Skip to main content

A new report shows that the Government of Indonesia could exceed its renewable energy targets with a few adjustments to its policy approach.

Released today in Jakarta, the report by the International Institute for Sustainable Development (IISD) recommends effective policy changes that would boost sustainable energy investments and allow Indonesia to meet its commitment to the Paris Agreement.

Roughly 13 per cent of Indonesia’s current energy mix comes from renewable energy. This number needs to almost double in the next five years to meet the target of 23 per cent.

“Indonesia has enough renewable energy potential to achieve its targets and even go beyond,” says Philip Gass, Senior Policy Advisor and Lead for IISD’s Global Subsidies Initiative Indonesia Program.  

“Rapid declines in renewable technology costs have now created a great opportunity for this country to harness its extraordinary endowment of natural resources. The only missing piece is the energy policy enablers to take advantage of this momentum,” he adds.

The report offers four recommendations:

1. Stop expanding coal. Indonesia needs a concerted plan to phase out coal, starting with a moratorium on all new coal-fired generation.

2. Achieve solar transformation. Indonesia’s solar potential is immense and virtually untapped. Although providing the grid infrastructure in remote areas will take time, the government could immediately expand rooftop solar.

3. Get the prices right—and make them fair. Current pricing policies discourage renewables. Changing these policies would not only boost renewables, it would allow a more transparent understanding of the costs of power, which would make the energy system fairer for all.

4. Reorient from biofuel to bioenergy. The government needs to shift its focus from biofuel to bioenergy, exploiting the immense biomass potential to generate green electricity.

At the moment, Indonesian pricing policies require renewable generation to be only 85 per cent of the cost of coal in many regions. This effectively means renewable energy developers would earn 15 per cent less than fossil fuel producers for the same amount of energy. Not surprisingly, the renewable energy market is not developing as fast as it could.

Policy change followed by proper electricity pricing would result in a rapid boost in the renewable energy market in Indonesia,” says Lucky Lontoh, IISD Associate and Country Coordinator for Indonesia.

“Part of the reason for this policy is that the government is trying to ensure electricity remains affordable for all,” says Lontoh. “But it is possible to achieve rapid renewable energy growth as well as reach energy access targets without increasing the overall cost of power to the people or expanding subsidies.”

The report was funded by the Swedish Energy Agency, which welcomed the research, calling it “a constructive input to the current energy policy debate in Indonesia,” according to country manager Paul Westin.