Indonesia Renewable Energy

Indonesia—No 100% commitment by 2050
Benchmark: 31% renewable target by 2050

Indonesia has not committed to reach 100% renewable energy by 2050. By 2025, Indonesia plans to raise renewable energies from the current 7% to 23% share in the national energy mix. By 2050, Indonesia seeks to raise renewables to 31% of the mix.

Indonesia has significant endowments of renewable energy resources; solar, wind, marine and an estimated 40% of global geothermal reserves. It is important to note, however, that 80% of Indonesia’s potential for geothermal energy is located in conservation forests. If geothermal is to be developed, it must limit its environmental impact. At the very least, peat domes should not be developed for any projects, even renewable energy plants. Indonesia’s extensive coastline allows it to have a 75 GW hydro and marine potential capacity. Indonesia’s coast also opens up opportunities for offshore wind energy development.

The state electricity agency, PLN, released the RUPTL (Rencana Umum Penyediaan Tenaga Listrik) 2016-2025 plan for Indonesia’s electrification. Of the 80.5 GW of new capacity to be installed in the next decade, 22 GW will be in renewable energy (6,150 MW of geothermal, 13,100 MW of large hydropower, 1,365 MW of small hydropower, 444 MW of solar, 640 MW of wind, and 488 of biomass). There are still 20 GW left to be allocated. Although hydro has the greatest potential, the focus of PLN remains on thermally generated sources (coal at 20 GW and gas at 13 GW). To reduce GHG emissions, PLN should concentrate the unallocated energy sources in renewables, especially ecologically sounder options such as hydro and offshore wind.

Technological and financial barriers prevent Indonesia from tapping its significant endowment of renewables. Capacity building, technology information sharing, and better market coordinations are some ways to reduce the barriers to adopting renewable energy technology. Land rights also need to be clarified. Limiting subsidies on other forms of energy would also help the development of renewables.

However, removing subsidies on gas and fuel to make renewables more competitive is very unpopular among Indonesian consumers. Barriers to foreign investment and foreign IPPs must be reduced to increase renewable development given Indonesia’s current electrification targets and plans. PLN allocations to independent power plants (IPPs) to meet its electrification targets will not be possible without bringing in investment from abroad; 57% of the government’s fast track plan to install 35 GW by 2019 is slated to come from private entities that will produce 45.7 GW of PLN’s 80.5 GW target by 2025. This kind of development requires outside funding sources. The skills and technology of foreign firms are also necessary to develop Indonesia’s energy sector.

Indonesia must be sure to put in environmental and social safeguards before it reduces foreign investment barriers. Fortunately, most of the foreign investment has its eyes set on renewables. The Ministry of Energy and Mineral Resources intends to establish a government enterprise similar to PLN that will concentrate on renewables. This will allow for greater flexibility in renewable energy development and reduce the monopolistic power of PLN.

Presidential Decree No. 12/2017 places a cap on renewable energy costs to 85% of local energy costs if those costs exceed the national average. This feed-in tariff (FiT) applies to all renewables except geothermal and waste-to-energy plants. It subsidies the heavy start-up costs of renewables and decreases PLN’s financial burden in regions with high local production costs.

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RUPTL 2016-2025 plan: