Indonesia

Until 2022, for renewable energy producers an “avoided cost” based approach for tariff setting was used. Remuneration for renewable electricity producers was capped at 85 percent of the local average costs of electricity generation (for more information, see ADB 2023). This was modified in 2022 via Presidential Regulation (PR) No. 112/2022 on Accelerating Development of Renewable Power Supply allowing for technology-specific and location-specific remuneration levels. The new tariff is also “front-loaded”, meaning higher tariff levels during the first years of operation to facilitate repayment of debt (Case 2024: 35). However, tariff payments are still capped at 100% of local average costs of electricity generation, thus hindering investment in more costly RE technologies. Regulatory requirements such as local content requirement increases project cost until suitable domestic manufacturing capacity is established. However, new regulation lower the local content requirements for solar projects and some companies are ommited from the requirement which is expected to allow more projects to be built.

Medium Barriers

The tariff for a renewable energy project is negotiated with PLN and follows a tendering process primarily based on the previous regulation (MEMR 50/2017). PLN uses two procurement routes: 1) direct selection and 2) direct appointment. The direct selection scheme serves as the primary procurement method for variable renewable energy projects. It involves a two-step tender process with a pre-selection round based on technical and financial criteria, followed by competitive selection in the form of a capacity auction. The direct appointment scheme applies to projects where a PLN subsidiary holds a majority share and is responsible for selecting partners. It is primarily used for dispatchable renewable energy projects, such as geothermal and hydropower (Case 2024: 36). The tender/auction scheme has been criticized and a more transparent scoring mechanism for project selection is recommended. Also, loosening PLN’s equity ownership share could increase interest of the private sector, increase competition and thus power prices for renewables (CASE 2024: 48).

Medium Barriers

PLN is using a “cost-plus margin framework” for new (fossil) power generation assets. Under this approach, PLN passes on the costs of new assets to rate- or taxpayers, irrespective of actual electricity demand (Aas, 2016).

Medium Barriers

There is currently no nationwide framework for direct PPAs or corporate PPAs. Demand for private and corporate PPAs is growing as companies aim to source low-carbon energy. However, several schemes are available in some areas that are not covered by PLN, for example in industrial estates or remote areas. One example of the scheme is power rental agreement where the power plant developer leases its power plant to a consumer and the rental fee is structured to include the cost of power consumed (Baker McKenzie, 2021).

High Barriers

Currently, there is a lack of a predictable procurement schedule in Indonesia, resulting primarily from the pending RUPTL (last version published in 2021 and not yet aligned with net zero commitment). The RUPTL provides an investment outlook for new power generation capacity for the coming 10 years, including detailed capacity additions for each technology for every year. The procurement is scheduled at least once a year by the PLN subsidiaries. Unclear project pipeline and intransparent tender procedure discouraged international developers to participate and prevent economy of scale. With increasing targets, several procurement rounds per year might be beneficial. Initially, the oversupply of coal capacity hinders the procurement of new RE capacity. However, the oversupply issue is expected to be solved soon

Medium Barriers

Not Assessed.

–

There are no limitations to self-consumption. MEMR Regulation No. 2/2024 encourages solar PV self-consumption for industrial consumers by removing the monthly capacity charge. Indonesia has a target of 3.6 GW rooftop solar by 2025. By the end of 2023, only 90 MW of rooftop solar were installed (CASE 2024: 37). The newly introduced quota might become a bottleneck for PV deployment due to long queues when registering the plan to build rooftop solar.

Low Barriers

In 2024, a “zero compensation” for excess electricity was implemented, incentivizing self-consumption and small sizing of PV systems and de-facto ending export of excess electricity (MEMR Regulation No. 2/2024).

High Barriers

Indonesia has implemented severe restrictions on the export of excess electricity. Previously, Indonesia supported rooftop PV via a net metering scheme and a self-consumption scheme, regulated under ESDM 26/2021 (until 2022). This scheme still encouraged and compensated for the export of electricity. In 2022, PLN introduced a “15 percent rule”, capping the maximum installed capacity at 15 percent of the contracted load. In 2024, the 15% rule was removed which allows for installing capacity more than contracted load. However, the registration is done through a quota system, forcing distributed generators to acquire a permit from the IUPTL holder (i.e. PLN or the respective PPU).

