64 ChapterIVFindingsandBusinessSolution 4.1Analysis 4.2ExternalAnalysis(PESTLE) 4.2.1PESTLEanalysis PESTLEanalysisforshortisPolitical,Economic,Social,Technology,Legal, Environmentalanalysis.Partoftheexternalpartythatcouldeffectthecondition ofprojectfinance.Sincetheexternalfactorwillalwayschangeinthefuture yearssothemodelofprojectfinancewillalsochangedependingonthe PESTLEanalysis.Politicalwillmostlydiscussthepoliticalproblemthat correlateswiththerenewableenergyproject,Economicwilldiscusstheproblem ofIndonesia’sstruggletoincreasetheamountofEBTwiththehaltoffunding, SocialtalksaboutthepartiesthataremostlybeingpartoffundinginEBT projects,Technologyisthepositiveimpactofapplyinghydropowerplantin Indonesia,Legalwilldiscusstheregulationsthatcirculateswithapplyinghydro powerplants,andlastlytheenvironmentalimpactsbyapplyinghydropower plant.BelowarethecompleteexplanationsofeachPESTLEanalysisbasedon thehydropowerplant. 4.2.2PoliticalAnalysis PTPLNissuedtoupdatetheirbusinessplan(RUPTL)fortheyearof2021-2030, theirgoalistoincrease75%ofnewpowerplantsthatsourcesinrenewable energy.ThereasonforthenewbusinessplanistosupporttheIndonesia’s governmentgoaltoreducetheamountofgreenhousegasfromfossilfueland focusoncleanenergytolastforthelongrunforfuturepotential.Thebusiness 65 planof2021-2030goalwastoincreasetheelectricitypower20,9gigawattsof renewableenergyandincreasingitto51,6%.Thisleaduptohaveapotentialto utilizedevelopinghydropowerplant,byconstructinghydropowerplantthis wouldincreasethepowerupto95gigawatts.Bydoingso,itcouldsupportthe greenRUPTLof2021-2023. Uponthenews,PLNarecommittedtoincreasethenumberofhydropowerplant thatcanachieveto10.4gigawattsby2030.Achievingthetarget2030will surelysupportthesuccessgoalofRUPTL2021-2030.Sofartheelectricity powerbuildbyhydropowerplantsinFebruary2022was6.6gigawattandthis hasraised9percentofthetotalcapacityof74.4gigawatt.Eventhoughthe exploitationofhydropowerisstillsmallbutthegovernmentisconfidentthat Indonesiacanreachtheirgoalof95Gigawatts.Astudyfromthecenterof researchanddevelopmentofelectricitytechnology,new,renewableenergyand energyconservationor(P3TEK),showsthatIndonesiahasover52thousandsof locationthathavepotentialfornewhydropowerplantwitharunoffsystemthat canproduceover94,627Megawatt,thisisbecausehydropowerplanthasa largecapacityfactorandareeasiertomanagepowerfluctuationsinpowerloads andmaintenancearemoresimple.Buildingahydropowerplantdoesrequirea lotoftimeandinvestmentbutdoingsothiswillsurelyhelpwithIndonesia’s achievingothergoalsuchasNetZeroemissionby2060.Thebenefitscoming fromhydropowerplantsareendlessanditwillhelpIndonesiabalancethe numberofEBTandalsohavingnumerousofadvantageswhenbuildingahydro powerplant. 66 4.2.3EconomicAnalysis Indonesia’spresidentPrabowoSubiantohasissuedatargetforIndonesiato retirefullyoncoalfireplantsbecauseoftheglobalclimateconcerninemissions. Indonesiahasbeenrelyingoncoalplantsbecauseofitscheappriceandeasy accessofresources.AccordingtoIEA,theimpactoftheseleadIndonesiato haveanamountof650Mntonnesofcarbondioxidein2022makingitthe7’th largestcarbonproducerintheworld. Thestruggletoexchangecoalplantstorenewableenergycausedbythe Indonesia’sinvestmentinrenewableenergyhaveremainedflatduringtheyears resultinginverylittlegrowthinEBT.Newsreportshowsthatinorderfor IndonesiatohaveapotentialtogrowtheirnumberofEBTisbyincreasingthe investmentrateestimatingatleast$1.2trillionfrompresenttill2050.Otherthan thelackoffundingfromgovernment,therehavebeenalackingofexternal partiesthatwouldliketofundIndonesia’senergytransition.Previously, IndonesiausedtohaveanagreementofexternalpartiesfromUSandJapanin 2022,wheretheynearlyprovide$22billiondollarstohelpIndonesiaretirefrom coalbutinreturnIndonesiacouldonlyreturnthemoneyinvestmentinsmall amountthantheonestheyagreedon.Thus,Indonesianeededahugeinvestment acrossmanyislandtostoragecleanpowersupply,thepotentiallandtobuild renewableenergyislocatedfarfromJavawhichishometo55%ofthe population.Currentlythenumberofcoalusagehasnowdoubledinsizehittinga newrecordof831mntonnesin2024. 