Amid mounting concerns over climate change, 2023 saw global temperatures soar to their highest levels in the 174-year observational record, surpassing pre-industrial levels by 1.45°C (±0.12°C). In response to this urgent crisis, renewable energy has emerged as a critical component of climate action worldwide.
As a signatory to the Paris Agreement, Indonesia pledged to reduce greenhouse gas emissions by 29% by 2030 through its own efforts, with the potential to increase this reduction to 41% with international support. Furthermore, Indonesia aims to achieve net-zero emissions by 2060 or earlier. Despite enacting regulations to support these ambitious targets, progress has been sluggish.
The latest data from the Ministry of Energy and Mineral Resources underscores Indonesia’s heavy reliance on fossil-based energy. In 2023, coal accounted for 40.5% of the energy mix, while renewable energy contributed a mere 13.1%. Rather than prioritizing the development of renewable energy sources to meet electricity demand, Indonesia’s dependency on coal-generated electricity has continued to rise annually.
National electricity utility PT Perusahaan Listrik Negara (PLN) plays a pivotal role in implementing renewable energy policies and decarbonizing Indonesia’s energy sector. However, historical data reveals that PLN has consistently fallen short of renewable energy targets. Financial instability has exacerbated this challenge, leading PLN to rely heavily on subsidies from the Government of Indonesia (GOI) to cover operational expenses. The GOI’s Fast Track Program (FTP)-1 (2006), FTP-2 (2010), and FTP-3/35,000-megawatt Program (2015) prioritized the expansion of coal-fired power plants, further straining PLN’s financial resources. In 2022 alone, GOI subsidies and compensation totaled approximately IDR123 trillion (US$8 billion).
With only seven years remaining to fulfill its Paris Agreement commitments, Indonesia faces a critical juncture. The development and utilization of renewable energy are imperative to meeting these obligations. This report delves into the challenges hindering Indonesia’s renewable energy progress, including:
The failure to achieve renewable energy targets and underlying reasons
PLN’s financial struggles amid its role in implementing energy policies
The potential of renewable energy, particularly solar and wind, to simultaneously enhance PLN’s financial sustainability and align with Indonesia’s Paris Agreement commitments.