Indonesia's Ten-Year Power Procurement Strategy Offers Encouraging Indications for Renewable Energy Expansion: according to investors and the Secretariat of the Jakarta Energy Transition Partnership
Industry experts gathered at the "Unlocking Capital for Sustainability Indonesia" forum have emphasised the need for policy reforms to drive funding towards clean energy projects in the country. The reforms aim to align with broader trends in Indonesia's energy sector and foster a stable and attractive investment environment.
One of the key areas of focus is the alignment with international standards. This involves updating liability provisions and insurance standards, particularly for nuclear energy, to match international best practices. The reforms will include robust waste management protocols, as outlined in Presidential Regulation No. 12/2025.
Another crucial aspect is the strengthening of the legal framework to support renewable energy targets. Indonesia aims to achieve a minimum of 23% renewable energy by 2025 and 31% by 2050, as mandated by PP 79/2014. To meet these targets, strong enforcement and incentives are required to attract investment.
Competitive incentives and financing models are also being developed to encourage private sector investment in clean energy. This includes innovative financing options and exit strategies to avoid excessive sovereign guarantees.
Grid modernization and flexibility are essential for the integration of intermittent renewable energy sources. Enhancing power system flexibility through modernization, grid digitalization, and battery storage will support the growth of renewable energy.
Local content requirements (TKDN) for clean energy technologies will be implemented and enforced to boost domestic manufacturing and supply chain resilience.
Policy coherence and consistency across different levels of government are also vital to foster a stable investment environment.
Most capital investment in power generation comes from the private sector, and regular updates are critical for investor confidence. However, updates to the Electricity Supply Business Plan (RUPTL) have been delayed due to the Covid-19 pandemic, creating uncertainty for developers and investors.
The RUPTL aims to expand renewable energy capacity to 69.5 gigawatts (GW) by 2034, with 76% expected to come from renewables. Meeting this demand sustainably requires significant renewable energy integration and infrastructure upgrades.
Experts have cautioned that enabling policy reforms are urgently needed to implement the accelerated build-out of new renewable power plants. However, there are concerns about whether there are enough bankable projects ready for investment, with potential for investment of at least US$500 million in renewable energy projects.
The high cost of electrifying remote island communities is another challenge. This affects the price of electricity in those areas, making it unaffordable for many residents.
Both Paul Butarbutar, head of the Just Energy Transition Partnership (JETP) secretariat, and Putra Adhiguna, managing director of independent think tank, the Energy Shift Institute, have highlighted the need for policies that support small-scale renewable energy in underserved regions.
Dody Setiawan, senior analyst at energy think tank Ember, has highlighted significant shortfalls in solar and wind deployment, with installed capacity remaining below 1 GW, far behind the 4 GW cumulative target by 2024. An additional 10.3 GW of energy storage, including pumped-storage hydropower and batteries, is also planned to support grid reliability.
The RUPTL targets 42.6 GW of new renewable capacity, 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).
Adhiguna expresses cautious optimism, noting that think tanks and policy advocates are continuing to push the government for the expansion of renewables. Without predictability in planning documents like the RUPTL, investor confidence wanes, and further delays can lead to doubts about Indonesia's climate commitment. The RUPTL is widely seen as a key milestone in the country's energy transition and serves as the main planning document guiding electricity development.
- The industry experts emphasized the importance of policy reforms to drive funding towards clean energy projects, aligning with international standards and favoring renewable energy, such as solar and wind.
- Indonesia's policy reforms will also focus on updating liability provisions and insurance standards for nuclear energy to match international best practices and will implement robust waste management protocols.
- To achieve the country's renewable energy targets, a strong legal framework, incentives, and funding models for the private sector must be developed, reducing excessive sovereign guarantees.
- Modernization of the power grid, including digitalization and battery storage, is essential to ensure flexibility and facilitate the integration of intermittent renewable energy sources in the Indonesian energy sector.
- To boost domestic manufacturing and supply chain resilience, local content requirements for clean energy technologies will be implemented and enforced.
- Policy coherence and consistency across different levels of government, regular updates for investor confidence, and addressing challenges in renewable energy deployment in remote areas are vital components for a stable investment environment and the successful energy transition in Indonesia.