67 Recentnews,Indonesiahasopeneditscarbonexchangewiththeinternational buyers,themoveopensthewayforforeigninvestorstoenterthemarketof Indonesiafordomesticplayers.Carbonexchangeareactivitiesthatavoidto reducetheamountofemissionsofcarbonmonoxide,thesecreditscanbe purchasedbycompaniesthatareseekingtocanceloursomeoftheiremissions, thisiseitherbyfollowingregulationsorhaveaboostofcarbonexchangecredit. Theplanoffundinggotfromcarbonexchangearehopingtouseitasfinancial forIndonesia’sgoalofgreentransition.InfigureII1.8arethehaltinvestment moneyforIndonesiarenewableenergy. FigureIV.1Indonesiarenewableenergyinvestment (Source:IndonesiaMinistryofenergyandmineralresources,Theinvestment includegeothermal,bioenergy,otherrenewableenergy,andenergy conservationinitiatives) 68 4.2.4SocialAnalysis Withthatbeingsaidfundingforgreenrenewableenergyissomewhatdifficultto getandwiththedemandingofincreasingnumbersofrenewableenergy.Itis PLN’sjobtogetstakeholderstojoinandfundtheirrenewableprojects,In energysector,thereare2typesofstakeholders,itcouldcomefromthe governmentbutalsonongovernment.Nongovernmentrangesfromprivate energysector,nongovernment/civilsocietyorganization,banks,andsociety. Stakeholdersmappingfocuseson3factors,thefirstoneiskeyfactor,theyare thestakeholdersthatareheavilyinvolvedintheproject,withoutthemthenthe projectwouldnotbeabletogoforward.Second,primaryfactor,thesearestake holdersthataretemporarilyinvolvedintheprojectbutareimportanttohaveon theproject.Finally,thesecondaryactorthatarepartiesthataretemporarily involvedintheprojectbuttheydonothaveanyeffectintheprojectitself.Table II1.3arethedescriptionofactors/stakeholdersthatareusuallybeingpartofthe fundinginrenewableproject. TableII.4RoleofsponsorsinEBT No NameofEntities Entities DetailFunction KeyActor 1 Selectedregionand regencygovernment Local government Providingassistancefor sustainableenergyinitiatives 69 No NameofEntities Entities DetailFunction ContinuedKeyActor 2 Ministryofenergy andmineralresources (MEMR) National government technical ministry Involvesintheprojectthat focusesonrenewableenergy andgivefullsupport Primarystakeholders 3 PTPLN National government underthe ministryofstate ownedenterprise (MSOE) Involvesintheprojectand helpstocoordinatewiththe transferringoftransmission electricity 4 Ministryoffinance National government Buildingfinancing mechanismsforrenewable energyandefficiency SecondaryActor 5 Ministryofnational developmentand planning (BAPPENAS) National government Buildconceptenergy programstothenational developmentplan 70 No NameofEntities Entities DetailFunction ContinuedSecondaryActor 6 CoordinatingMinistry foreconomicaffairs (CMEA) National government coordinating ministry Helpidentifymultilevel governanceinenergy management 7 NationalEnergy Council(DEN) National Government coordinating ministry Helpstodeterminetheenergy directionoftheproject 8 Ministryof Environmentaland Forestry(MoEF) National government Helptoidentifytheriskand mitigationoftheproject 9 Ministryofstate ownedenterprise (MSOE) National government coordinating ministry Neededintheprojectto understandthecoordinationin theenergysectorrelatedto PertaminaandPLN 10 Ministryofpublic workandhuman settlement(MPWHS) National government Assistinginenergy infrastructuredevelopment 71 No NameofEntities Entities DetailFunction ContinuedSecondaryActor 11 Privateenergysector Privatesector Helpindevelopingenergy visionandprograms 12 Banks Stateandprivate sector