Indonesia

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

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

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

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

Medium 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

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

Indonesia’s renewable energy procurement remains a high barrier for new entrants. The procurement schedule is still unclear and does not provide a reliable signal of future auction demand, even relative to the RUPTL. In addition, participation is limited to developers on PLN’s selected provider list (DPT), but the process for joining the list is itself opaque and unclearly defined, creating an additional entry barrier for new players.

Medium Barriers

By regulation the PLN can only procure renewable energy through direct selection (auction with selected list providers) or direct appointment (entity to provide service and goods are selected directly). The direct appointment is only reserved to specific case and renewable energy (e.g. geothermal power).

Process of procurement is lengthy process, PLN will conduct first its own estimate pricing. This will be the basis of auction (and negotiation later on). Afterwards, the mechanism is decided by PLN (whether there is strategic partnership, mandatory partnership with PLN subsidiaries, or more IPP equity etc).

Since it takes long time to prepare one per project, and there is not yet improvement in the process, this can be potential barrier especially since they actually have to ramp up procurement due to distributed nature of renewables.

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The tariff for renewable energy projects in Indonesia is now
governed by Presidential Regulation 112/2022, which replaced MEMR 50/2017. Under the current framework, tariffs are benchmarked against a ceiling tariff, representing an improvement over the previous regulation. However, negotiation after the auction is still part of the process, so the overall increase in transparency remains limited. PLN continues to use two procurement routes: direct selection and direct appointment. Direct selection is the main route for variable renewable energy projects, while direct appointment is mainly used for dispatchable renewable energy projects such as geothermal and hydropower.

Medium Barriers

Indonesia’s renewable electricity tariff is now benchmarked
against a ceiling tariff under Presidential Regulation 112/2022,
replacing the previous BPP-based approach. While this is an improvement in tariff setting, the auction process still involves post-bid negotiation, so transparency gains remain limited. The cost-plus margin framework, by contrast, refers to PLN’s broader electricity cost-recovery model (BPP) and is used to determine electricity sales tariffs, subsidies, and compensation to PLN rather than the RE PPA tariff itself.

Medium Barriers

Until 2022, renewable energy tariffs in Indonesia were based on an avoided-cost approach and capped at 85% or 100% of PLN’s local average generation cost (BPP), depending on the location. This was revised under Presidential Regulation No. 112/2022, which moved tariff setting to a technology- and location-specific ceiling tariff structure. The ceiling tariff is still informed by PLN’s own cost estimates and is intended to stay below the local average generation cost, so the tariff framework remains cost-constrained.

Separately, local content requirements have been a major project barrier because they increase costs before a domestic manufacturing base is fully established. However, the new rules have temporarily relaxed local content requirements for some solar projects, which is expected to support more project development. This relaxation is time-limited and, as currently framed, applies only until the end of 2025.

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

Indonesia has removed the monthly capacity charge for rooftop solar self-consumption, which should in principle encourage adoption, especially among industrial consumers. However, MEMR Regulation No. 2/2024 introduced a quota system that makes rooftop solar deployment dependent on available capacity in each grid area. This has become a major bottleneck, particularly for residential users and, to some extent, SMEs. Even industrial consumers that primarily self-consume their PV output remain subject to the quota if they are connected to the PLN grid; the alternative is to go off-grid, which requires additional battery investment.

Low Barriers

Under MEMR Regulation No. 2/2024, excess electricity exported to the PLN grid is no longer credited against the customer’s bill, although export itself is still allowed. At the same time, the previous 15% cap on installed capacity relative to contracted load has been removed, so system size is now determined by customer needs and the available quota in each grid area. In practice, this quota system has become the main bottleneck for rooftop PV, especially for residential users and SMEs, while even industrial self-consumption projects remain subject to the quota if they are grid-connected.

High 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

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

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.

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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

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

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

Renewable energy development sites are identified in the RUPTL, but renewable-energy zonation is not yet applied as a general rule and remains sparse. In practice, IPP developers are responsible for securing land and identifying suitable sites before participating in auctions. While some project areas are designated through special economic zones (KEK) or provincial spatial plans (RDTR), these are still exceptions rather than a nationwide spatial planning framework. A few strategic locations, such as parts of the new capital, have been reserved for low-carbon electricity, renewable energy, and hydrogen development.

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

Not Assessed.

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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

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.

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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.

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

Low 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

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

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

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

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

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

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

High Barriers

Battery energy storage systems (BESS) are still at an early stage in Indonesia, but the policy landscape has started to change. The 2025–2034 RUPTL now includes stand alone BESS targets, so storage is no longer absent from planning. However, procurement remains constrained because tariff rules for BESS are still not fully in place, limiting near-term project bankability.
In practice, the absence of a clear tariff regulation still means that procurement is not yet operational at scale. While PLN has already launched pilot projects and signed early RE+BESS PPAs, these arrangements have not yet been designed to provide broader grid flexibility services.

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

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 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

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

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 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

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

High 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

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. It is an important planning reference, but it does not have regulatory force.

Indonesia consists of several island grids. The government has committed to developing an integrated inter-island grid system (the Indonesian “super gridˮ) 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

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

As of 2026, policies are being developed for renewable electricity export to neighboring countries. 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

MEMR Regulation No. 11/2021 introduces a framework for
transmission tariffs and in principle allows third-party network access, but implementation remains unclear. In practice, each operating area has only one utility, and there are still no detailed implementing rules to operationalize third-party access. This creates legal uncertainty for private renewable energy investors, while PLN also has little incentive to open access because it may reduce its revenue.

High Barriers

PLN generally owns and operates the grid infrastructure in its
service areas, while private utilities are typically limited to industrial parks or special economic zones. There is no general regulatory framework for direct private grid lines between IPPs and consumers. Private sector participation in network investment has so far been limited to specific cases where an IPP is required to finance the connection between its plant and the grid, after which the asset is transferred to PLN.

Medium Barriers

Indonesia does not yet have an operational power wheeling
framework, and the scheme remains unregulated in practice. Although the government has proposed including power wheeling in the New and Renewable Energy Bill, no clear tariff or implementation rules are in force, so it cannot yet be used. PLN also remains the sole grid owner and operator in most areas, and while internal wheeling-cost studies have reportedly been conducted, no formal mechanism has been adopted.

Medium 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

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

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

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

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

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

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

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).

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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.

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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.

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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

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 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.

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Not Assessed.

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Not Assessed.

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Not Assessed.

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Indonesia’s RUPTL 2025–2034 increases planned renewable
additions to 42.6 GW out of 69.5 GW of total new capacity, alongside 10.3 GW of storage. 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

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

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

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 for renewable energy deployment in order to produce green hydrogen.

High Barriers

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

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

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.

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

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

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

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