High Barriers

The JET-P program provides almost USD 7 billion of concessional finance (IESR/NCI, 2024). Providing low-cost loans to RE producers is one option for JET-P finance. Concessional loans are already provided for geothermal projects. “79% of geothermal investments were through concessional loans and grants” (CPI). Domestic financial institutions (such as PT SMI and IIF) have proven to be successful case of specialized financing vehicles. However, there are further capacity needed to fund renewable energy projects. Lower cost of capital would also be needed for RE power projects for self-consumption in industrial/mining sector (EY, 2023).

Medium Barriers

Not Assessed.

–

Available tax and duty allowances (income tax reduction equivalent to 30% of fixed capital investment, applied as 5% over 6 years), accelerated depreciation and amortization, and tax holiday for companies and individuals installing renewable energy power plant. These however are deemed insufficient to trigger large scale investment.

Medium Barriers

There are several line ministry and regional infrastructure budgets that are available to fund RE projects, for example Special Allocation Fund for the Small-Scale Energy Sector, however typically for off-grid systems. There is also Infrastructure fund for Geothermal Sector.

Medium Barriers

In
2021, President Joko Widodo issued Presidential Regulation Number 98 on the
Carbon Pricing Mechanism.  In September 2024, the Indonesian Stock
Exchange launched the Indonesia Carbon Exchange (IDX Carbon). However, demand
for carbon credits was very low during the first months of operation, leading
to low carbon prices (Climate Home News 2023). In the first half of 2024,
Indonesia recorded a transaction value of 380k USD with trading volume of
114500 tons of CO2eq. The first operational phase covers on-grid coal plants
larger than 100 MW in 2023, expanding to on-grid coal plants larger than 25 MW
in 2024, including off-grid coal plants in 2025, and covering other
fossil-based power plants in 2028 (CAT, 2024). 

Medium Barriers

The government indicated that a carbon tax would be implemented in 2022 (Indonesian National Law No. 7 of 2021), but plans were postponed. First, a functioning carbon market will be established (see below).

High Barriers

Risk mitigation elements in the design of power purchase agreements

Related policy guide sections

• Power purchase agreements
• Direct power purchase agreements
• Off-taker risk mitigation

Foreign exchange risk is borne by the RE project developer (CASE 2024: 36). Currency fluctuations compared to the USD were relatively minor.

Medium Barriers

PPAs are typically signed for 20-30 years, during which time capital costs are recovered. Details of PPA terms for RE are currently drafted by MEMR and not yet detailed in PR 112/2022. The terms of the Power Purchase Agreement (PPA) require PLN to purchase renewable energy output up to the contractually specified energy volume. Payment to IPPs needs to be made for deemed energy if the network cannot absorb the power (compensation for curtailed electricity). The PPA design only imposes volume and price risk for output above and below the contracted energy. RE producer’s experience revenue reductions in cases of underperformance. Conversely, when production exceeds expectations, revenue gains are limited, as higher production may result in lower offtake prices or no offtake at all (Kuungana Advisors 2024). In addition, the contract negotiation process between PLN and private sector RE installers has proven to be lengthy six to nine months), significantly increasing transaction costs (CASE 2024: 36). 

High Barriers

PPAs with PLN are considered bankable and developers are generally comfortable with the general risk allocation (Case 2024: 36, EY 2023). The bankability are dependent on agreed PPA tariff. The capacity payment structure in Power Purchase Agreements (PPAs) significantly reduces investment risk and enhances project bankability. It provides Independent Power Producers (IPPs) with protection against unexpected variations in dispatch decisions and mitigates the long-term risk of stranded assets. In addition, sovereign guarantees protect PLN in the case of default and mitigate the offtake risk faced by independent power producers (Case 2024: 40).

Low Barriers

Curtailment is not a major risk factor currently, due to the relatively modest share of (variable) renewables in most parts of the country (VRE share is less than 1% on average). Curtailment of solar PV sometimes occurs in Sumatra (IEA, 2022). However, due the fact that fossil fuel based PPAs “often have clauses specifying minimum take obligations” (IEA, 2022: 27), curtailment of renewables will likely increase soon if market frameworks will not be changed. Indonesia’s 2020 grid code (MEMR 20/2020) state that VRE curtailment is to be a last-resort option (CASE 2024: 45).

