Indonesian 10-year power procurement strategy signals support for renewable energy growth: investor feedback and JETP endorsement
Indonesia Faces Challenges in Achieving Renewable Energy Targets
Indonesia, with its ambitious renewable energy goals, is facing hurdles in meeting its targets. Despite a cumulative target of 4 GW of solar power by 2024, installed capacity remains below 1 GW, with annual additions averaging just 174 MW. This is far from the target, and the ongoing global energy crisis serves as a wake-up call that relying on volatile, imported fossil fuels is no longer a sustainable strategy to meet Indonesia's growing energy demand.
The state utility, PT Perusahaan Listrik Negara (PLN), is passing the costs associated with renewable energy projects to the government, increasing the subsidy burden. Small-scale off-grid renewable energy projects, which often struggle to attract investment, require additional policy support.
Experts at the "Unlocking capital for sustainability Indonesia" forum have emphasized the need for key policy reforms to ensure funding flows to clean energy projects. These reforms include strengthening ambitious climate targets, modernizing the power system, implementing clear local content requirements, ensuring coherent regulatory frameworks, developing workforce capacity, and aligning financing structures with sustainability goals.
The reforms aim to create an enabling environment that drives capital towards Indonesia's renewable energy projects, aligning with the government’s recent declarations such as committing to 100% renewable energy within the next decade and pursuing net-zero by 2050. Regional cooperation and policy coherence across Southeast Asia are seen as critical to accelerate investments and scale solutions.
However, challenges remain. Implementation gaps and misalignment with Indonesia's climate goals are major concerns. There is a concern about whether there are enough bankable projects ready for investment in renewable energy. Meeting this demand sustainably will require significant renewable energy integration and infrastructure upgrades.
By 2030, Indonesia's energy demand is expected to reach 445 terawatt hours, with a 100% electrification ratio and 94.1 million customers. In remote areas without grid access, households pay around 5,000 rupiah per kilowatt-hour, plus connection and monthly charges.
The Electricity Supply Business Plan (RUPTL) 2025-2034, developed by PLN, outlines a goal of 69.5 gigawatts (GW) in new power generation capacity by 2034. 76% of the expected new power generation capacity is expected to come from renewable sources, including solar, hydropower, wind, geothermal, bioenergy, and nuclear. An additional 10.3 GW of energy storage, including pumped-storage hydropower and batteries, is also planned to support grid reliability.
Policy reform is essential to phase out coal-fired power plants and expand electrification across the archipelago. Regular updates to the RUPTL are critical to maintain investor confidence since most capital investment in power generation comes from the private sector. The RUPTL is widely seen as a key milestone in the country's energy transition and serves as the main planning document guiding electricity development.
- Transitioning to clean energy and achieving net-zero carbon emissions by 2050 is a key climate policy for Indonesia.
- The energy crisis underscores the importance of investing in renewable energy sources to meet growing demand and reduce reliance on volatile fossil fuels.
- Sustainability experts advocate for policy reforms to facilitate financing for renewable energy projects, aligning with the government's goal of 100% renewable energy within a decade.
- These reforms focus on strengthening climate targets, modernizing the power system, developing workforce capacity, and ensuring regulatory coherence.
- Regional cooperation is critical for accelerating investments and scaling renewable energy solutions across Southeast Asia.
- By 2030, Indonesia's energy demand is projected to reach 445 terawatt hours, necessitating significant infrastructure upgrades for renewable energy integration.
- The electricity crisis in remote areas emphasizes the need for electrification and more affordable energy through renewable sources.
- Education and self-development in environmental science and sustainability, along with skills training, are crucial for promoting career development in the clean energy industry.
- The finance sector plays a crucial role in supporting renewable energy investing and facilitating the energy transition, contributing to sustainable business growth.
