May 30, 2025
JAKARTA – Indonesia has backtracked on pledges it had made to stop building new coal-fired power stations – other than those it had already previously committed to – with the announcement of a new 10-year plan that includes more coal plants coming into operation as late as 2033.
But in a shift from the past, renewable energy comprises the majority of the 69.5 gigawatts (GW) additional power capacity outlined in the government’s 2025-2034 electricity procurement business plan (RUPTL).
The ambitious plan, released on May 26, has been met with scepticism, with analysts and observers questioning whether the country can truly achieve its power supply and environmental targets.
Indonesia issues updated power business plans every few years to reflect estimated electricity demand growth, investment needs and technology costs. The last one, covering the years from 2021 to 2030, was released in September 2021.
Based on the new 10-year plan, Indonesia would have to build renewable power plants five times faster than today in the first five years and 11 times faster in the second five years of the period, Mr Tata Mustasya, the executive director of the Indonesian Sustainable Welfare Foundation (Sustain), told The Straits Times.
“This is hard to achieve without major policy reforms,” Mr Tata said, pointing out that between 2018 and 2023, Indonesia added a total of 3.2GW of renewable power capacity, or equivalent to 0.53 GW annually, and a 2025 target to achieve 23 per cent renewable energy was later revised to between 17 and 19 per cent.
At present, wind and solar comprise less than 1 per cent of Indonesia’s annual power-generating capacity.
Some of the policy reforms, according to Mr Tata, include offering attractive power purchase rates to solar farms and channelling some of the government royalties collected from coal mines to the construction of smart grids to help distribute power from the renewables.
Indonesia has been stepping up efforts to attract green investment, including by promoting floating solar farms on reservoirs, or installing them offshore, to avoid the high costs of land procurement and having to relocate local residents.
But coal power still dominates, with just over 60 per cent of the nation’s electricity generated by burning the fuel. Indonesia is also a major coal producer and top global exporter.
Lobbying efforts by coal interest groups, and government policies, have ensured coal’s pre-eminent position.
A government coal price cap ensures that power producers can access affordable coal shipments. And an unattractive power purchase rate offered to solar farms has deterred investors, according to Jakarta-based Institute for Essential Services Reform (IESR).
All power plants and solar farms must sell their generated electricity through PLN, the state power utility.
But things are changing, especially as using solar and wind is now cheaper than fossil fuels, in addition to the lure of investment and jobs in renewable energy product manufacturing. Worries over coal plants’ air pollution, health costs and their planet-warming emissions are also pressuring the government.
Indonesia, which lies on the Equator, and Singapore are also discussing the terms of a possible agreement for a planned sale of solar power from Batam to Singapore via an undersea cable.
Earlier talks have revealed that the possible sale size would be 2GW annually as part of the Republic’s biggest effort so far to import low-carbon electricity, ST reported in November 2024.
The plan is part of a memorandum of understanding (MOU) on renewable energy cooperation between the two neighbours signed in March 2023 during the Singapore-Indonesia Leaders’ Retreat held in Singapore.
“Very soon. It won’t be long. Signs started to emerge that we would have an agreement (with Singapore),” Energy and Mineral Resources Minister Bahlil Lahadalia said at the May 26 RUPTL press briefing, referring to the Singapore-Indonesia MOU.
Analysts and industrialists have offered mixed views about the new RUPTL, with some of them seeing it as the government striking a balance between the interest to promote green investment and to accommodate coal proponents.
“In terms of energy mix (proportion between renewable and fossil energies), it looks okay because the renewable energy portion increased, but we are seeing new coal-fired power plants being planned.
“This is against an earlier commitment,” the chief executive of a Jakarta-based business group that seeks renewable energy projects told ST in a text message.
He did not want to be named when commenting on government policies.
Of the additional 69.5GW in power capacity outlined in Indonesia’s new 10-year power procurement plan, 42.6GW would come from renewable energy – 17.1GW from solar, 11.7GW from hydroelectricity, 7.2GW from wind power, 5.2GW from geothermal, 0.9GW from bioenergy and 0.5GW from nuclear.
On top of that, it also includes: 10.3GW of battery and pumped (hydroelectricity) storage; and 16.6GW of fossil-based electricity production from coal (6.3GW) and gas (10.3GW).
Ms Mutya Yustika, who covers economics, finance and politics of the Indonesian electricity market for the Institute for Energy Economics and Financial Analysis (Ieefa), noted that the 16.6GW of additional fossil fuel power capacity would require multibillion-dollar investments.
“Obtaining the necessary financing will be challenging, considering the strict ESG (environmental, social and governance) guidelines by banks or other financial institutions,” Ms Mutya told ST.
Many foreign banks, for example, will no longer fund new coal- or gas-powered plants.
“This condition might tip the balance towards the acceleration of renewable energy power plants,” she added. Ieefa is a US-based think-tank.
Still, the plan now expects coal power to be part of the energy mix until 2063 – well beyond 2057 in the previous plan and challenging the government’s net-zero 2060 pledge. New coal plants typically have an average life of 30 years.
But overall, the RUPTL represents an important step in the right direction, said Mr Dody Setiawan, senior analyst of climate and energy at London-based energy think-tank Ember. “It aims to ensure that Indonesia’s 8 per cent economy target has the energy it needs to support industrial development while also beginning to address decarbonisation,” Mr Dody told ST.
President Prabowo Subianto has set an 8 per cent annual growth target for the latter part of his five-year term that started in October 2024. South-east Asia’s largest economy has grown about 5 per cent annually in the past decade.
Mr Dody said that while the RUPTL gives encouraging signals, there needs to be clear regulatory support.
Jakarta-based foundation Sustain’s Mr Tata said the government needs to introduce incentives to help bring down the costs of building renewable energy power plants, which typically require heavy capital investment upfront, although they typically have low operating costs.
This is especially the case for solar power plants, he added.
“A bold incentive the government could offer investors would be a large-scale competitive bidding auction at one go – combining several projects into one package – to build solar farms,” Mr Tata said, arguing that this would create economies of scale.
Under the revised investment plan, 47,758km of new transmission lines will be built, connecting Java island with Sumatra and Kalimantan, moving the nation a step closer to a single power grid.
At present, Indonesia’s main power grid links only Java, Bali and Madura islands, with other islands operating independently.
“Expanding transmission lines is necessary to connect new power plants, particularly renewables, to demand centres to strengthen the grid reliability and flexibility,” Ember’s Mr Dody said.
- Wahyudi Soeriaatmadja has been Indonesia correspondent at The Straits Times since 2008, and is based in Jakarta.