Missing the 23 Per Cent Target: Roadblocks to the development of renewable energy in Indonesia

The report identifies a 'political equilibrium' in Indonesia where the priorities of maintaining low electricity tariffs and low government subsidies outweigh the commitment to renewable energy targets. Key roadblocks include power purchase price caps (BPP) that make projects unviable, policy instability, and the dominant influence of the state-owned utility PLN and the coal industry. Experts interviewed for the study unanimously believe the 2025 target will be missed unless significant policy shifts occur.

• There is a consensus among experts that Indonesia will not meet its goal of 23 per cent renewable energy in the energy mix by 2025; linear extrapolation of trends suggests a maximum of 12 per cent by that date.
• Power purchase prices are too low for developers to recover investments, specifically due to Regulations 12/2017 and 50/2017 which cap prices at 85 per cent of the local average generation cost (BPP).
• The Indonesian government indirectly disadvantages renewables by subsidizing the coal industry, which artificially lowers the BPP benchmark that renewable energy prices are linked to.
• The state-owned utility PLN faces internal conflicts of interest that hinder renewable energy growth, as it owns approximately 54 per cent of coal power capacity and acts as the sole electricity buyer.
• Local content requirements, such as Ministerial Decree 5/2017 which aims to increase local content from 40 per cent in 2017 to 60 per cent in 2019, increase project costs and reduce the number of viable solar projects.
• Indonesia faces an 'energy trilemma' where it is practically impossible to simultaneously keep electricity tariffs low, keep subsidy costs low, and meet renewable energy targets.
• While geothermal capacity increased by 67 per cent between 2007 and 2016, solar and wind deployment remains almost nonexistent, with solar PV production at just 21 GWh and wind at 5.7 GWh in 2016.
• Rent-seeking behavior in fossil fuel supply contracts, particularly regarding diesel generators in remote areas, creates opposition to transitioning to renewable microgrids.

APA

Bridle, R., Gass, P., Halimajaya, A., Lontoh, L., McCulloch, N., Petrofsky, E., & Sanchez, L. (2018). Missing the 23 Per Cent Target: Roadblocks to the development of renewable energy in Indonesia. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/roadblocks-indonesia-renewable-energy.pdf

Chicago

Bridle, Richard, Philip Gass, Aidy Halimajaya, Lucky Lontoh, Neil McCulloch, Erica Petrofsky, and Lourdes Sanchez. Missing the 23 Per Cent Target: Roadblocks to the development of renewable energy in Indonesia. International Institute for Sustainable Development, 2018. https://www.iisd.org/system/files/publications/roadblocks-indonesia-renewable-energy.pdf.

Wikipedia

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BibTeX

@techreport{bridle2018missing, author = {Bridle, Richard and Gass, Philip and Halimajaya, Aidy and Lontoh, Lucky and McCulloch, Neil and Petrofsky, Erica and Sanchez, Lourdes}, title = {{Missing the 23 Per Cent Target: Roadblocks to the development of renewable energy in Indonesia}}, institution = {International Institute for Sustainable Development}, year = {2018}, month = feb, url = {https://www.iisd.org/system/files/publications/roadblocks-indonesia-renewable-energy.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }