Indonesia's fresh 10-year power procurement strategy delivers optimistic indication for renewable energy growth: as per investors and JETP secretariat commentary
Indonesia is taking significant steps towards a cleaner energy future with the release of the Electricity Supply Business Plan (RUPTL) 2025-2034. This plan, developed by state utility PT Perusahaan Listrik Negara (PLN), aims to expand renewable energy capacity with a goal of 69.5 gigawatts (GW) in new power generation capacity by 2034.
The RUPTL outlines short-term targets for renewable energy capacity, which is expected to account for 76% of the new power generation capacity. Solar energy will lead the charge, with a planned capacity of 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).
However, the road to a renewable-focused energy landscape is not without challenges. Large-scale renewable projects on-grid may benefit from current tariff and policy frameworks, but small-scale off-grid systems (under 1 megawatt) often struggle to attract investment and require additional policy support.
Policy Reforms for a Clean Energy Future
The current policy reforms needed to ensure funding flows to clean energy projects in Indonesia's 10-year power procurement plan (RUPTL) primarily involve creating supportive regulations that attract private investment, developing blended financing mechanisms, and strengthening local supply chains and industrial policies.
Key reforms include:
- Implementing supportive regulations that make renewable energy projects commercially viable and attractive for private investors. Currently, slow regulatory implementation limits private financing participation, so reforms should focus on streamlining permitting, tariff structures, and market rules to reduce risks for investors.
- Utilizing public funds strategically to trigger private investment through concessional loans, guarantees, and blended finance mechanisms. Public finance should be disbursed to de-risk projects and incentivize private capital participation, especially since many projects are not yet fully bankable on their own.
- Strengthening local content requirements (TKDN) and domestic industry development to build a resilient clean energy supply chain. This enhances both supply security and economic benefits, supporting sustainable industrial growth aligned with renewable energy deployment goals.
- Modernizing grid infrastructure and increasing flexibility via investments in battery storage, grid digitalization, and interconnection to integrate increasing shares of variable renewable energy reliably.
- Aligning the 10-year RUPTL with ambitious climate targets, such as net-zero emission commitments and updated Nationally Determined Contributions (NDC 3.0), to provide clear long-term policy signals that help attract investments into renewables.
- Facilitating diversified international finance partnership, including but not limited to Chinese investments, while ensuring affordable renewable energy prices and balanced industrial development.
Ensuring a Just Energy Transition
The RUPTL targets 42.6 GW of new renewable capacity. However, it's crucial to design policies that support small-scale renewable energy in underserved regions to facilitate a just energy transition. Households in villages without grid access currently pay around 5,000 rupiah (US$0.31) per kilowatt-hour, plus a connection fee of 600,000 rupiah (US$37) and a monthly charge of 16,000 rupiah (US$0.98).
Experts have cautioned that enabling policy reforms are urgently needed to implement the accelerated build-out of new renewable power plants. Regular updates to the RUPTL are critical for investor confidence, as most capital investment in power generation comes from the private sector.
The RUPTL, widely seen as a key milestone in the country's energy transition, serves as the main planning document guiding electricity development. However, meeting this demand sustainably will require significant renewable energy integration and infrastructure upgrades, especially considering Indonesia's electricity demand is projected to grow significantly, reaching 445 terawatt hours (TWh) by 2030, with a 100% electrification ratio and 94.1 million customers.
Moving Forward
The RUPTL demonstrates that Indonesia is approaching an "inflection point" in its energy transition. Meeting this demand sustainably will require significant renewable energy integration and infrastructure upgrades. Unlocking capital for sustainability is crucial, and events like the Unlocking capital for sustainability forum in Kuala Lumpur, Malaysia, can help facilitate this.
However, despite the ambitious development plan, implementation gaps and misalignment with Indonesia's climate goals remain major concerns. The government must continue to push for policy reform and work towards a just energy transition that ensures reliable and affordable electricity for all Indonesians, especially those in rural and remote communities.
Adhiguna expressed cautious optimism, noting that think tanks and policy advocates are continuing to push the government for the expansion of renewables. However, there are concerns about whether there are enough bankable projects ready for investment.
In summary, reforms should focus on regulatory clarity and support, innovative financing frameworks leveraging public funds to mobilize private capital, supply chain development, and infrastructure modernization, all aligned with Indonesia’s ambitious energy transition targets outlined in the national climate and energy strategies.
- Indonesia's 10-year power procurement plan (RUPTL) aims to achieve net-zero emission commitments and updated Nationally Determined Contributions (NDC 3.0), aligning with the global sustainability goals (SDG).
- The RUPTL emphasizes a shift towards clean energy, with renewable energy expected to account for 76% of new power generation capacity and solar energy leading the charge.
- To ensure funding flows to clean energy projects, policy reforms are needed, including creating supportive regulations, utilizing public funds strategically, strengthening local industry, modernizing grid infrastructure, and facilitating diversified international finance partnerships.
- Despite the ambitious RUPTL targets, challenges remain, such as the need for policy support for small-scale off-grid systems, ensuring affordable renewable energy prices, and balancing industrial development.
- The RUPTL serves as a key milestone in Indonesia's energy transition, but meeting demand sustainably requires significant renewable energy integration and infrastructure upgrades, considering the growing electricity demand and 100% electrification ratio by 2030.
- Continuous policy reform and a just energy transition that ensures reliable and affordable electricity for all Indonesians, particularly rural and remote communities, are essential for a successful energy transition and a sustainable future.
