Evaluation of a green credit line in Indonesia

Indonesia aims at reaching at least a 23 percent renewable energy share by 2025. In 2018, roughly 200 MW of wind and solar capacities were installed, representing less than 0.5 percent of the total electricity generation capacity. Including also geothermal energy, biomass, biogas and hydro power, the share of renewables rises to about 15 percent, still well below the set target. The main cause for these diverging numbers are lacking investments in sustainable energy infrastructure.

In order to boost investments in renewable energies, the French Development Agency (AFD) implemented a three-year financing programme in Indonesia in 2015. The main objective of this intervention was to expandthe loan portfolio for sustainable energy investments of PT Sarana Multi Infrastruktur (PT SMI, a Special Mission Vehicle under the Indonesian Ministry of Finance) and to strengthen PT SMI's capacities in renewable energy technologies. To this end, AFD provided funding to PT SMI via a 10-year 100 million US dollar credit facility and a 5 million US dollar “quasi-equity facility” to reduce the investment risks for PT SMI. Additionally, AFD also launched a technical assistance programme to enhance expertise of PT SMI's staff and facilitate knowledge transfer in the field of renewable energy investments. The quasi-equity facility and the technical assistance programme were supported with funds from the British Department for International Development (DFID).

In order to assess the impacts of the first green credit line from AFD to PT SMI, adelphi, in cooperation with Climate & Energy Solutions (CES), conducted an ex-post evaluation of all components: the credit facility, the quasi-equity facility and the technical assistance programme. The target of the evaluation was to examine whether the green credit line strengthened PT SMI’s role in the market and increased overall investments in renewable energies in Indonesia. Furthermore, the impact on climate mitigation and adaptation was identified. The lessons from this analysis will help AFD to adapt and improve the design of the second credit line and similar future interventions.