Jakarta, December 4, 2025 – Although Indonesia has issued the Ministerial Regulation of the Energy and Mineral Resources (MEMR) No. 10/2025, which should regulate the roadmap for the phase-out of Coal-Fired Power Plants (CFPPs) to achieve the net-zero emission (NZE) target by 2060 or sooner, its implementation has not shown concrete progress. While Minister of Energy and Mineral Resources Bahlil Lahadalia has reiterated his commitment to supporting the early retirement of the Cirebon-1 CFPP (660 MW), no follow-up action has taken place to date..
On the other hand, a discourse has emerged suggesting that PLN might cancel the early retirement of the Cirebon-1 CFPP due to the high penalty cost, which are estimated to reach around Rp60 trillion. The Institute for Essential Services Reform (IESR) views PLN’s hesitation as a reflection of uncertainty stemming from the government’s failure to provide clear approval. The plan to retire the Cirebon-1 CFPP early was first initiated in 2021, when Indonesia joined the Asian Development Bank’s Energy Transition Mechanism (ETM), launched together with Finance Minister Sri Mulyani at the 26th Conference of the Parties (COP26) in Glasgow.
The plan progressed further when Indonesia held the G20 Presidency and signed the Just Energy Transition Partnership (JETP) in the same year. The early retirement of the Cirebon-1 coal-fired power plant has undergone technical and economic feasibility studies, and several agreements have been reached between PLN and PT Cirebon Electric Power. The Asian Development Bank (ADB) has also prepared financial support for the early retirement, but the Indonesian government still considers the proposed financing insufficient.
IESR believes that if the government does not promptly finalize the decision to retire the Cirebon coal-fired power plant, it will undermine Indonesia’s credibility and worsen the country’s investment climate, as such indecision contradicts its own policy commitments. Moreover, canceling the early retirement plan for Cirebon-1 will slow the energy transition and hinder decarbonization of the electricity sector. This stance is inconsistent with President Prabowo’s stated goal, delivered in his address to the House of Representatives on August 15, 2025, to move away from fossil fuels within the next ten years.
Chief Executive Officer (CEO) of IESR, Fabby Tumiwa, considers that the reluctance of the government and PLN to proceed with the early retirement of coal-fired power plants reflects a weakening commitment to the energy transition. Concerns about the high costs of early retirement focus solely on contract compensation, without considering the broader economic benefits from reduced pollution and lower public health expenditures. Moreover, the high compensation costs stem from policies and regulations established by the government itself, policies that it has been hesitant to revise.
An IESR study shows that retiring coal-fired power plants before 2050 would, in fact, generate greater long-term economic benefits compared to allowing them to operate until the end of their technical lifespan.
“In general, the high cost of early coal retirement is rooted in the structure of coal PPAs. These contracts include take-or-pay clauses that force PLN to pay for electricity at high capacity levels and lock in 30-year terms, three times longer than the normal payback period. On top of that, the coal DMO policy shifts fuel price risks to PLN and the state, creating the false impression that coal power is cheap. These policies also prevent renewable energy from competing on a fair playing field,” said Fabby.
Fabby added that electricity from coal-fired power plants is not actually inexpensive, as significant externalities, such as health impacts and air pollution costs, are never included in the price. These costs ultimately fall on the public and the government, including increased expenditures for BPJS (the national health insurance system). Furthermore, an IESR study found that the economic benefits of early coal retirement, such as subsidy savings, reduced risks, and lower health costs, are actually two to four times greater than the retirement costs themselves.
IThe 2022 IESR study estimates that achieving the Paris Agreement, aligned with early retirement of 9.2 GW of coal-fired power plants in the PLN system by 2030 would require USD 4.6 billion (Rp73.6 trillion). The cost increases to USD 27.5 billion (Rp440 trillion) to retire the remaining coal fleet by 2045. However, the potential economic benefits are far greater. Avoided coal electricity subsidies are projected to reach USD 34.8 billion (Rp556 trillion), while public health cost savings could amount to USD 61.3 billion (Rp980 trillion) over the same period.
In addition, investments needed for renewable energy, grid expansion, and energy storage, to replace coal generation and meet future electricity demand, are estimated at USD 1.2–1.3 trillion by 2050. Importantly, these expenditures are investments in infrastructure, not sunk costs borne by asset owners, and the resulting assets will ultimately belong to PLN and the state.
Canceling the early retirement of the Cirebon-1 coal-fired power plant would undermine efforts to accelerate the shutdown of other coal plants in Indonesia through the ETM or blended finance mechanism, thereby weakening, not strengthening, Indonesia’s green energy transition