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[JAKARTA] Indonesia is promising a surge in renewable energy over the next decade, but its latest power plan also locks in billions of dollars for new coal-fired capacity, raising fresh doubts over its climate ambitions.

The 2025-2034 power supply plan aims to add 60 gigawatts (GW) of power generation capacity over the next nine years – part of a broader push to fuel its 8 per cent economic growth target – with three-quarters of the new supply expected to come from renewable sources, according to a Ministry of Energy and Mineral Resources document reviewed by The Business Times.

However, the simultaneous plan to add 6 GW of new coal-fired capacity has raised concerns among observers, who warn it could undercut Indonesia’s energy transition efforts and cast doubt on President Prabowo Subianto’s earlier pledge to phase out coal power plants by 2040.

“We maintain our view that Indonesia is likely to miss its 2040 coal phase-out targets, given the country’s continued economic reliance on coal as a low-cost baseload power source,” analysts at BMI, a unit of Fitch Solutions, wrote in a recent note.

Indonesia’s continued reliance on coal is set to push emissions higher, according to BMI.

Coal-related emissions are projected to rise by 45 per cent to 681 million tonnes of CO2 over the next decade, while total power sector emissions are expected to climb 35 per cent to 1,033 million tonnes between 2025 and 2034.

“We think Indonesia’s current trajectory is not on track to achieve its net zero target by 2050 despite ambitious commitments,” BMI said.

Lofty goal

Indonesia is charting an ambitious path towards a cleaner energy future with its updated national power plan, targeting 42.6 GW of new renewable capacity. Solar energy leads the charge with 17 GW in planned additions, followed by 12 GW of hydropower, according to a government presentation.

In a notable move, the country also has introduced 0.5 GW of nuclear capacity in Sumatra and Kalimantan, signalling a significant policy shift in Indonesia’s energy mix.

To connect new power sources to population centres and industrial hubs, the government, via state-owned utility PLN, plans an extensive infrastructure expansion, including nearly 48,000 kilometres of new transmission lines. The plan also prioritises grid reliability by incorporating 10.3 GW of energy storage capacity.

The plan carries a hefty price tag, with the Ministry of Energy and Mineral Resources estimating 2,967 trillion rupiah (S$234.1 billion) in investment over the next nine years to fund power generation, energy storage, and grid expansion.

Dody Setiawan, senior climate and energy analyst at Ember, emphasised that upgrading Indonesia’s power transmission network is now more urgent than ever.

“One of the biggest barriers to integrating renewables is the grid’s limited readiness,” he said. “There are many transmission projects in the pipeline, but they will need substantial financial backing.”

He added that Indonesia should leverage funding from the Just Energy Transition Partnership – despite the US withdrawal from the initiative – to support its shift away from fossil fuels and build a smarter, more resilient grid aligned with its clean energy ambitions.

The Indonesian government has acknowledged that its energy transition plan will rely heavily on private and foreign investment, given the limited financing capacity of PLN, which holds a monopoly over electricity distribution.

Under the new road map, the government has allocated 60 to 73 per cent of new power generation capacity to independent power producers, a strategic move to attract private capital and technical expertise.

Still, industry observers warn that translating Indonesia’s renewable energy road map into real-world progress will be no easy feat.

Quota limit stalls expansion

Despite the growing cost advantage of solar power – especially for industrial users – industry players say the country’s ambitious targets face major implementation hurdles.

Andre Susanto, a senior energy analyst and chief technology officer at Inovasi Dinamika Pertama said a major bottleneck is PLN’s annual rooftop solar cap, which restricts new installations to 800 megawatts.

This government-mandated quota limits the total capacity of rooftop solar photovoltaic (PV) systems connected to the national grid and is overseen by PLN. Once the quota is reached, no further rooftop solar projects are approved, stifling growth despite increasing demand.

“If that quota were removed and the process to register solar PV projects made easier, that would be the biggest – and fastest – acting incentive,” Susanto said.

Susanto emphasised that renewable electricity prices in Indonesia are becoming increasingly competitive, contributing to a surge in demand. He noted that as solar PV costs continue to fall, more industrial users are recognising the financial benefits, driving greater adoption despite ongoing regulatory challenges.

Solar PV providers are currently offering projects to factories and industrial zones at rates roughly 40 per cent below PLN’s tariff, making renewable energy a financially appealing choice for industrial users.

“If approvals from PLN become easier, I believe we could see one to two gigawatts of rooftop solar PV installed on industrial and commercial facilities within the next two to three years.”

No penalties, no progress

Indonesia’s efforts to boost the share of renewables in its energy mix have repeatedly fallen short of official targets. In 2024, renewables made up just 12 per cent of the total energy mix, significantly below the government’s goal of 23 per cent.

Despite the widening gap, Jakarta has raised its clean energy ambitions, setting a new target for renewables to make up 35 per cent of the energy mix by 2035.

While PLN and other licence holders are required to publish long-term electricity supply plans annually, there are no penalties for failing to meet the renewable energy targets set in the national energy plan.

Moreover, PLN’s status as a subsidised utility makes it difficult to impose financial penalties, as any fines would likely be absorbed by the government itself.

Experts warn that the absence of enforcement mechanisms could undermine the credibility of Indonesia’s net-zero push.

Dody from Ember noted that the drive to retire coal-fired power plants early in Indonesia is primarily fuelled by external pressures, with limited motivation coming from within the country itself.

“There are significant legal and fiscal consequences due to long-term contracts with developers, so strong international support is needed to accelerate this process,” he said.

Susanto from Inovasi Dinamika Pertama said Indonesia has the potential to become a leader in the global energy transition, given its vast renewable energy resources.

“The biggest leverage Indonesia has is PLN’s renewable energy installation and energy transition plans,” he said.

“If PLN can fulfil its plans and the government can support and encourage PLN to do even more, Indonesia’s place in the global energy transition leadership is unquestionable.”