Policy Opportunities to Advance Clean Energy Investment in Indonesia

The document argues that while Indonesia has a renewable potential of over 400 GW, its energy sector is dominated by fossil fuels (70% of generation) and a vertically integrated market controlled by the state-owned utility PLN. To unlock investment, the authors recommend reforming the renewable energy tariff regime, removing stringent local content requirements, enabling direct corporate power purchase agreements (PPAs) through power-wheeling, and improving the transparency of renewable energy certificates (RECs).

• Indonesia possesses a renewable energy potential exceeding 400 GW, yet as of 2021, its installed renewable capacity was only approximately 10.8 GW. To achieve net-zero by 2060, the country requires annual investments of $150-200 billion until 2030.
• The current renewable energy tariff regime is based on the Biaya Pokok Penyediaan (BPP) benchmark, which is linked to highly subsidised fossil fuel generation costs. This prevents renewable projects from competing fairly and limits their financial viability.
• Stringent local content requirements, particularly for solar photovoltaics (PV) which rose from 40% in 2012 to 60% in 2019, discourage investment due to limited domestic manufacturing capacity, higher costs, and concerns over the quality and efficiency of local panels.
• The Indonesian electricity market structure prevents independent power producers (IPPs) from entering into direct power purchase agreements (PPAs) with corporate customers, forcing all contracts through the state-owned utility PLN.
• There is a significant gap between policy enactment and implementation regarding power wheeling and on-site generation. While regulations theoretically allow 100% renewable installation at consumer premises, approved capacity in practice typically does not exceed 15%-20%.
• Indonesia heavily subsidises fossil fuels, spending $5.6 billion on power generation in 2021 and maintaining a domestic market obligation (DMO) that caps coal prices for PLN at $70 per tonne, creating a disadvantage for renewable energy sources.
• The existing renewable energy certificate (REC) scheme lacks a clear traceability mechanism to ensure that funds are used for the additionality of new renewable energy capacity, which hinders investment from global businesses with strict international targets.

APA

World Economic Forum (2022). Policy Opportunities to Advance Clean Energy Investment in Indonesia. https://www3.weforum.org/docs/WEF_Policy_Opportunities_to_Advance_Clean_Energy_Investment_2022.pdf

Chicago

World Economic Forum. Policy Opportunities to Advance Clean Energy Investment in Indonesia. 2022. https://www3.weforum.org/docs/WEF_Policy_Opportunities_to_Advance_Clean_Energy_Investment_2022.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=Policy Opportunities to Advance Clean Energy Investment in Indonesia |date=November 2022 |url=https://www3.weforum.org/docs/WEF_Policy_Opportunities_to_Advance_Clean_Energy_Investment_2022.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2022policy, author = {{World Economic Forum}}, title = {{Policy Opportunities to Advance Clean Energy Investment in Indonesia}}, institution = {World Economic Forum}, year = {2022}, month = nov, url = {https://www3.weforum.org/docs/WEF_Policy_Opportunities_to_Advance_Clean_Energy_Investment_2022.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }