Jakarta – The Institute for Essential Services Reform (IESR) highlighted that the preference for coal and unfavourable regulations are the main factors hindering this sector’s growth. In an official statement Monday, February 17, IESR stated that investment in the renewable energy sector in Indonesia is still far from the set target.
According to a recent report by the Ministry of Energy and Mineral Resources (MEMR), realised investment in the new renewable energy and energy conservation (EBTKE) sector in 2024 will only reach USD 1.8 billion, far below the target of USD 2.6 billion. IESR considers that the main obstacles to achieving this target are unconducive policies, a less competitive electricity industry structure, and various investment risks that make investors reluctant to invest in Indonesia.
IESR Executive Director Fabby Tumiwa said that to attract more investment, the government must immediately reform energy policies, including removing dependence on coal.
“The preference for coal, including the domestic market obligation (DMO) policy that keeps coal prices low, makes it difficult for renewable energy to compete. In addition, unclear regulations and complicated bureaucracy are a big obstacle for investors,” Fabby said.
Fabby also highlighted the importance of transparency in the government’s renewable energy achievement report. Based on MEMR data, the renewable energy mix in Indonesia only increased slightly from 13.9 per cent in 2023 to 14.1 per cent in 2024. This figure is still far from the 19.5 per cent target that should be achieved this year.
“The government must immediately conduct an in-depth evaluation and prepare innovative strategies to accelerate the energy transition,” he said.
IESR also encourages using international funding, such as the Just Energy Transition Partnership (JETP), to fund strategic renewable energy projects. However, Fabby revealed that the disbursement of JETP funds is still hampered by the slow development of bankable projects and policy uncertainty after the change of government last year.
“The government needs to be more proactive in preparing bankable projects and accelerating policy reforms so that JETP funds can be utilised optimally,” he explained.
On the other hand, the government has taken steps to retire the Cirebon PLTU early and replace it with 700 MW of solar power plants with battery storage, 346 MW of solar power plants, 1,000 MW of wind power plants, and 12 PLTSa. However, Fabby said that the final decision regarding the early retirement of the Cirebon PLTU, which has been discussed since 2022, has not yet been finalised. “This early retirement process is an important reference for accelerating the energy transition in Indonesia. According to our study, there are 4.6 GW of power plants have the potential to stop operations before 2025,” he said.
Furthermore, Fabby said that the government must start planning to limit coal production, which has continued to increase in the past decade. This year, national coal production reached 836 million tons, exceeding the target of 710 million tons.
“This increase in coal production sends a negative signal to Indonesia’s commitment to energy transition,” he said.
Fabby also highlighted that without significant policy reforms, producing electricity from renewable energy would still be more expensive than coal.
“Our study shows that by 2030, electricity production costs can be cheaper if the renewable energy mix reaches more than 30 per cent in the electricity system. This should be a target that the government encourages,” he added.
As a concrete step, IESR recommends better coordination between the Ministry of Energy and Mineral Resources, Ministry of Investment and Downstream, Ministry of Finance, Ministry of State-owned Enterprises, Bappenas, and Ministry of Foreign Affairs to create more harmonised and attractive investor policies. With improved policies and clear incentives, Indonesia has an excellent opportunity to achieve more ambitious energy transition targets in the future. (Hartatik)
