Indonesia's fresh 10-year energy acquisition strategy generates optimistic signs regarding renewable energy expansion: affirmations from investors and the JETP administration
Indonesia is facing a critical juncture in its energy sector, with experts calling for immediate policy reforms to facilitate the rapid expansion of renewable power plants. The country aims to increase its renewable capacity to 69.5 gigawatts (GW) by 2034, according to the Electricity Supply Business Plan (RUPTL) 2025-2034.
The RUPTL targets significant growth in renewable energy, with solar accounting for the largest share at 17.1 GW, followed by hydropower (11.7 GW), wind (7.2 GW), geothermal (5.2 GW), bioenergy (0.9 GW), and nuclear (0.5 GW). However, current challenges are hindering the commercial viability of renewable energy projects, deterring private investment.
Industry experts advocate for policy reforms to enable blended public and private financing, guarantee mechanisms, and supportive long-term regulatory frameworks. Key reforms include promptly implementing supportive regulations, using public funds strategically as concessional loans or guarantees, establishing a "buyer of last resort" mechanism, developing domestic finance institutions, creating robust policy frameworks, and aligning national climate and energy plans with ambitious, science-based climate targets.
These reforms aim to accelerate Indonesia’s transition to 71 GW of new solar, hydro, and geothermal capacity by 2033, requiring an estimated US$80 billion investment, plus another US$30 billion for grid upgrades. Experts also emphasize the importance of balancing foreign investment with domestic industry development to sustain growth and innovation in renewables.
Meeting this demand sustainably will require significant renewable energy integration and infrastructure upgrades. In villages without grid access, households currently pay around 5,000 rupiah (US$0.31) per kilowatt-hour, plus a connection fee and monthly charge. Small-scale off-grid renewable energy projects often struggle to attract investment and require additional policy support.
Significant shortfalls in solar and wind deployment have been noted, with installed solar capacity remaining below 1 GW, far behind the target of 4 GW by 2024. Policy reform is essential for phasing out coal-fired power plants and expanding electrification across the archipelago. Between 2021 and 2024, fossil fuel capacity grew by 14 GW, compared to just 5 GW of renewables, according to energy analyst Dody Setiawan.
Since most capital investment in power generation comes from the private sector, regular updates to the RUPTL are critical for investor confidence. An additional 10.3 GW of energy storage, including pumped-storage hydropower and batteries, is planned to support grid reliability.
However, concerns have been raised about whether there are enough bankable projects ready for investment in the renewable energy sector. The RUPTL's rigid procurement process is seen as a major barrier to Indonesia's renewable energy expansion. Prior to 2017, project developers with renewable energy potential could approach PLN directly, making renewable energy projects more bankable and attractive to investors. However, this process resulted in very strong power purchase agreements (PPAs), especially for fossil fuel-based projects.
The government's force majeure clause in power producer contracts allows additional operating costs due to new government policies to be passed back to PLN, increasing the subsidy burden. Providing reliable and affordable electricity to rural and remote communities should be a core component of Indonesia's just energy transition. Ensuring policy reforms are implemented promptly and effectively is crucial for addressing these challenges and accelerating Indonesia's renewable energy transition.
References: [1] World Bank. (n.d.). Unlocking Capital for Sustainability Indonesia. Retrieved from https://www.worldbank.org/en/programs/unlocking-capital-for-sustainability-indonesia [2] Asian Development Bank. (n.d.). Indonesia's Energy Transition: A Pathway to a Low-Carbon Future. Retrieved from https://www.adb.org/sites/default/files/publication/640299/indonesias-energy-transition-pathway-low-carbon-future.pdf [3] United Nations Framework Convention on Climate Change. (n.d.). Nationally Determined Contributions (NDCs). Retrieved from https://unfccc.int/process-and-meetings/the-paris-agreement/nationally-determined-contributions-nationally-determined-communications-nationally-determined-contributions/nationally-determined-contributions-nationally-determined-communications [5] Climate Action Tracker. (n.d.). Indonesia. Retrieved from https://climateactiontracker.org/countries/indonesia/
- Indonesia's energy sector is undergoing a critical transition towards net zero and sustainability, with a focus on expanding renewable energy sources.
- The Electricity Supply Business Plan (RUPTL) aims to increase renewable energy capacity to 69.5 GW by 2034, emphasizing solar, hydropower, wind, geothermal, bioenergy, and nuclear.
- To facilitate this transition, industry experts propose policy reforms, including blended public and private financing, guaranteed mechanisms, and supportive long-term regulatory frameworks.
- Accelerating Indonesia’s transition to 71 GW of new solar, hydro, and geothermal capacity by 2033 requires an estimated US$80 billion in investment, plus additional funds for grid upgrades.
- Balancing foreign investment with domestic industry development is crucial to sustaining growth and innovation in renewable energy.
- Meeting this demand sustainably requires significant renewable energy integration and infrastructure upgrades, particularly in villages without grid access.
- Shortfalls in solar and wind deployment have been noted, with installed solar capacity far below the target, necessitating policy reform to expand electrification.
- Regular updates to the RUPTL are vital for investor confidence and attracting capital investment in power generation, particularly for renewable energy projects.
- Reliable and affordable electricity for rural and remote communities should be a priority in Indonesia's energy transition.
- The government's force majeure clause in power producer contracts may increase subsidy burdens, and policy reforms should address this issue.
- Policy reforms for a just energy transition must be implemented promptly and effectively to address challenges and accelerate Indonesia’s renewable energy expansion.
- Investments in renewable energy projects are essential for Indonesia's energy sector, as per data from the World Bank, Asian Development Bank, and United Nations Framework Convention on Climate Change.
- Indonesia's renewable energy expansion is also crucial for achieving its climate policy targets, aligned with the Sustainable Development Goals (SDGs) and science-based climate targets.
- In the context of this energy transition, personal growth, career development, and learning opportunities in environmental science, science, technology, finance, education-and-self-development, and sustainable living are invaluable, as are sports, sports-betting, basketball, and the home-and-garden industry as they relate to energy efficiency and sustainability.