Medium Barriers

Inflation in Indonesia was relatively stable (ranging from 2-4% in the past 5 years) and therefore is not a significant risk factor.

Low Barriers

The private sector participates in electricity generation through IPP and PPP arrangements (MEMR 03/2015; GR 23/2014; PR 38/2015; PR 112/2022). However, missing unbundling and the dominant role of PLN as a vertically integrated utility only grants a limited role to the private sector (Case, 2024: 28). This means the tender participants should create joint venture with PLN subsidiary which holds 51% ownership of the project, while at the same time requested to fully fund the equity. However, the share of electricity from independent power producers (IPPs) has risen steadily over the years and reached 40 percent in 2022 (PLN, 2023). Foreign investment in the electricity sector is increasing. It is expected that over half of the investments in renewable energy by 2025 will originate from foreign sources, with international investors anticipated to contribute more than 60 percent of the new capacity in geothermal, wind, and solar energy (PwC, 2023). Some developers raised concerns about ownership lock-in period which restrict small developers to recycle capital that could be invested in new projects. RE projects are awarded on BOOT basis which means no possibility to account for additional revenue after the PPA years are concluded.

Medium Barriers

Permits and the number of permits required are based on the level of risks. Installing power plants or becoming a “private power utility”, require specific permits. Generally, they can obtain two types of permits. “An Electricity Supply Business Licence (IUPTLU) is reserved for utilities serving end consumers, while an Electricity Supply Business License for Captive Use (IUPTLS) is for on-site generation (e.g. industrial parks). Depending on the size of the project and location, the permits are issued by the ministry of energy or governor. In addition to these electricity supply permits, the project would need an environmental permit, building permit, land use permit which takes 9-12 months. While these are standard duration, the lengthy PPA negotiation are cited as the main barrier.

–

Inquiry for permits is submitted online through one stop shop (OSS) which are then evaluated by the MEMR or relevant government agency. However, the centralisation process also caused a bottleneck in obtaining a permit.

Low Barriers

Not Assessed.

–

Developers and financiers indicated that permitting is quite complex and often delayed. The delayed permitting and approval incurred indirect cost for investors. Permits and the number of permits required are based on the level of risks. Installing power plants or becoming a “private power utility”, require specific permits. Generally, they can obtain two types of permits. “An Electricity Supply Business Licence (IUPTLU) is reserved for utilities serving end consumers, while an Electricity Supply Business License for Captive Use (IUPTLS) is for on-site generation (e.g. industrial parks). Depending on the size of the project and location, the permits are issued by the ministry of energy or governor. In addition to these electricity supply permits, the project would need an environmental permit, building permit, land use permit which takes 9-12 months. While these are standard duration, the lengthy PPA negotiation are cited as the main barrier.

Medium Barriers

Similar to
other energy projects, solar and wind project larger than 50 MW are required to
obtain environmental and social impact assessment (ESIA). Smaller projects
(10-50 MW) are only required to produce Environmental Management and Monitoring
Effort (UKL and UPL in Bahasa).  

Medium Barriers

Not Assessed.

–

Sites for renewable energy development projects are listed in Electricity Supply Business Plan (RUPTL). From spatial planning perspective, the zonation for renewable energy is not widely implemented as general rule but rather sparse. The government established special economic zones (KEK) and in some instances, renewable energy projects are also included as direction in these zones or in the Provincial Spatial Development Plan (Rencana Detail Tata Ruang / RDTR). For example, Presidential regulation 64/2022 stipulate the new capital to be supplied 100% by low-carbon electricity and some sites are specifically reserved for renewables and hydrogen development.

Medium Barriers

Geospatial planning via GIS was conducted
for wind energy and solar PV in Indonesia. For instance, for wind energy,
resource maps are provided by World Bank (2023) and the Global Wind Atlas.
Similarly, World Bank (2023) provides resource maps for solar.  

Low Barriers

Land acquisition could be a lengthy and complicated process due to unclear title ownership especially in remote areas. Developers should obtain permit from MoEF and after that finalise transactions on land acquisition within the time limit of the permit – which often create challenge for developer (EY, 2023).

