Jakarta, December 5, 2024 – The Institute for Essential Services Reform (IESR) has consistently monitored the development and direction of Indonesia’s energy transition as outlined in the Indonesia Energy Transition Outlook (IETO) 2025 report published since 2018. IESR highlights that despite the government’s pledge to reduce emissions and increase the utilization of renewable energy, the reality of Indonesia’s energy transition has yet to bear fruit. The fossil energy mix continues to rise, with electricity supply from power plants reaching the highest level in the last five years, while renewable energy growth is much lower. In addition, energy intensity is also still below the target set by KEN.
The National Long-Term Development Plan (RPJPN) Law 2025-2045 with energy transition as one of its main objectives, seems to be countered by the new National Energy Policy (KEN) which actually lowers the renewable energy mix target to 17-19 percent in 2025 and the target in 2045. In addition, since the launch of the 2021-2030 Electricity Supply Business Plan (RUPTL), which is claimed to be a green RUPTL, it has not brought significant changes. Most of the renewable energy generation projects that must be executed in 2021-2025 have not been auctioned, constructed and operated. Until 2024, the achievement of the renewable energy mix target is only around 13.1 percent, even though the original target was 2 percent.
IESR assesses that Indonesia’s energy transition is at a crossroads between continuing to accommodate the economic and political interests of the fossil industry, or immediately shifting to renewable energy and building a low-carbon economy. IESR notes that indecision in determining the direction and pace of the energy transition could threaten the achievement of the net zero emission (NZE) target before 2050, as targeted by President Prabowo in his statement at the G20 Summit in Brazil, while weakening Indonesia’s chances of becoming a major player in the global renewable energy market.
Fabby Tumiwa, Executive Director of IESR, said that the energy transition in 2024 is still in the consolidation stage as a result of the change of national leadership with new targets and priorities and the uncertainty of the global and Indonesian economy. Based on the Transition Readiness Framework (TRF) developed by IESR in 2022, policy consistency and leadership are seen by business players as one of the biggest obstacles in Indonesia’s energy transition agenda. Similarly, in TRF 2024, despite significant progress in the cost competitiveness of low-carbon technologies and fuels, the energy transition is still hampered by a lack of political commitment, unattractive regulations, and unsupportive governance.
Fabby called 2025 a critical point to formulate reformative strategies and policies to accelerate a fair and efficient energy transition. He also mentioned the government’s strategy that tends to focus on carbon storage and capture technology (CCS/CCUS) which is immature, expensive and risky, compared to solar, wind energy, and battery or energy storage technologies that are already available in the market and are increasingly competitive. Meanwhile, many countries have committed at COP-28 in 2023 to contribute to global efforts to double down on energy efficiency and triple up by 2030. These commitments will increase investment and funding opportunities for renewable energy and energy efficiency.
“The good news is that President Prabowo Subianto in the G20 Brazil Summit forum stated that Indonesia will end coal-fired power plants in 2040. This aligns with the mandate in Presidential Regulation 112/2022 to retire coal-fired power plants earlier than their economic life. Earlier at the APEC Summit, the president stated that Indonesia will achieve 100 percent renewable energy within 10 years from now. This mission is not impossible if complemented by efforts to carry out policy reforms, massive regulation, and integrated electricity system planning so that it can ensure its energy security and contribute to 8 percent economic growth, as envisioned by President Prabowo’s administration,” Fabby explained at the launch of IETO 2025 (5/12/2024).
Raditya Wiranegara, IESR Research Manager and author of IETO 2025 revealed that all sectors are still significantly dependent on fossil fuels, with coal, liquefied petroleum gas (LPG), and fuel oil (BBM) dominating the use. In the electricity sector, 81 percent of its energy came from fossil energy in 2023. Not only that, but the capacity of captive power plants outside PLN’s business area grew to 21 GW in 2023, contributing to a 27 percent increase in emissions in the same year. In addition, 87 percent of households use subsidized LPG, with total subsidies reaching Rp83 trillion in the fourth quarter of 2024. Meanwhile, renewable energy only makes a minimal contribution to the energy mix. For example, in the industrial sector, renewable energy only contributes 6.52 percent of the total energy used.
“The government needs to progressively reduce fossil fuel subsidies and shift the subsidies to the renewable energy sector. In addition, President Prabowo’s statement about the early retirement of coal-fired power plants in 2040 must be realized immediately, starting with the least efficient power plants instead of equipping them with CCS/CCUS technology. From our analysis, early retirement of PLTU Cirebon-1, for example, will require its carbon reduction cost to be around USD 31-40/tCO2e, lower than CCS, which reaches USD 62-324/tCO2e. Not only that, but the government also needs to improve the supervision of captive PLTUs and encourage their early retirement.
Anindita Hapsari, IESR’s Agriculture, Forestry, Land Use, and Climate Change Analyst, stated that without strategic and ambitious steps to reduce emissions across all sectors, Indonesia risks facing global warming of more than 3 degrees Celsius, based on IESR’s modeling. She urged the government to design a planned and phased approach involving all parties, including local governments, to support Indonesia’s energy transition. Anindita emphasized short-term strategies to address immediate issues and long-term strategies to build the foundation of a sustainable low-carbon energy system aligned with the Paris Agreement.
In the short term, the government needs to first enforce compliance in ensuring the implementation of existing policies, such as tightening fuel emission standards and implementing green buildings. Second, provide incentives to accelerate the adoption of low-emission technologies, such as electrifying road vehicles and implementing carbon trading mechanisms. Third, support sectors such as mineral processing to be more environmentally friendly and prioritize and accelerate renewable energy procurement.
Meanwhile, in the long term, the government needs to first build renewable energy infrastructure, such as developing the production capacity of green hydrogen and ammonia as future fuels and strengthening electricity grid infrastructure to support the integration of renewable energy. Second, establish market mechanisms that promote energy efficiency and sustainability should be developed. Third is the electricity system’s flexibility with additional services and innovations such as ESCOs (Energy Service Companies). Fourth, the role of regions in implementing energy transition policies, such as local resource management and regional energy planning, must be strengthened.
