Financing of Energy Efficiency in Public Goods: The Case of Street Lighting Systems in Indonesia

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Economics, Law, and Institutions in Asia Pacific


Energy demand growth in Asian countries is predicted to be the highest in the world. One of the drivers of energy demand growth is urbanization. Along with growing urban areas, public infrastructure, such as streetlights, is also expanding. Unfortunately, energy conservation measures in public facilities are commonly constrained by the budget limitations of local governments, while the potential participation of energy service companies (ESCO) requires regulation reformation settling the contradicting regulations. This study proposes several policy recommendations to modify existing guidelines for selecting ESCOs for the energy efficiency of streetlights in Indonesia that has the highest urbanization rate. Regulation review and several potential improvements for selecting ESCOs are provided. In 2017, the Ministry of Domestic Affairs released a Circular Letter to solve barriers to ESCO businesses in public sectors; however, the Circular Letter could be improved in several ways by eliminating the clauses on the holder of intellectual property rights, revising the valuation of economic benefit bidding, and increasing the maximum contract period. Moreover, we propose the use of smart street lighting technologies to improve the value-added services of streetlights and the establishment of a super ESCO to accelerate ESCO business activity in all economic sectors.

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