Medium Barriers

Marine spatial planning is regulated by
Law No 32 of 2019 (FAO, 2024). However, no specific site for offshore wind
energy development have yet been established.  

High Barriers

The application of virtual power plants has been discussed conceptually (Setiawan et al, 2024). However, they are not deployed widely in Indonesia.

High Barriers

The deployment and use of battery energy storage systems (BESS) is still in a nascent stage in Indonesia. Government targets and strategies for BESS are yet to be formulated and is not part of RUPTL. In 2022, the PLN launched a 5 MW BESS pilot project (Energy Storage News 2022). The first PPAs for “RE+BESS” system were signed in 2023 is not yet aimed to provide flexibility services to the grid (Energy Global 2023).

High Barriers

The flexible operation of fossil fuel plants is discussed as possible scenario in JETP investment plan, however there are no specific market or financial incentives to date.

High Barriers

In order to balance fluctuations from wind and solar PV, dispatchable renewables (hydro, geothermal, biomass) can be incentivized to produce electricity flexibly (e.g., higher remuneration for generation during peak demand periods and lower remuneration during off-peak periods. Due to the relatively low share of variable renewables, PPAs for dispatchable RE are not (yet) structure accordingly. Dispatchable RE producers deliver “baseload” profiles, or in some cases of hydro power is load-following profiles.

Medium Barriers

Indonesia is incentivizing EVs via tax incentives (ASEAN Briefing 2024). Specific incentives and time-of-use rates for smart charging of EVs has not yet been adopted.

High Barriers

There are no dedicated policies for demand-side flexibility (e.g., demand-response programs, real-time pricing, critical peak pricing, etc.). Also, time-of-use tariffs only exist for commercial and industrial consumers and not for the residential sector.

High Barriers

There is priority dispatch for variable renewable energy sources according to Indonesia’s 2020 grid code (MEMR 20/2020) (CASE, 2024: 45). However, the RE PPAs do not oblige PLN to purchase renewable output above contracted volumes. Therefore, not all power produced by wind and solar with zero marginal costs is integrated, thus increasing overall system costs (CASE 2024: 49).

Medium Barriers

PPA design for fossil fuel power plants is a bottleneck for flexible operation, as many PPAs include clauses specifying minimum take obligations. So-called take-or-pay clauses are also common in gas supply contracts, thus constricting PLN’s ability to take advantage of the operational flexibility of gas-fired power plants (IEA, 2022: 37). However, the capacity payment included in PPAs are designed for baseload availability but lack the criteria for flexibility service provisions which would facilitate the integration of variable renewables and reduce full-load hours of coal plants. The flexible operation of gas-fired power plants is also hampered by contractual design. PLN maintains annual and monthly gas supply contracts with specified minimum and maximum offtake volumes. The take-or-pay provisions are supported by corresponding minimum offtake obligations for gas-fired electricity (Case 2024: 42).

High Barriers

Theoretically, power plants are dispatched in line with their short-term marginal costs. However, the “Domestic Market Obligation” distorts the dispatch order by providing a subsidy for coal producers. In addition, the RE PPAs do not oblige PLN to purchase renewable output above contracted volumes. This interferes with the merit order.

Medium Barriers

Time-of-use rates are not widely available in Indonesia.

High Barriers

There are currently no intra-day markets in Indonesia.

High Barriers

Indonesia currently does not operate an ancillary services market. Balancing and ancillary services are largely provided by coal fired power plants, which receive generous capacity payments in order to provide these services.

High Barriers

Power plants need to comply with their availability factor (contracted amount of electricity as stipulated in the PPA with PLN). If they fail to comply with the pre-defined availability factor, penalties need to be paid (MEMR 2024).

Medium Barriers

There are no third-party aggregators for forecasting VRE output. This is related to the market design (PLN being the single buyer and power producers not selling their power onto wholesale electricity markets).

High Barriers

Currently, there is no system-wide forecasting of VRE output. This would allow for a more efficient system operation (IEA 2022)

High Barriers

VRE plants submit real-time generation data and daily forecasts at 15-minute intervals that are updated every six hours. Moving scheduling closer to real time would allow for a more accurate forecast. Forecasting is done for each individual plant, not on a system-wide level. Operators of hydropower plants must update the system operator every hour about reservoir levels and provide production forecasts for the following day (CASE 2024: 38).

