Only a few newspapers paid any attention to the Asian Development Bank’s (ADB’s) press release last Friday addressing its approval of US$200 million in new loans to Indonesia’s state-owned export credit agency, Indonesian Export Financing Agency (LPEI).
But the new loan package is strategically important, especially in the latest wave of the oil price shock, because a portion of the credits will be used for major energy efficiency improvements.
The loan will fund a pioneering financing mechanism for energy efficiency improvements because banks in Indonesia are not yet familiar with the business concept of lending to industrial companies for upgrading plants and purchasing equipment to make energy cost savings and meet new international energy management standards.
As the experiences of most other countries have shown, a viable, long-term energy policy should cover not only energy diversification away from fossil fuels into a wide variety of renewable energy, but also should encompass compulsory energy conservation measures.
Only with this combination of programs will a country be able to improve the energy efficiency ratio of its economy, which is the unit of energy used to generate one unit of gross domestic product.
Certainly, a market pricing mechanism alone is not sufficient to force users to conserve energy. It should be supplemented with financing facilities and fiscal and financial incentives to encourage companies to conduct active in-house management of energy efficiency through maintenance and housekeeping measures, replacement of oil-guzzling equipment or technology.
The government announced last year that it was finalizing a special regulation which would require big energy users (minimum usage of 11.63 megawatt hour) to improve their energy efficiency through an incentive-disincentive mechanism.
Energy users, the government said, would be required to establish an energy management system, implement energy conservation programs, conduct periodical energy use audits and report the progress in their energy conservation efforts to the central government and local administrations.
But, unfortunately, no further development of the planned policy was heard of.
ADB estimated that energy efficiency improvements by industrial companies in Indonesia could cut peak electricity demand by around 2,500 megawatts — equivalent to the current power shortfall faced by the State Electricity Company (PLN).
An ADB study conducted in 2009 concluded that Indonesia needed to invest $4 billion in improving real-sector energy efficiency over the next five years to make the economy more competitive.
The estimate covered electrical retrofits and other energy-saving projects, including improving the efficiency of air conditioning, lighting and waste-heat recovery in commercial buildings and industrial facilities.
It will take sometime before the energy conservation can significantly improve our energy efficiency, but strong energy policies can serve as clear-cut directives for long-term investments in energy-efficient plant equipment and the choice of manufacturing technology.
Hopefully, the ADB-pioneered program for lending to energy-efficiency and conservation programs will create a business model that can be replicated by domestic banks for their credit portfolio.
Like it or not, we will continue to live with a periodical bout of oil-price gyration. But consistent enforcement of energy conservation and diversification policies will eventually cut down our dependence on fossil fuels, among
But the new loan package is strategically important, especially in the latest wave of the oil price shock, because a portion of the credits will be used for major energy efficiency improvements.
The loan will fund a pioneering financing mechanism for energy efficiency improvements because banks in Indonesia are not yet familiar with the business concept of lending to industrial companies for upgrading plants and purchasing equipment to make energy cost savings and meet new international energy management standards.
As the experiences of most other countries have shown, a viable, long-term energy policy should cover not only energy diversification away from fossil fuels into a wide variety of renewable energy, but also should encompass compulsory energy conservation measures.
Only with this combination of programs will a country be able to improve the energy efficiency ratio of its economy, which is the unit of energy used to generate one unit of gross domestic product.
Certainly, a market pricing mechanism alone is not sufficient to force users to conserve energy. It should be supplemented with financing facilities and fiscal and financial incentives to encourage companies to conduct active in-house management of energy efficiency through maintenance and housekeeping measures, replacement of oil-guzzling equipment or technology.
The government announced last year that it was finalizing a special regulation which would require big energy users (minimum usage of 11.63 megawatt hour) to improve their energy efficiency through an incentive-disincentive mechanism.
Energy users, the government said, would be required to establish an energy management system, implement energy conservation programs, conduct periodical energy use audits and report the progress in their energy conservation efforts to the central government and local administrations.
But, unfortunately, no further development of the planned policy was heard of.
ADB estimated that energy efficiency improvements by industrial companies in Indonesia could cut peak electricity demand by around 2,500 megawatts — equivalent to the current power shortfall faced by the State Electricity Company (PLN).
An ADB study conducted in 2009 concluded that Indonesia needed to invest $4 billion in improving real-sector energy efficiency over the next five years to make the economy more competitive.
The estimate covered electrical retrofits and other energy-saving projects, including improving the efficiency of air conditioning, lighting and waste-heat recovery in commercial buildings and industrial facilities.
It will take sometime before the energy conservation can significantly improve our energy efficiency, but strong energy policies can serve as clear-cut directives for long-term investments in energy-efficient plant equipment and the choice of manufacturing technology.
Hopefully, the ADB-pioneered program for lending to energy-efficiency and conservation programs will create a business model that can be replicated by domestic banks for their credit portfolio.
Like it or not, we will continue to live with a periodical bout of oil-price gyration. But consistent enforcement of energy conservation and diversification policies will eventually cut down our dependence on fossil fuels, among
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