Jakarta, 11 December 2024– The Indonesian government acknowledges the importance of fostering the decarbonization of the energy system as it brings environmental, social, and economic benefits to the nation. The integral part of energy transition is underscored in the National Long‐Term Development Plan (RPJPN) 2025–2045, where it is identified as a key game-changer for Indonesia’s economic growth. Under President Prabowo Subianto’s leadership, the new administration has set ambitious targets, including achieving 8 percent economic growth, energy self-sufficiency, a complete transition to 100 percent renewable energy within the next decade, and coal phase-out by 2040.
The Institute for Essential Services Reform (IESR) applauds these ambitions and encourages substantial reform in the planning, construction, and operation of the power system. Phasing out coal plants by 2040 and reaching 100 percent renewable energy is daunting but possible, said IESR Executive Director Fabby Tumiwa. He emphasized that, as a first step, the government must rapidly increase renewable energy deployment in the next five years to reach 60 to 80 GW, with more than half coming from solar PV, before allowing 5 to 8 GW of coal plants to be retired nationally by the end of 2030. Solar PV dominates the new capacity for renewable energy deployment because of its abundant resources and lowest capital costs. It can be developed relatively faster compared to other renewable energy technologies.
Solar and wind are intermittent renewable energy sources that are frequently cited as a major barrier to being largely integrated into the power system. IESR argues that this challenge can be addressed by optimizing load management, strengthening and modernizing the grid, building more energy storage systems, and enhancing grid flexibility. These initiatives would ensure a stable supply of environmentally friendly energy, maintain system reliability, and bolster energy security.
“Planning the grid ahead to anticipate large-scale variable renewable energy integration into the power system is a must. Once planning is done, constructing the grid presents another challenge, as it takes time to secure the transmission’s right of way and finance transmission projects, which typically have a poor return on investment. In this case, public financing support for PLN to build transmission infrastructure should be considered a government commitment to fostering the energy transition,” said Fabby.
Erina Mursanti, Manager of Green Energy Transition Indonesia at IESR, highlighted that the UK has innovated by implementing electricity network services through battery storage, enhancing flexibility in responding to electricity demand, and developing interconnection networks to facilitate the large-scale integration of renewable energy.
“The Indonesian government plans to establish a green electricity network that will connect power systems across the country starting in 2029. This initiative also includes developing a smart grid and operating flexible power plants to integrate renewable energy sources, such as wind and solar. Indonesia can collaborate with the UK to secure financial support and capacity building,” Erina explained.
The UK government, through the Green Energy Transition Indonesia (GETI) project in collaboration with IESR, encourages Indonesia to accelerate its energy transition. Rapidly scaling up renewable energy deployment by 2030 will make renewable electricity more competitive, drive green hydrogen development, unlock its potential demand, and advance industrial decarbonization, contributing significantly to Indonesia’s net-zero target by 2060.
The GETI project focuses on two key outcomes. First, it aims to translate Indonesia’s Comprehensive Investment and Policy Plan (CIPP) into action by mobilizing support to accelerate policy reforms that boost renewable energy deployment in the power sector. Second, it establishes the Indonesia Green Hydrogen Accelerator, laying the foundation for a green hydrogen market aligned with Indonesia’s 2023 National Hydrogen Strategy.
Erina also stressed out that the critical role of policy integration in promoting renewable energy adoption is significant to establish the green hydrogen ecosystem in Indonesia.
To support these objectives, the British Embassy Jakarta and IESR organized a Focus Group Discussion (FGD) on “Improving Power System Flexibility for Rapid Energy Transition” in Jakarta on December 10, 2024. The FGD, attended by representatives from MEMR and PLN, served as a platform for exchanging knowledge and best practices, addressing challenges, and fostering collaboration.
According to Erina, the National Energy Policy (KEN) and the New Energy and Renewable Energy Bill (EBET) must align with the RPJPN and the Electricity Supply Business Plan (RUPTL), incorporating ambitious renewable energy mix targets. Such policy alignment, coupled with high targets, would send strong positive signals to investors, encouraging greater investment in renewable energy development.
The National Electricity General Plan (RUKN) 2023–2060 estimates that developing a super grid connecting Sumatra, Java-Bali, Kalimantan, Sulawesi, and Nusa Tenggara will require an investment of approximately USD 25 billion for 50,000 kilometers of transmission network.
Muhammad Bintang, Energy and Power Resources Research Coordinator at IESR, emphasized the importance of ensuring licensing certainty, transparent project governance, and attractive financing schemes to facilitate international cooperation, including partnerships with the UK. He noted that although Indonesia’s vertically integrated electricity market began allowing market participation through the IPP scheme in the 1990s, current regulations have not been updated to address modern needs. For example, there is no clear mechanism for PPAs involving storage assets for ancillary services or capacity markets, which are crucial for increasing renewable energy penetration.
“Once a legal framework is established, support schemes will be essential to enhance the economic viability of storage projects, given the relatively new and costly nature of the technology. Alongside providing incentives for pilot projects, such as tax breaks and waivers on local content requirements, Indonesia can adopt the UK’s strategy with its capacity market auctions, which have spurred storage development. Recently, the UK also introduced a cap-and-floor scheme to encourage long-duration storage and interconnection projects,” Bintang remarked.