High Barriers

First, power producers must obtain an Electricity Supply Business Licence which is granted for up to 30 years (extendable). Upon completion of construction, owners are required to obtain an Operation Worthiness Certificate (Sertifikat Laik Operasi) as evidence that the power plant has successfully passed the necessary commissioning tests, ensuring adherence to the relevant technical standards and regulatory requirements. Once producing electricity, power producers must comply with existing grid codes.

Medium Barriers

There are no simplified procedures for small scale distributed generators. Removal of net metering system of rooftop solar reduces the benefit of connecting to the grid.

Medium Barriers

Indonesia’s power sector comprises five island systems. Each system has its own grid code: I. Java, Madura, Bali, II. Sumatra, III. Sulawesi, IV. Kalimantan, and V. Nusa Tenggara, Maluku, and Papua. Grid codes regulation was updated in 2020 (MEMR Regulation No 20/2020) with more detail regulation to support adoption of renewables, as well as improving safe operation.

Low Barriers

Grid connection costs are covered by PLN. Private sector involvement in network investments has thus far been restricted to specific instances where Independent Power Producers (IPPs) were mandated to fund the infrastructure connecting their generation facilities to the existing grid – shallow connection charging approach (CASE 2024: 34).

Low Barriers

The role out of smart grids is one of PLN’s eight lighthouse initiatives for the energy transition. In 2020, PLN plan to implement smart grid for Java Bali system in 5 locations. The implementation includes Power plant Digitalization, Sub-Station Automation and Digitalization, Distribution Grid Management, EV Charging Station and emobility, Smart micro grids, Advance Metering Implementation implementation, Upgrading SCADA to Wide Area Monitoring, Protection and Controlling System (WAMPAC), Dynamic line rating and other (PLN 2021).

Medium Barriers

There is limited deployment of advanced monitoring infrastructure (AMI) and real-time control of generators, electricity networks and high-voltage substations (IEA, 2022: 37).

High Barriers

PLN is currently upgrading a new control center supported by UNOPS and Asian Development Bank (ADB).

Medium Barriers

Limited detail information. However, the grid operator is focusing on lowering daily operation cost due to financial situation. This potentially hinder operational practices that result in long-term optimal system cost.

High Barriers

PLN has set the target of 1.2 million smart meters by end-2023, 4 million by 2025 and 10 million by 2030 (Huawei 2021).

Low Barriers

PLN owns and operates all grid lines. There is no regulatory framework for direct, private grid lines between IPPs and consumers. Private sector involvement in network investments has so far been restricted to specific instances where an Independent Power Producer (IPP) was required to invest in the connection between its plant and the grid (Case 2024: 34). In this case, the IPP develops the grid and transfers ownership to PLN. IPPs

Medium Barriers

Besides connection fees, no separate network charges apply in Indonesia (Case 2024: 47). PLN owns, operates and pays for the electricity grid network. PLN conduct studies on the cost of wheeling which result in around 4-5cts USD/kWh (IESR Power Wheeling webinar, 2024) Payment for using the electricity grid (wheeling): Due to financial constraints, PLN stated in its 2019 and 2021 RUPTLs that it might tender new transmission line projects. Build-operate-transfer (BOT), build-lease-transfer (BLT), and power wheeling schemes are being considered, although no such tender has been issued to date (Case 2024: 34). As of 2024, the Indonesian government is reportedly considering the introduction of a power wheeling scheme as part of the forthcoming New Energy and Renewable Energy Bill.

Medium Barriers

MEMR Regulation No. 11/2021 establishes a framework for the introduction of transmission tariffs and encourages, though does not mandate, PLN and PPUs to grant network access to third parties (Case 2024: 34). In principle, this would be dependent on the owner of the operating areas (wilayah usaha) which in most cases is PLN. This lack of legal certainty about third party access is a clear barrier for (private sector) renewable energy investment.

High Barriers

According to the Net Zero Roadmap for Indonesia's energy sector, developed by the International Energy Agency (IEA) and the Ministry of Energy and Mineral Resources (MEMR), annual investments in electricity grid infrastructure need to rise from approximately $3 billion to a range of $6 to $9 billion per year in order to meet the nation's climate targets for achieving net-zero emissions by 2060. Indonesia consists of several island grids. The government has committed to developing an integrated inter-island grid system (the Indonesian “super grid”) to connect resource-rich areas to demand centers, unlock renewables potential, mobilize investment in remote regions and enhance the security of supply (Julian & Mahadi, 2023; Case 2024: 32).