Helptogivefeedbackinthe projectimplementationof renewableenergy 13 NGO’s CSO Understandtheenergygap andproblemsthathavebeen identified (Source:EnergySituationalandstakeholderanalysis) 4.2.5TechnologyAnalysis Hydropowertechnologyareknowntobeoneofthetypesofrenewableenergy thathasnumerousofadvantages,commonlytheyareknownfortheiressential power,storage,andflexibilityservicebecauseoftheirtypeofrenewablethat useswaterastheresource.Hydropowerareatypeofrenewableenergythat doesnotrelyoninternationalfuelresourcesbutcancomefromlocally,thisis trulyanadvantagesforIndonesiahencethecountryisfilledwithbodyofwater. Commonlyhydropowerareaflexibletypeofrenewableenergybecauseoftheir facilitiesthatcouldsupporttheminmaximaloutputaswellasprovidingback uppowerduringmajorelectricityoutages. 72 Otherthanprovidingelectricity,hydropowercanalsopreventfloodcontrol, irrigationsupport,andcleandrinkingwatersupplyforthelocalstoenjoy. Unlikeotherrenewableenergy,hydropowerisaffordableandprovidesalow costelectricityanddurability.Localswhoneededjobscanbeappliedinthe hydropowerplantareaasthesecanhelpthenumberofunemploymentratesin Indonesiawhereusuallythelocationsthatareagreedtobuildhydropowerplant areinruralareasandthiscouldhelpthenumberofunemploymentratesin Indonesia. 4.2.6LegalAnalysis ThepowersectorisregulatedbytheministryofEnergyandmineralresources (MoEMR)anditssubagencies.Wherethesubagenciesinvolvesinthe directorategeneralofelectricityandthedirectorategeneralofnewand renewableenergyandenergyconservation. CurrentlyIndonesiaregulatoryframeworkusesisprovidedbytheelectricity lawNo.30/2009andimplementingregulationsGRNo14/2012discussingabout thecrossbordersaleandpurchaseandGRNo62/2012onelectricitysupport business.Otherregulatoryframeworkincludeministryofindustryregulations No54M-IND/PER/3/2012astheguidelinefortheuseofdomesticproductsin constructionofelectricityinfrastructure,MolregulationNo54/2012an agreementthatrequireaminimumpercentageofthelocalcontentbelowarethe tableoflocalcontentneededforeachrenewableenergytofollow. Lastlythe2012landacquisitionlaworPRno71/2012providingframework foracquiringlandforinfrastructureprojects.Otherthan(MoEMR)beingin 73 changeofthelaw,RUKNalsogiveguidelinestothecentralandregional governmentsandpotentialinvestors,wheretheyrenewandreviewannually. OtherregulationsthatareneededtoberecognizedaretheinvestmentlawNo 25/2007providinginvestmentframeworkforinvestorstofundinprojects,this alsoincludesforeignandlocalinvestors,The“negative”listno77/2007,no 11/2007,andno36/2010wherethisisusedforbusinessthatdoesnotwantany foreignactivitiesinsidetheirbusinessorlimittheforeignpartiesthatcould partakeintheproject.Environmentalissueslawno32/2009wherethisrequires tohaveaAMDALdocumentiftheprojectgenerateslargerthan10mwcapacity. AccordingtoRajamandalaproject,theprojectgeneratesaroundmoreoverthan 150mw,soitisrequiredtohaveAMDALdocumentaswellasthebenefitsof hydropowerwillbesharedinto44.82%forgoods;46.98%forservicesand 47.60%forgoodsandservicescombined. 4.2.7EnvironmentAnalysis Buildingahydropowerplantrequiresalotofconsiderationtobuildespecially intheenvironmental.Environmentalimpactassessmentisaimportantfactorin thefinancialoperationalsustainabilityofhydropowerprojects.Theassessment isdonebyconductingUKL-UPL(Upayapengelolaanlingkungan&upaya pemantauanLingkungan)fortheRajamandalahydropowerplantproject,the useofthesedocumentsistohaveaguidelinesonmitigatingtheenvironmental risk.Understandingtheenvironmentalobligationsofenvironmentalregulation isimportantforabalancefinancialperformance.Forfurtherdetails,theauthor provideafewofscreenshotsoftheUKL-UPLofRajamandalabutitdoesnot 74 includeallofthedata,toseethefullfilereaderscanaccessthroughthislink https://www.miga.org/project/rajamandala-hydropower-project-1.