New Ten-Year Power Procurement Plan in Indonesia Brings Optimism for Renewable Energy Expansion: As Viewed by Investors and The JETP Administration
Indonesia's energy transition, spearheaded by the Renewable Energy Roadmap (RUPTL), is making strides towards a greener future. However, concerns about implementation gaps and misalignment with the country's climate goals persist. To address these challenges, industry experts advocate for policy reforms to mobilise sustainable finance and unlock capital flows to clean energy projects in the archipelago.
Support from Government Ministries Key to Meeting Ambitious Renewable Targets
The Ministry of Energy and Mineral Resources (ESDM) and the Ministry of Finance are encouraged to provide massive financing support and policy reforms to meet Indonesia's ambitious renewable energy targets, including President Prabowo Subianto's goal of 100% renewable energy by 2035.
Phasing Out Coal-Fired Power Plants and Encouraging Renewables
The phase-out of fossil fuel projects and early retirement of coal-fired power plants is crucial to redirect investments towards renewables. This transition requires supportive regulatory frameworks and incentives that can attract private and institutional capital.
Boosting the Annual Installation Rate of Renewables
To dramatically increase the annual installation rate of renewables, policies must be aligned to de-risk investments and provide clear signals to investors. Long-term power purchase agreements and streamlined permitting processes are essential for this growth.
Strengthening the Solar Power Industry Ecosystem
Developing an integrated solar supply chain from raw materials to manufacturing of cells and modules, supported by a comprehensive national roadmap, can secure local content, increase resilience, and reduce dependency on imports. This, in turn, improves investor confidence.
Updating and Enhancing Climate Targets
Indonesia's Nationally Determined Contribution (NDC 3.0) should be updated and enhanced to reflect ambitious, science-based goals consistent with the Paris Agreement 1.5°C pathway. This policy certainty and long-term commitment to clean energy are crucial for attracting investment.
Improving Access to Capital with Sustainable Finance Policies
Regulatory reforms that reduce barriers to funding, facilitate green bonds and other green financing instruments, and enable private sector participation in the energy transition are essential for improving access to capital for renewable energy projects.
The Role of Small-Scale Off-Grid Renewable Energy Systems
Small-scale off-grid renewable energy systems, under 1 megawatt, face challenges in attracting investment and require additional policy support to thrive.
The RUPTL: A Step Towards Certainty for Investors
The Electricity Supply Business Plan (RUPTL) 2025-2034, developed by state utility PT Perusahaan Listrik Negara (PLN), aims to increase power generation capacity to 69.5 gigawatts (GW) by 2034. The RUPTL outlines short-term targets for renewable energy capacity, providing more certainty for investors.
Meeting Indonesia's Growing Energy Demand Sustainably
Indonesia's electricity demand is projected to grow significantly, driven by population and economic expansion. By 2030, its energy demand is expected to reach 445 terawatt hours (TWh), with a 100% electrification ratio and 94.1 million customers. To meet this demand sustainably, significant renewable energy integration and infrastructure upgrades will be required.
The Role of Renewables in Meeting Indonesia's Energy Demand
76% of the new power generation capacity is expected to come from renewable energy sources, including solar, hydro, wind, geothermal, bioenergy, and energy storage. However, despite a cumulative target of 4 GW of solar by 2024, installed capacity remains below 1 GW, with annual additions averaging just 174 MW.
Cautious Optimism and the Need for Policy Reforms
Experts have expressed cautious optimism, noting that think tanks and policy advocates are continuing to push the government for the expansion of renewables. However, it is emphasised that enabling policy reforms are urgently needed to implement the accelerated build-out of new renewable power plants.
Supporting Small-Scale Renewable Energy in Underserved Regions
Both Butarbutar and fellow panellist Luthfyana Kartika Larasati emphasised the need for policies that support small-scale renewable energy in underserved regions, particularly outside Java.
A Just Energy Transition for All
Butarbutar highlighted the importance of a just energy transition, stating that providing reliable and affordable electricity to rural and remote communities should be a core component of Indonesia's energy transition.
The road to a sustainable and just energy transition in Indonesia is paved with policy reforms. By addressing the challenges outlined above, Indonesia can unlock capital, reduce investment risks, and create a conducive environment for the rapid deployment of clean energy technologies.
- The government ministries, particularly the Ministry of Energy and Mineral Resources (ESDM) and the Ministry of Finance, should provide massive financing support and policy reforms to meet Indonesia's ambitious renewable energy targets.
- The phase-out of fossil fuel projects and early retirement of coal-fired power plants is crucial to redirect investments towards renewable energy sources.
- To increase the annual installation rate of renewables, policies must be aligned to de-risk investments and provide clear signals to attract private and institutional capital.
- Developing an integrated solar supply chain can secure local content, increase resilience, and reduce dependency on imports, improving investor confidence.
- Updating and enhancing Indonesia's Nationally Determined Contribution (NDC 3.0) should reflect ambitious, science-based goals consistent with the Paris Agreement 1.5°C pathway.
- Regulatory reforms that reduce barriers to funding, facilitate green bonds and other green financing instruments, and enable private sector participation in the energy transition are essential for improving access to capital for renewable energy projects.
- Small-scale off-grid renewable energy systems face challenges in attracting investment and require additional policy support to thrive, particularly outside Java.
- A just energy transition should provide reliable and affordable electricity to rural and remote communities, being a core component of Indonesia's energy transition plan.