Low Barriers

Grid expansion planning is part of the Electricity Supply Business Plan (RUPTL). This is a ten-year business plan, outlining investment needs in generation, transmission and distribution. The planning document is updated annually (CASE 2024: 33). According to the 2021 RUPTL, the transmission and distribution lines will be expanded by more than 47 000 km from 2021 to 2030 in order to reach the targets.

Low Barriers

Interconnections with neighboring countries are not a political priority, as even main islands within Indonesia are not yet interconnected. With regard to transnational power transmission grids to neighboring countries, the sole existing connection in Borneo links the Malaysian state of Sarawak to West Kalimantan. As part of the ASEAN Grid Initiative, several other cross-border interconnections are planned.

High Barriers

There is no specific strategy for upgrading the distribution grid and making it “smarter” for the integration of behind-the-meter, distributed generation. RUPTL only detail expansion plan up to 20 kV lines.

High Barriers

The deployment of new coal capacity accelerated in the first two decades of the 2000s. However, as of 2022, the procurement of coal-fired power plants has been subject to a set of constraints: “1) the pipeline of new projects is limited to the capacity additions provided for in the RUPTL of 2021-2030. This is about 14 GW, or 34 percent of the total capacity additions towards 2030. Beyond that number, 2) new coal plants are allowed on the condition that their emissions are reduced by 35 percent within ten years of commercial operation – by means of retrofits or carbon offsets. 3) New and existing coal plants are allowed to operate until 2050 but not beyond. Restrictions on captive coal plants (i.e. on-site for industrial use) are looser: new capacity is allowed if its use contributes to job creation and economic growth. Yet, like on-grid coal assets, their operations must cease by 2050.” (CASE 2024, 39). The JETP aims to work for an early retirement of coal plants. The Asian Development Bank’s early retirement programme for coal plants, the Energy Transition Mechanism, is being used in Indonesia under the JETP financing (JETP 2023). The early retirement of the 660 MW coal plant Cirebon-1 serves as the mechanism’s pilot project.

–

Currently, the market is distorted due to implicit subsidies for coal. The Indonesian government subsidizes coal consumption through its Domestic Market Obligation (DMO) policy, which requires coal producers to allocate a specified percentage of their production for the domestic market at a regulated, capped price. The DMO distorts short- and long-term price signals in the electricity sector and tilts the playing field in favour of coal-fired power plants. The Domestic Market Obligation (DMO) reduces the average cost of electricity generation (Biaya Pokok Produksi, BPP), which establishes the ceiling price for renewable energy tariffs. As a result, variable renewable energy sources must compete with coal plants that benefit from subsidies (CASE 2024: 43). Abolishing those subsidies would be an important step towards a level playing field between all power producers. In 2023, the government implemented an Emissions Trading System (ETS) targeting emissions from electricity generation. However, due to limited demand for carbon certificates prices remained very low and had no decarbonization effect.

–

Indonesia has adopted a net zero by 2060 target, requiring a decarbonization of the energy sector and electricity system. According to PR 112/2022, MEMR is mandated to create fossil fuel phaseout roadmap. The roadmap is still underway, which may include plan for early retirement of 13 coal units with total capacity of 5.2 GW by 2030 (Ember 2024, MEMR 2024). To be in line with 1.5 degree, 8 GW of coal should be retired by 2030 (IESR, 2023) Ownership of coal plants by foreign investors could hamper the coal phase out. Approximately one third of Indonesia’s grid-connected coal fleet is owned by investors from Japan, Korea and China (Cui et al., 2023). Foreign-owned coal assets are safeguarded by international investment law, enabling investors to contest coal phase-out policies and pursue compensation. International arbitration offers an additional layer of protection for foreign investors (Boute and Hug, forthcoming).

–

Concrete plans for achieving a net zero energy sector are still pending. Draft National Energy Plan (RPP KEN) are currently being discussed in the parliarment (DPR). The National Energy Plan and National Energy Supply Business Plan (KEN and RUPTL 2024) is expected to describe a trajectory towards a net zero electricity system.

