Jakarta – Stakeholders warn that global investors view Indonesia’s delay in decommissioning coal-fired power plants as a negative signal. The Institute for Essential Services Reform (IESR) says that amid the accelerating energy transition and tightening international environmental standards, the government’s indecisiveness in ending coal-fired power plant operations could deter new investment.
At the Brown to Green Conference: Unlocking Enabling Environments for Indonesia to Transition Beyond Coal, held on 2–3 December 2025, IESR reiterated that the global market is no longer tolerant of coal dependency. Without a clear and accelerated schedule for retiring coal-fired power plants, Indonesia risks falling behind in regional economic competition. At the same time, countries that have successfully reduced their dependence on coal are now the leading destinations for environmentally friendly investments, which continue to increase in volume.
The government has restricted the construction of new coal-fired power plants through Presidential Regulation No. 112/2022, but it still allows certain projects, such as industrial estates, national strategic projects, and old plans. This regulation has now been revised, but without concrete steps to phase out coal-fired power plants by 2050—or even by 2040, as directed by President Prabowo—Indonesia is at risk of losing momentum.
IESR states that transition solutions are already available, including the flexible operation of relatively new coal-fired power plants. Operating at a capacity factor of 40–65% allows PLN to reduce generation costs, while any supply shortfall can be met by solar energy, whose investment costs continue to decline.
In addition, coal-fired power plant infrastructure can be converted into geothermal power plants. A consortium study involving IESR, the Purnomo Yusgiantoro Centre, UGM, Brawijaya University, Project InnerSpace, and Geoenergies shows that Indonesia’s geothermal potential is 2,160 GW, including new-generation technology that utilises hot rock formations at depths of more than 3,000 metres.
Raditya Wiranegara, Research Manager at IESR, believes that the operational flexibility of coal-fired power plants is key to the large-scale integration of renewable energy.
“With international coal prices as a reference, reducing the operating hours of coal-fired power plants can actually save costs. Solar power plants can replace the energy gap,” he said on Thursday, 26 November.
However, the challenges do not only come from the PLN system. Captive power plants—which are outside the PLN network and widely used by downstream industries—are also increasingly dependent on coal-fired power plants. IESR believes that the government should encourage captive asset owners to switch to renewable energy at their locations, or open up options for low-carbon electricity distribution from the PLN network.
In terms of alternative energy sources, IESR Energy System Transformation Manager Deon Arinaldo emphasised the enormous potential of geothermal energy for providing low-carbon electricity and industrial heat. According to him, many industries require heat below 200 degrees Celsius—a need that can be met directly by geothermal energy, but its utilisation remains very limited.
“Indonesia has extensive experience in the oil and gas sector. This expertise can accelerate the development of geothermal energy, which has enormous potential,” said Deon.
Without decisive steps to accelerate the retirement of coal-fired power plants, Indonesia is not only jeopardising its 2060 NZE target, but also its future investment appeal. Global investors are increasingly seeking certainty about the direction of the transition, and delaying action risks losing access to increasingly competitive economic opportunities. (Hartatik)
Banner photo: PLTU Cirebon-1. (Source: Cirebon Electric Power)
