Jakarta – Energy policy observers believe that the government’s strategy to promote solar energy as a means of reducing electricity subsidies aligns with the transition to clean energy, provided one key condition is met: the cost of solar power must be lower than that of coal-fired power plants.
Executive Director of the Indonesian Sustainable Welfare Foundation (SUSTAIN), Tata Mustasya, said on Monday, September 22, that although the Ministry of Finance’s initiative is on target, its realisation is highly dependent on the cost competitiveness of solar energy.
“Reducing electricity subsidies through solar energy can only be done if the cost of generation is lower than coal-fired power plants, which currently still contribute 60 per cent of the national electricity supply,” said Tata.
The Ministry of Finance (Kemenkeu) recorded energy subsidies of Rp 177.62 trillion in 2024, representing an 8.1% increase from the previous year. Of this amount, Rp75.8 trillion, or 42.7%, was allocated for electricity subsidies, making it the second-largest portion after fuel.
Tata added that the installed solar energy capacity in Indonesia is still growing at a slow pace. Over the last five years, the increase has been only 753.8 MW, far short of the target to reach the gigawatt (GW) level.
Four requirements for accelerating solar energy
According to SUSTAIN, four priority policies need to be implemented immediately so that solar energy can reduce electricity subsidies and compete with coal-fired power plants. First, PLTS incentives. The Ministries of Finance and Energy and Mineral Resources need to provide incentives for solar power plants in the industrial, business, and household sectors. Tata cited the example of electric vehicle (EV) incentives, which have been proven to accelerate market penetration. PwC notes that EV sales in Indonesia rose from 9% (2023) to 15% (2024), and are projected to reach 29% by 2030.
Second, promote regional solar power plants. Currently, only Bali and Jakarta have regional regulations for solar energy. Expansion to other regions will create economies of scale and reduce costs.
Third, integration with the local industry. Solar energy development must be linked to the domestic solar panel and battery industries. SUSTAIN notes the potential funding from China’s Belt and Road Initiative (BRI), with a total energy investment of USD 900 million in 2023. If the entire allocation is diverted to renewable energy, Indonesia has the potential to earn IDR 14.4 trillion per year.
Fourth, the development of a smart grid. Smart grid infrastructure is needed for solar power plants to develop on a massive scale. The estimated cost is USD 19.6 billion, which can be covered through coal production levies.
SUSTAIN also emphasises that accelerating solar power is not only about clean energy, but also about creating jobs. Based on the 2025–2034 RUPTL, solar power projects have the potential to create 348,057 green jobs in Indonesia.
“The grid is the key, incentives are the trigger, and local industry is the foundation. If all three are in place, solar energy can reduce electricity subsidies while bringing new economic benefits,” Tata said. (Hartatik)
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