High Barriers

The Indonesia Net Zero Emission (NZE) Roadmap for the energy sector, introduced by the Ministry of Energy and Mineral Resources (MEMR) in September 2022, delineates a strategic framework to reach peak emission in 2035 and net zero emission in 2060. The phasing out coal-fired power generation as a national energy source starts in 2030 and attaining an more than 70% renewable energy share within the national energy mix by 2060 (CPI 2023).

Low Barriers

There are no specific targets for renewable energy deployment in order to produce green hydrogen

High Barriers

In order to contribute to the RE target for the energy sector, Indonesia adopted a 20% biodiesel blending in transport fuels (Kurniawan, 2019).

High Barriers

There are no specific targets (or measures) for increasing the share of renewables in the heating & cooling and industry sector

High Barriers

Not Assessed.

–

According to RUPTL 2021-2023, 10.6 GW of additional renewable power generation will be added by 2025. Additionally, JETP CIPP sets target of 34% renewable energy shares by 2030 and net zero in power sector by 2050. These targets are yet to be aligned with the upcoming electricity plans (RUKN).

Medium Barriers

Not Assessed.

–

The country's National Energy Policy (KEN) 2014 set a target of 23% of renewables in the energy mix by 2025 (including 10 per cent bioenergy, 7 per cent geothermal, 3 per cent hydropower and 3 per cent other NRE). However, this target will likely be missed and lowered to 17-19% in the next iteration yet to be published in 2024 (Ember 2024).

High Barriers

Not Assessed.

–

Under the JET-P scenario, the target for RE with be raised to 44% in 2030 and 66% in 2035 (Ember 2024). Under the JET-P scenario, solar will account for 8% of electricity generation in 2030 and wind for a 6% share (Ember 2024).

Medium Barriers

Not Assessed.

–

Targets are monitored and reported periodically by Ministry of Energy and Mineral Resources. Automatic adjustment of policies: There is no process to automatically trigger policy modifications if RE targets are not met. 

Low Barriers

The coal phase out has still not started and therefore re-skilling programs or plans are not yet in place. First estimates for re-skilling needs have been provided by studies in the context of JET-P. For instance, IESR/New Climate (2024) estimates that the number of coal workers will decrease from 400,000 to 200,000 by 2030 (under JET-P scenario), requiring re-training or re-location for coal workers which are not close to retirement.

High Barriers

Coal mining activities are in a few regions in Indonesia, namely South Sumatra as well as South, Central, and East Kalimantan. Enabling conditions for economic transformation have been initially identified (IESR 2022). The current practice is top-down planning, where central government gives growth target to the the regional government. The regional transition plan (RPJPD) is underway. The regional/provinces also called for multi-stakeholder dialogue to consider input from the region.

Medium Barriers

Specific programs to locate new RE capacity in coal regions are not in place.

Medium Barriers

There are no specific support policies to incentivize community owned RE projects. However, specific projects that have received funding from the Ministry of Energy and Mineral Resources (MEMR). For instance, in 2016, MEMR awarded Muara Enggelam a Special Allocation Fund of IDR 3.9 billion (USD 250,000) to construct a 35 kWp communal solar grid. Watukarere received assets under the Physical Special Allocation Fund (DAK Fisik) from the central government in 2017 to develop a communal 30 kWp mini-grid (CPI 2024).

Medium Barriers

There are no legal requirements for including the local population in financing RE projects. However, there are regulation of local content requirement in energy projects which aimed to grow local renewable energy industry

Medium Barriers

Public consultations are mandatory in large scale power projects. The processes are conducted in several stages. In some major instances, community protests happen despite obtaining the development permit from the local government.

Medium Barriers

Indonesia has established local content requirements to foster benefits related to local manufacturing and job creation. However, due to domestic supply bottlenecks and financing challenges, the initial target for PV module manufacturing of 60% was reduced to 20% (new local content regime based on MEMR 11/2024). The initially high shares of local content requirement have been perceived as a barrier for rapid deployment of renewables (Case 2024: 34).

Low Barriers

New Climate Institute, Ember, and IESR as well as JETP working group provided an initial assessment of job creation potential related to the energy transition/renewables.

Low Barriers