The Norwegian Climate Investment Fund makes first direct investments in Indonesia

July 1, 2024

The Norwegian Climate Investment Fund, managed by Norfund, announces its first direct investments in renewable energy in Indonesia, a country heavily reliant on coal. The investments, totaling 29.6 million USD, are part of Norway’s contribution to a just energy transition in the country.

The announcements coincide with an official visit of the Norwegian Minister of Energy, Terje Aasland, to Indonesia.

“Norway and Indonesia have had close energy cooperation over the past thirty years. The Climate Investment Fund contributes to further strengthening this collaboration. Norfund has extensive experience with investments in renewable energy in developing countries, Tinfos brings important expertise in hydropower, and together with Indonesian partners, they will contribute to both energy security and reduced emissions in the country”, says Terje Aasland, Norwegian Minister of Energy.

Photo credit: Naina Helen Jåma/NTB Kommunikasjon

Norway contributed along with the G7 countries, the EU and Denmark, to a Just Energy Transition Partnership (JETP) with Indonesia during its G20 presidency in 2022. The partnership aims to mobilize USD 20 billion to accelerate Indonesia’s energy transition, of which half should be through mobilized private finance. Norway’s contribution was a pledge that up to 250 million USD could be invested by the Climate Investment Fund in the country.

“The purpose of the Climate Investment Fund is to invest in emerging markets that have a high dependency on coal, and Indonesia is one of the countries where we can make a substantial impact. We are happy to announce our first investments in the country”

Anders Blom, SVP Renewable Energy in Norfund

While the Climate Investment Fund invested in a regional fund that also covers Indonesia earlier this year, today’s announcement marks the commencement of direct investments in the country through three new partnerships: rooftop solar, combined solar and battery, and a hydropower project.

“The energy transition in Indonesia presents challenges. The country has vast fossil resources and comprises numerous islands that are not connected by a national grid. Nevertheless, we recognize the potential impact of investing in smaller, decentralized renewable energy projects”, says Blom.

The new investments are expected to avoid emissions of almost half a million tons CO2e annually.

130 years of Norwegian experience in hydropower

The Norwegian hydropower-company Tinfos is one of the actors now entering a partnership with Norfund with the aim of developing hydropower in Indonesia. Even though the beginning is modest, the ambitions are substantial.

“We have an ambition to develop 1TWh of small-scale hydro power projects by 2032, and our partnership with Norfund is an important part of this”

Harald Reigstad, Investment Director in Tinfos.

The Norwegian company entered the Indonesian market in 2007 and have since developed and built smaller hydroelectric power plants in the country.

Terje Aasland, Norway’s minister for Energy, is in Jakarta to participate in the 10th Energy Dialogue between Norway and Indonesia, visit the JETP secretariat, and meet Tinfos and other Norwegian actors in the Indonesian market.

25 million USD to develop rooftop solar energy

One of the projects of Xurya in Indonesia

The Climate Investment Fund is investing 25 million USD in Xurya, a company that offers rooftop solar rental to commercial and industrial companies. By renting out the solar PVs, the businesses can overcome the high installation costs of adopting renewable energy, making it easier to switch from fossil to renewable energy supply. With the investments of Norfund and co-investors in this round, it is estimated that 370,000 tons of CO2e will be avoided annually.

“Xurya is our very first direct investment in Indonesia with the Climate Investment Fund. We are looking forward to taking an active participation through this equity investment and partake in the further development of the company.”

Anders Blom, SVP Renewable Energy in Norfund

Complex electricity supply across 17,500 islands

Indonesia comprises of more than 17,500 islands with many remote islands not connected to a national grid. An ongoing initiative driven by the JETP, is modernizing the more than 4000 fossil-fueled mini-grids scattered across remote areas of the country.

Empat Mitra Indika Tenaga Surya (EMITS) is one of the companies planning to address this through a partnership with Norfund. The parties signed an agreement in Jakarta on July 1st. The plan is to build combined solar and battery storage facilities on remote islands. Energy storage plays a crucial role in ensuring stable and renewable electricity to residents and businesses at the islands.

“This project is in an earlier phase but holds a large potential that we look forward to explore through this partnership,” says Anders Blom.

EMITS targets to install up to 500 MWP of solar capacity by 2025 and has already established 60 MW installed base across key regions in the country.