Indonesia Renewable Energy Profile

Last updated Jul. 26, 2024.

I. Introduction

In 2022, Indonesia relied on fossil fuels to produce 80% of its electricity.¹Ember. Coal was the largest fossil fuel in its electricity mix, dominating with 60% share in total generation.  While Indonesia possesses immense renewable energy potential, significant challenges persist in transitioning away from fossil fuels.

Indonesia aims to increase renewable energy’s share in its electricity mix to 45% by 2030, as outlined in its JETP. While progress has been made, this target falls short of the global goal of 60%. To align with and surpass international standards, while also reducing fossil fuel dependency, the government must prioritize expanding renewable energy systems and fully harnessing the country’s abundant renewable resources.

II. Current Status of Renewable Energy

Installed capacity of major renewable sources (2022):

• Hydropower – 6.78 GW
• Geothermal – 2.37 GW
• Solar – .31 GW
• Wind – .15 GW

Electricity generation of major renewable sources (2022):

• Hydropower – 27.30 TWh
• Geothermal – 16.69 TWh
• Solar – .44 TWh
• Wind – .36 TWh

In 2022, major renewable energy sources generated a total of 44.79 TWh of electricity. This represents 10.25% of the country’s total demand of 334.34 TWh. To fully detach itself from fossil fuels in its power generation mix, Indonesia needs to further accelerate the development of renewable energy sources (RES).

Hydropower is Indonesia’s largest renewable energy source, contributing 8% to the electricity mix. Geothermal power accounts for 5%. In contrast, non-hydro renewables like solar and wind have a very low share. To mitigate the risk of hydropower disruptions due to extreme heat and decreased water supply, Indonesia must diversify its electricity and harness the potential of other sources of renewable energy. 

Indonesia’s electricity demand is projected to increase by threefold by 2030. In 2022, the share of renewables in its electricity mix was only 19 percent. 

Hydropower remains the largest source of renewable electricity with 8% Renewable energy is significantly behind fossil fuels in terms of electricity generation. To ensure that the rise in demand is met, the government must push for policies and frameworks that support the acceleration of development of RES, particularly solar and wind.

Indonesia has a massive amount of geothermal energy potential. According to Japan Oil, Gas and Metals National Corporation, Indonesia has the potential capacity of 27.79 GW of geoenergy potential.²Nikkei. However, while it has the potential to produce a huge amount of electricity from geothermal sources, it currently uses very little of this potential.³Energy Tracker Asia.

The potential for Solar and Wind RES are yet to be fully realized. With the combined installed capacity of .46 GW in 2022, there is a significant room for solar and wind energy development in the country given its massive potential.

III. Renewable Energy Potential

In the face of worsening impacts, shifting to renewable energy sources becomes a requirement in mitigating imminent disasters caused by excessive usage and over reliance on fossil fuels.

With an estimate of 3294 GW of solar potential capacity,⁴Business Indonesia. and 9.5GW of wind potential capacity.⁵ETA. However, despite this promising outlook, Indonesia’s current renewable energy targets fall short of its true potential. The government has set a goal of achieving only 31% of its electricity needs from renewables and “new energy” (which includes fossil fuels) by 2050. 

The inclusion of fossil fuels in its energy targets is particularly alarming as the Global South, including Indonesia, faces the brunt of climate change’s impacts. Policies and financing of projects must be shifted from dirty energy and into renewable energy systems.

IV. Summary of Renewables Policies and Incentives

TYPE OF POLICY		INDONESIA
REGULATORY POLICIES	Renewable energy in INDC or NDC	✔
	Renewable energy targets	✔
	Feed-in tariff/auctions/premium payment	✔
	Net-metering/billing/direct consumption-supply	✔
	Biofuel blend obligation/mandate/target	✔
	Electric utility quota obligation/RPS	✔
	Tradable REC
	Renewable heat obligation/mandate
FISCAL INCENTIVES AND PUBLIC FINANCING	Tax incentives	✔
	Public investment/loans/grants/subsidies/rebates	✔
	Reductions in sales, CO2, VAT or taxes	✔
	Tendering	✔
	Investment or production tax credits	✔
	Energy production payment

View comprehensive list of renewables policies here.

V. Summary of Identified Challenges

EMBER’s 2023 analysis of Indonesia’s current policy framework for renewable energy found that Indonesia is lacking in a coherent and effective framework, the current framework being characterized by sporadic incentives, ad-hoc initiatives, and inchoate programs for promoting RE projects.⁶Ember. These current policy features of the electricity sector hinder RE development: excess supply capacity backed by PPAs with take-or-pay clauses, leaving limited scope for renewable energy; electricity subsidies that affect PLN’s capacity to fund necessary network augmentation to manage intermittency; PLN potentially disadvantaging renewable projects; and governance complexity that makes a major reorientation of industry development difficult to attain.⁷Ember.

The frequent changes in the regulatory framework indicated in the above section have posed a challenge for renewable energy, as the changing regulations include tariffs for selling renewable energy, and business parties have needed to make frequent adjustments.⁸Mahiddin et al.

There are also bankability issues associated with Power Purchase Agreements (PPAs), which govern the sale and purchase of electricity as well as the project terms from construction to termination.⁹Mahiddin et al., supra.

There is no particular legal framework and no incentives for distributed or commercial and industrial (C&I) renewable projects.¹⁰Mahiddin et al., supra.

View comprehensive list of identified challenges here.

VI. Future Outlook

• Indonesia plans on sourcing 23% of its electricity from renewables by 2025, and 31% by 2050. 
• In 2023, President Joko Widodo committed to shutting down all Indonesian coal-fired power plants by 2050 and replacing them with renewable energy power plants.¹¹Earth Journalism.
• To increase its renewable energy share, Indonesia’s government must ensure the passing and implementation of new and renewable energy bill which will allow for RES to thrive through increased support in subsidies, incentives, and infrastructure.¹²Climate Transparency.

VII. Conclusion

• Indonesia heavily relies on fossil fuels, particularly coal (60%), for electricity generation.
• The country’s electricity demand is projected to triple by 2030.
• Hydropower Dominance: In 2022, hydropower was the largest renewable energy source, but its share is relatively small (8%).
• Solar, and wind resources are vastly untapped.
• Inconsistent and ineffective policies hinder renewable energy development. Lack of incentives, complex power purchase agreements, and limited financing options impede RE projects.

References

• 1
  Ember.
• 2
  Nikkei.
• 3
  Energy Tracker Asia.
• 4
  Business Indonesia.
• 5
  ETA.
• 6
  Ember.
• 7
  Ember.
• 8
  Mahiddin et al.
• 9
  Mahiddin et al., supra.
• 10
  Mahiddin et al., supra.
• 11
  Earth Journalism.
• 12
  Climate Transparency.