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What Hampers Indonesia's Green Energy Growth?

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Indonesia has set an ambitious target to use 23% of renewable energy by 2025. But the progress has been slow and time is ticking.

Wind Turbine as alternative energy source
Wind Turbine as alternative energy source

Source: Zbynek Burival [11]

Climate change is becoming too big of a problem to ignore, and to address that, Indonesia has made commitments to reducing its greenhouse gas emissions by 29-41% by 2030 [1]. The country is eyeing for renewable energy and has promised that it will achieve 23% renewable energy use by 2025.

However, According to the 2019 Renewable Energy Country Attractiveness Index (RECAI), Indonesia ranked 38th out of 40, with three Southeast Asian countries such as Thailand, Philippine, and Vietnam ranking above Indonesia [2]. So what is the reason behind this slow transition?


Political Will and Commitment

According to Agus Sari, an environmental expert and lecturer at ITB, the coal industry has had a longer and more profitable supply chain for various stakeholders, including government officials. For this reason, it is understandable why they may feel hesitant towards renewable energy [3].

Additionally, according to Indonesia’s Energy Transition Assessment of Indonesia Energy Transition Outlook 2021 by Institute for Essential Services Reform (IESR), such a transition would take a large portion of the government budget, which can be spent on other sectors that the government may deem more pressing [4].

Investment and Finance

Financing is another issue. To achieve the 23% target of renewable energy use by 2025, Indonesia needs an investment of IDR 2,000 trillion [5].

As Directorate General of New Renewable Energy and Energy Conservation sub-sector, Dadan Kusdiana admitted high loan interest, high collateral requirements and the BOOT (build, own, operate, transfer) scheme in the power purchase agreement make allocating this investment challenging [6].

In other words, the state needs private financing, yet potential investors and lending banks are reluctant due to regulatory uncertainty and clashing policies [7].

Land Use

Building renewable energy facilities require large amounts of land, and land acquisition has historically been tricky in Indonesia. Perhaps most important is for the government to make sure that this development can proceed without displacing the local community and threatening their livelihood [8].

Reliance on Fossil Fuel

The last issue lies in Indonesia’s massive coal reserves. Coal is not only plentiful but also cheap, and considering how embedded and powerful the fossil fuel industry is, it makes it all the more difficult for renewable energy to compete in the market [9].


Despite all this, the demand for renewable energy is reaching an all time high. With significant natural resources, Indonesia has the potential to become a leading nation in renewable energy. But with air pollution, climate change and blackouts, the transition to renewable energy is an inevitable future.

"Renewable energy offers so many benefits, from cleaning the air and reducing the pollution, to lowering prices and taking us off the destructive boom-and-bust merry-go-round of fossil fuel prices.” – Marty Spitzer, Director for US Climate and Renewable Energy Policy, WWF [10]

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