Economist urges use of community-based energy to support energy self-sufficiency

Islamic economics and finance academic Dr Hayu Prabowo has stated that community-based energy innovation can promote energy self-sufficiency and reduce the use of fossil fuels, which harm environmental sustainability. Speaking at a discussion on sharia financial investment for the benefit of the earth and society in Jakarta on Wednesday, he said the centralised use of coal-based fossil energy does not suit Indonesia’s archipelagic geography, making a community energy innovation approach more relevant as it can explore regional energy potential suited to local natural conditions. “Essentially, communities need to be empowered to produce energy independently according to local potential,” he said. He noted that with more than 17,000 islands, each region in Indonesia has different energy potential and needs to be developed according to local characteristics, rather than solely depending on coal. According to him, the development of energy sources that communities can produce themselves can include processing organic waste to generate biogas, very small-scale hydroelectric power plants utilising river flows or nanohydro, and harnessing solar energy with simple technology rather than conventional solar panels. He said coal sources are currently heavily concentrated in Java, Sumatra, Kalimantan, and parts of Sulawesi, while many areas in eastern Indonesia still depend on diesel or fuel oil for power generation. He urged a transition from coal to cleaner energy sources, as the impact of coal on the environment and quality of life is increasingly evident. However, this transition also requires innovation in financing models, namely combining commercial financing with social financing so that clean energy projects can develop sustainably through long-term financing and help empower communities from the outset. “On the financing side, we are also developing the concept of blended finance. This concept is necessary because energy transition projects generally have high-risk and low-profit characteristics, making them unattractive for commercial financing. Therefore, philanthropic funds such as zakat and waqf are needed as initial capital,” he added. Through this mechanism, it is hoped that investors will be attracted, thereby drawing in commercial funds for renewable energy investments beyond coal.