Jakarta – Renewable energy observers have stated that the massive solar power plant (PLTS) target requires a strong policy and financing foundation. President Prabowo Subianto’s idea of building 1-megawatt (MW) solar power plants in every village through the Merah Putih Village Cooperative (KDMP) is considered a breakthrough in the energy transition and electricity distribution agenda, but there are still various obstacles.
This ambition, which aims to reach a total capacity of 80 gigawatts (GW), is still hampered by various fundamental obstacles, ranging from financing and regulatory readiness to the design of the national electricity system.
Lead Researcher at SUSTAIN Indonesia, Adila Isfandiari, stated on Monday, 15 December, that Indonesia actually has the potential to secure funding to drive the realisation of its 100 GW solar energy target, but this has not yet been locked into a binding policy. She said that to realise this plan, the government needs to allocate specific funding for this programme in the state budget.
Adila explained that one financing option comes from a 5 per cent increase in coal export levies starting in 2026, which has the potential to generate between Rp 20 trillion and Rp 90 trillion per year in state revenue and could finance the construction of solar power plants in around 18,000 villages. Additionally, funding could be optimised through cooperation with China’s Belt and Road Initiative (BRI), where an allocation of around Rp 14.4 trillion per year for renewable energy is considered equivalent to funding 32 projects on the scale of the Cirata Floating Solar Power Plant.
Climate Programme Manager at the Foreign Policy Community of Indonesia (FPCI), Kiara Putri Mulia, cautioned that this ambitious goal must not be pursued without ensuring that the national electricity system is ready to absorb solar energy. She believes that without structural reforms, adding large capacity could potentially create new bottlenecks.
“India and Vietnam show that a surge in solar power capacity is only possible if policies and electricity systems are comprehensively overhauled,” Kiara said.
According to him, India has been successful because it has a special ministry that handles new and renewable energy, as well as state-owned enterprises that focus on implementing targets. Vietnam, on the other hand, has carried out major reforms by opening up its electricity system through a feed-in tariff scheme that attracts investors.
Funding at the village level
CERAH Policy Strategist Coordinator Dwi Wulan Ramadani believes that this plan could potentially be hampered by the enormous investment required. If equipped with storage batteries, the total investment required is estimated to reach USD 250 billion or around IDR 4,125 trillion.
Dwi explained that the cost of building a 1 MW solar power plant in 2024 has indeed fallen to around USD 900,000, or the equivalent of IDR 14.58 billion, compared to USD 1–1.5 million in the previous year. However, this figure still far exceeds the average village fund capacity of only around IDR 1 billion per year, while the financing capacity of village cooperatives is also very limited.
“This means that even though global solar panel prices have been on a downward trend over the past decade, it is not enough to offset the complexity of financing risks for village projects,” explained Dwi in a discussion entitled Assessing the Feasibility of 100 GW of Solar Power Plants: Technical, Financial and Institutional Analysis.
He added that even if KDMP obtained a bank loan ceiling of around Rp 3 billion with a six-year tenor, this amount would still be insufficient to cover the capital costs of building a 1 MW solar power plant. On the other hand, national banks do not yet have a specific scheme for managing the risks of rural energy projects, making it difficult for such projects to be viewed as bankable assets.
To address this issue, Dwi believes that the government needs to devise innovative financing schemes, one of which is through project bundling to make it more attractive to investors, such as green bonds or green sukuk with tenors of 10 to 25 years. “The bundling model has proven successful in Nigeria in accelerating community-scale renewable energy investment,” he said.
In addition to funding, Dwi also highlighted the role of KDMP, which needs to be defined more realistically. According to him, burdening village cooperatives as both owners and operators of solar power plants risks creating governance problems, given that there will be around 80,000 different entities that require auditing, maintenance and supervision.
According to him, KDMP should not be burdened with the responsibility as the owner of PLTS assets. Assets should remain owned and operated by professional parties such as state-owned enterprises, IPPs, or licensed EPC companies. In this scheme, KDMP would simply act as an electricity buyer or off-taker through official tariffs like other PLN customers. However, according to Dwi, this depends on the readiness of the national electricity policy.
Given the magnitude of the investment challenges and the complexity of the system, observers believe that the success of the village solar power plant project will not only be determined by the size of the target, but also by the government’s courage to comprehensively reform regulations, electricity schemes, and financing architecture. (Hartatik)
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