Cleantech Startups: Solutions for Accelerating Energy Transition with Significant Economic Potential

Wednesday (08/09), Jakarta – New Energy Nexus Indonesia highlights the indispensable role of government support in propelling the cleantech startup ecosystem toward accelerating the energy transition and unlocking the vast economic potential of the global clean energy technology market in the just recently released report, Titled “Clean Energy Technology Startups in Indonesia: How the Government Can Help the Ecosystem,”

The report sheds light on the crucial role governmental backing plays in catalyzing this transformative sector. Government support is crucial given that the majority of cleantech startups are still in the early development stage, where cleantech startups often struggle to obtain support and funding for their technology and business development.

Pamela Simamora, the lead author of the report, emphasized that the government should pay more attention to cleantech startups in Indonesia. Supporting cleantech startups will not only help accelerate the energy transition in Indonesia through technological innovation and business models but also bring significant economic, social, and environmental benefits.

“The Indonesian government should learn from other countries, setting an example to create an enabling environment for cleantech startups by providing maximum support. This support could be in the form of fiscal, financial, and non-financial support accessible to actors in the cleantech startup ecosystem such as startups, venture capital, incubators, and others. It is also worth acknowledging that the support needed for these clean energy startups is different from any other established digital startups.  For instance, because the majority of these startups are hardware-based therefore require a more intensive R&D for their technology development,” said Pamela.

The Minister of Tourism and Creative Economy, Sandiaga Salahuddin Uno, also attended the report launch virtually. “I fully support and appreciate this initiative taken by New Energy Nexus Indonesia to compile this comprehensive report, titled ‘Clean Energy Technology Startups in Indonesia: How the Government Can Help the Ecosystem.’ This report can potentially contribute to shaping new regulations related to clean energy technology, especially renewable energy, in Indonesia. With this report, the government and other stakeholders have a clearer picture of the latest trends and developments in the clean energy technology industry in Indonesia. The data collected from this report can serve as a baseline for identifying new opportunities, evaluating challenges faced by startups in this sector, and tapping into the potential role of the government in supporting the development and growth of sustainable businesses,” said the Minister of Tourism and Creative Economy.

This report highlights several challenges faced by cleantech startups, ranging from difficulty in accessing funding, limited R&D funds for technology development, difficulty in finding a skilled workforce in the clean energy technology field, to the weak regulatory framework in the related sector. Meanwhile, the majority of the venture capitals mentioned in the report that the limited number of cleantech startups in their portfolios is not due to a lack of interest in this sector, but rather due to the high risks in the clean energy sector in Indonesia given inadequate policies and regulations. The same is mentioned by business incubators and similar organizations involved in this report.

The survey from the report shows that 22 out of 35 cleantech startups have a runway of less than 6 months. This means that these cleantech startups can only survive for up to 6 months. This fact is rather far from ideal, as startups should ideally have a runway of at least 18 months. The survey results also show that the majority of cleantech startups in Indonesia are still bootstrapping and have not been able to secure external funding.

“Indonesia can learn from other countries that have already developed cleantech startup ecosystems,” said Pamela. For example, the government can learn from Canada where the provincial government of British Columbia provides incentives in the form of tax credits for investors who invest in early-stage companies in the clean energy technology sector. In addition, incubation programs, accelerations, and startup competitions organized by various ministries and government agencies need to be aligned to maximize their impact on the startup ecosystem and eliminate overlapping programs. “The government, for example, can differentiate each program based on the Technology Readiness Level (TRL) of startups participating in programs like Startup4industry, ETIC KESDM, PLN Elevation, and PPBR BRIN,” continued Pamela. This aligns with best practices in countries like the United States, Chile, and Morocco.

Furthermore, the government can also catalyze private investment in cleantech startups by mobilizing state-owned venture capital for investment in the cleantech sector and providing a fund-of-funds scheme where the government becomes an investor in selected venture capital funds for early-stage cleantech startup investments. This mechanism is widely used in countries like China and Singapore, which have successfully developed their startup ecosystems, including cleantech startups. “The government should focus more on early-stage startups rather than late-stage ones to prevent public funds from crowding out private capital from the market,” said Pamela.

Lastly, the government needs to ensure that the policy and regulatory framework in the energy sector enables a conducive investment climate for the use and development of clean energy technology in Indonesia. Other recommendations also include strengthening cooperation between the public and private sectors to increase investment in startups, providing testbed facilities to support research and development of clean technology, mandating green procurement practices for the government, and enhancing STEM education and vocational training to prepare a skilled green workforce in Indonesia.

The Indonesian government needs to acknowledge that the cleantech startup ecosystem is a strategic ecosystem considering the global trend of transitioning to clean energy. This report serves as a call to action to enhance support for cleantech startups in Indonesia. The growth of this sector has tremendous potential for job creation, economic development, and technological innovation. By supporting cleantech startups, the Indonesian government can achieve its climate goals, promote economic growth, ensure energy resilience, and enhance the country’s competitiveness in the global market.



About New Energy Nexus Indonesia

New Energy Nexus is the world’s leading ecosystem of funds and accelerators supporting diverse clean energy entrepreneurs. In Indonesia, New Energy Nexus works to support the development of ecosystems that can support the needs of not only innovators, startups, and entrepreneurs, but also other stakeholders in the clean energy and climate solutions sectors.

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