Indonesia, as a developing country with the fourth-largest population in the world, continues to strive to maintain its economic growth at 6-7% in order to become a developed nation. To achieve the goal of Indonesia Emas 2045, the eighth elected president, Prabowo Subianto, has even promised to boost economic growth up to 8% during his five-year administration (Rachman, 2024). This is a highly ambitious target, which means that key sectors supporting the economy must be fully prepared to facilitate the anticipated economic activities. One of the most critical sectors supporting economic activity is energy.
Amid the strong push for energy transition, the energy sector must also undergo significant reform, shifting from its reliance on fossil fuels to renewable energy sources. These two goals—economic growth and energy transition—must progress hand in hand so that Indonesia not only succeeds in becoming an economically advanced country but also reduces the impacts of climate change by freeing itself from fossil fuels. Therefore, the energy transition must also provide long-term economic benefits. Several factors contribute to the energy transition’s potential to bring long-term economic advantages, such as attracting new foreign investments, creating an ecosystem for innovation and new energy technologies, transforming the job market towards “green jobs,” especially in the energy sector, and opening opportunities for new industries that support the energy transition.
The Ministry of Energy and Mineral Resources (ESDM) has stated that an investment of up to US$ 36.95 billion is needed over five years to achieve the energy mix target through renewable energy sources (NRE) (Pribadi, 2019). However, in 2023, investment realization in the NRE sector fell by 9.3%, down to US$ 1.5 billion from US$ 1.6 billion in 2022 (Komalasari, 2024). Based on the US$ 36.95 billion target, an estimated US$ 7.39 billion in investment per year is required. This figure is far from the average investment realization of US$ 1.55 billion over the past three years (2021-2023). Meeting this target will undoubtedly require hard work and cooperation between government and non-government entities, particularly between the Ministry of Investment/BKPM and the Ministry of Energy.
The arrival of this investment is closely linked to the establishment of an innovation and technology ecosystem in the energy sector, which has yet to meet its targets. In 2021, Indonesia’s renewable energy capacity reached 11,157 megawatts (MW), which fell short of the year’s target of 11,357 MW (Renewable Energy Indonesia, 2024). Likewise, the renewable energy mix in the national energy mix is progressing slowly, projected to reach only around 13-14% by 2025 (Adi, 2024).
According to a 2020 report from the International Renewable Energy Agency (IRENA), the global renewable energy sector employed 7.28 million workers in 2012, increasing to 12.02 million workers by 2020 (Mediana, 2023). This means that over eight years, the global renewable energy sector absorbed around 590,000 workers per year, a relatively small number. In Indonesia, according to the IESR publication “Deep Decarbonization of Indonesia’s Energy System: A Pathway to Zero Emissions by 2050,” the creation of jobs from the use of 100% renewable energy is expected to reach almost 1.5 million jobs by 2030 and nearly 3.5 million by 2050 (IESR, 2021). With its large population, Indonesia has a great opportunity to create significant employment, which must align with the inflow of investment.
Although investment in the renewable energy sector has not yet reached the target and the number of renewable energy plants and job creation in the energy transition sector remains low, there are still many opportunities for improvement as a stimulus for future economic growth. The energy transition, aimed at reducing greenhouse gas emissions, must also bring long-term economic benefits. These benefits should not only be limited to the energy sector but should also extend to other industries, from large-scale to medium-sized enterprises. The growth of new manufacturing industries, such as solar cell, inverter, battery, and geothermal equipment manufacturing, will further support this transition. The growth of domestic renewable energy manufacturing industries is also driven by the Domestic Content Requirement (TKDN), which compels the ecosystem to be developed locally. This TKDN requirement serves as a key factor in ensuring that the energy transition provides long-term economic benefits.
