement .
Implementation Arrangement
Agency / Authority
Responsibilities
IPP
Installation, commissioning and O&M of the
mini-grid plant, including tariff collection
from the end consumer up to the end of life
of the plant.
Transfer of asset to government after end
of BOT period.
Village Energy Committee (VEC)
Help in tariff collection
Dispute resolution
End Consumers
Adherence to the approved load and time
of use.
Regular payment of electricity charges as
per the MoU with the IPP.
Operation of Mini-grid Project in Case of
Extension of Grid at Project Site
Implementation Arrangement
Agency / Authority
Responsibilities
Director General of New, Renewable Energy
and Energy Efficiency
Determination of Feed-in Tariff on cost plus
basis for sale of electricity to PLN.
Allow the IPP to work as distribution franchisee
of PLN.
Provide financial assistance to PLN so as to
cover the gap between FIT and consumer retail
tariff.
PLN
Allow connectivity to the mini-grid plant.
Execute PPA and franchise agreement with the
IPP.
Regular payment of FIT and franchisee charges
to IPP.
IPP
Work as distribution franchisee of PLN.
Look after the generation, distribution and
tariff collection activities as earlier.
Tariff collection and payment to PLN.
Business Model: Large Scale Distribution of
Solar Home System with Private Participation
Government
Subsidy
Distribution,
installation and
O&M
Loans
Banks
Household
s
ESCO
Collateral and
EMI
Rent including
O&M cost
Implementation Arrangement
Agency / Authority
Responsibilities
Government (Ministry of Energy &
Mineral Resources)
Identification of area for implementation of projects.
Technical standards and specifications of SHS.
Partial subsidy disbursement to the commercial bank
depending on the project site.
Local / Regional Government
Selection of private entrepreneurs to work as ESCOs.
Coordination with MEM for selection of area for
project implementation.
ESCO
ESCOs will act as implementing agencies.
Will rope in the interested buyers.
Will submit application with collateral security to the
bank for loan.
Implementation Arrangement
Agency / Authority
Responsibilities
ESCO
Bank
Avail subsidy from government and pass on the same to the ESCO in
the form of capital grant or soft loan.
Sanction loan to the ESCO.
Release collateral guarantee after repayment of loan.
End Consumer
Pay regular rent to the ESCO.
Take custody of the SHS.
Take over the SHS on completion of agreed rent period.
Avail loan and subsidy, or soft loan from the Bank.
Bulk procurement of SHS and distribution to end consumers.
O&M services up to repayment period.
Collect rent from end consumer, which will take care of EMI of bank
and O&M costs.
Regular payment of EMI to the banks.
Thank you for your attention !