Slow progress: A barge carrying coal near a coal-fired power plant in Banten province. Indonesia has committed to moving away from the fuel despite being one of the world’s top exporters. — AFP
JAKARTA: With the year drawing to a close, Indonesia appears set to miss its renewable energy target in the national power mix again, according to the Energy and Mineral Resources Ministry.
The shortfall underscores drastic failure to fulfill national commitments in the energy transition, highlighting the persistent gap between progress on the ground and the ambitious green-energy goals pledged by President Prabowo Subianto.
“One of the most critical barriers is the slow procurement process within state utility firm PLN, which has delayed the implementation of renewable-energy projects and prevented them from progressing on schedule,” Mutya Yustika, an energy economist at the Institute for Energy Economics and Financial Analysis, said to The Jakarta Post on Dec 15.
As of October, renewables accounted for only 14.4 % of the national energy mix, equivalent to 15.47GW of installed capacity, falling short of the 15.9 % target set out in PLN’s 2025 to 2034 electricity business plan.
Hydropower dominates the renewable segment, contributing 7.1 % of the national mix with an installed capacity of 7.57GW.
Biomass power plants account for 3% (3.17 GW), followed by geothermal at 2.6% (2.74GW).
Solar energy contributes around 1.3% (1.37GW), while wind power makes up about 0.1% (0.15GW).
Indonesia’s power system remains dominated by fossil fuels which, coupled with electricity oversupply in key grids such as Java and Bali, has reduced the urgency for new renewable energy development.
“Compounding this is inadequate transmission and distribution infrastructure, which is not yet ready to integrate renewable energy at scale,” Mutya added.
The Energy and Mineral Resources Ministry’s acting director-general of electricity Tri Winarno expressed scepticism that the renewable energy targets in PLN’s latest electricity supply business plan can be achieved.
“The models indicate we still have a 2% gap,” he said on Nov 14. “I don’t think we will close that gap by year’s end.”
This gap is evident on two major fronts: policy and finance. On one hand, ambitious targets for renewables coexist with proposed regulatory exemptions that could lock in new coal capacity for decades.
On the other, the landmark Just Energy Transition Partnership is struggling with slow disbursement and has seen a symbolic early coal retirement project collapse, raising questions about its implementation pathway.
The cornerstone of Indonesia’s energy transition ambitions is outlined in PLN’s latest business plan, which targets the addition of 42.57GW of renewable energy capacity, supported by 10.26GW of energy storage.
As detailed in the document, solar power is set to dominate with 17GW, followed by hydropower at 11.7GW, wind at 7.2GW and geothermal at 5.1GW.
Financing this transition, however, requires an unprecedented investment of 1.7 quadrillion rupiah or about US$101.6bil over the coming decade, with 70% expected to come from private capital.
While the government has touted several strategies to improve project attractiveness, recent years have seen persistent headwinds slowing final investment decisions and ground breaking, including regulatory uncertainty, cumbersome permitting processes and financing hurdles.
“The government needs to implement stronger policies and incentives to fully optimise renewable energy,” said Dinita Setyawati, senior South-East Asia electricity policy analyst at energy think tank Ember, to the Post on Dec 15, stressing that the government should prioritise expanding the national transmission grid.
“Developing inter-island and cross-border interconnections is also crucial to unlocking renewable-energy potential, ensuring a reliable power supply and improving overall energy efficiency.”
Indonesia is forecast to add between 1.5GW and 2GW of data centre capacity by 2027, equivalent to about 5% of the current 40GW peak demand.
Yet physical constraints continue to slow the development of new generation capacity.
These constraints include limited inter-island grid connectivity, a lack of energy storage, wind potential concentrated far from demand centres in Sulawesi and scarce land availability for projects in Java.
Moreover, key projects such as geothermal, hydropower and gas face long development timelines.
Given these limitations, solar power emerges as Indonesia’s most viable near-term option.
“Project-level economics ultimately determine how these policies translate into real deployment. Understanding how pricing and development costs affect returns is key to assessing the maturity of these evolving markets,” Ember wrote in a report issued on Dec 2.
This disconnect between national potential and local reality is starkly evident in the severe underfunding at the regional level.
Putra Maswan, a financial and economic analyst at the Institute for Essential Services Reform (IESR), noted that the renewable-energy budget for this year allocated to provincial governments totals just 426.7 billion rupiah across 33 provinces.
This constrained funding limits local governments’ ability to develop necessary infrastructure, thereby suppressing the overall renewable-energy mix.
He cited Bali as a case in point. Despite having solar potential of up to 21GW, the province has achieved less than 3% of its 11% renewable-energy target for this year.
“We identified a large gap between Indonesia’s abundant renewable energy potential, the planning process and actual implementation in the field. This indicates persistent challenges in translating government ambitions into real projects,” said IESR executive director Fabby Tumiwa. — The Jakarta Post/ANN
