Clean energy: Struggling to meet NRE targets
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Energi bersih: Kembang kempis kejar target EBT
18 December 2024
By M. Ryan Hidayatullah
Bisnis, Jakarta – The government is adopting a more realistic approach in setting targets for the share of new renewable energy (NRE) in the national energy mix. This year, the Energy and Mineral Resources Ministry aims for the clean energy portion to reach 14.1%.
The national energy authority is relying on geothermal energy to increase the share of NRE in the national energy mix this year. At present, the utilisation of NRE in the national energy mix has reached 13.93%.
Eniya Listiani Dewi, the Director General of New Renewable Energy and Energy Conservation at the Energy and Mineral Resources Ministry, stated that several geothermal projects expected to be completed by the end of this year are anticipated to boost the utilisation of NRE.
"With a commercial operation date and an operational feasibility certificate, several geothermal projects are expected to increase the NRE mix to 14.1% this December," Eniya said on Tuesday (17/12).
Eniya detailed that several geothermal projects expected to commence operations by the end of this year include the Sorik Merapi Geothermal Power Plant (PLTP) with a capacity of 41 megawatts (MW), which obtained an operational feasibility certificate on 15 December, the Salak Binari PLTP with a capacity of 15 MW, and the Ijen PLTP with a capacity of 45 MW.
In total, NRE-based power plants will contribute an additional 547.41 megawatts (MW) of clean energy by December 2024. Consequently, the total capacity of NRE power plants by the end of this year will reach 14,110 MW.
"With this realisation, we can create 13,285 green jobs," Eniya stated.
Eniya emphasised that President Prabowo Subianto is focused on increasing the utilisation of NRE in the national energy mix. This aligns with the directive from Energy and Mineral Resources Minister Bahlil Lahadalia, who is continuing to expedite permits for the operation of NRE-based power plants.
"I see that geothermal energy still has significant potential. It is a low-hanging fruit to establish more commercial operation dates, alongside solar power plants (PLTS). Our priorities are floating and rooftop PLTS, hydropower plants, and wind turbines," Eniya stated.
Moreover, he mentioned that currently, three companies are planning to continue investing in the NRE sector, particularly in wind power utilisation. The government has requested these companies to conduct follow-up studies on their business plans.
According to data from the Energy and Mineral Resources Ministry, electricity generated from geothermal sources currently constitutes 5% of the national energy mix, which accounts for 40% of the total NRE utilisation.
Since 2014, the installed capacity of geothermal power plants (PLTPs) has increased by 1.2 gigawatts (GW), reaching a total of 2.6 GW.
This figure represents 11% of Indonesia's total geothermal potential, making the country the second-largest geothermal energy producer in the world. Geothermal energy contributes 5.3% to the national energy mix.
To date, the government has identified 362 potential geothermal locations with a total capacity of 23.6 GW. Additionally, 62 geothermal working areas have been prepared, along with 12 assignment areas designated for initial surveys and explorations, all of which are still active.
During the occasion, Eniya also reported that the investment realisation in the NRE and energy conservation subsector had reached US$1.49 billion as of the beginning of this month.
Jumbo funds
On a separate occasion, PT Perusahaan Listrik Negara (Persero) revealed that the investment required to accelerate NRE development in the electricity sector amounts to US$235 billion.
PLN Risk Management Director Suroso Isnandar stated that these funds are necessary for several projects, including the expansion of NRE sources and the development of transmission infrastructure, such as a smart grid.
"How much does it cost for the energy transition in the electricity sector? To develop everything by 2040, we need US$235 billion," Suroso said at the Bisnis Indonesia Economic Outlook 2025 event recently.
Suroso explained that increasing the NRE capacity by 33 GW—which includes 24.9 GW of hydropower, 6.5 GW of geothermal, and 0.9 GW of bioenergy—will require an investment of US$80 billion over the next 15 years.
Meanwhile, increasing NRE capacity from natural gas as a transitional bridge will require 21.7 GW, and coal will require 5.6 GW, needing US$33 billion. On the other hand, expanding NRE from wind turbines by 14.2 GW and solar energy by 27.3 GW will require US$43 billion from 2025 to 2040.
"Including the transmission, we need US$235 billion. This is the amount we must spend to implement the energy transition," Suroso stated.
Meanwhile, Investment and Downstreaming Minister Rosan Roeslani stated that Indonesia requires funding support to maximise its NRE potential of 3,700 GW. This can be achieved by establishing partnerships with other countries, including those in the European Union (EU).
Rosan explained that the need for partnerships arises from the government's strategic initiative to accelerate the energy transition and achieve net zero emissions by 2060 or earlier.
He noted that Indonesia's NRE potential is abundant, estimated at around 3,700 GW. This potential is derived from various sources, including solar energy, hydropower, sea waves, and geothermal energy.
On the other hand, European countries possess the technology and funding necessary to utilise and develop NRE optimally.
"We cannot do this alone. Indonesia needs support from overseas to activate this potential. We require funding, technology, and talent. This is why establishing partnerships, especially with European countries, is crucial for us," he stated.
The Institute for Essential Services Reform (IESR) believes that PLN's limited investment capability is one of the main obstacles to accelerating the development of NRE-based power plants.
IESR Executive Director Fabby Tumiwa stated that the business margin available for PLN to invest is quite small. According to him, the investable business margin only amounts to around US$2 billion to US$3 billion per year.
"Ideally, PLN should have equities of US$5 billion to US$6 billion per year. Additionally, due to PLN's high debt, there are limitations on obtaining new loans."
Fabby observes that this situation indicates that private investment in PLN projects is not being utilised optimally. Meanwhile, private investment in the Electricity Procurement Plan (RUPTL) is expected to account for 60% to 65% of the required investment.
He provided five recommendations for the government to increase funding for NRE power plant development. First, strengthen PLN's investment capability by adjusting the electricity tariff to ensure a sufficient business margin.
Second, the government can provide state equity participation to PLN specifically for renewable energy development. Third, improve the tender mechanism for renewable energy power plants at PLN, making it more timely and frequent.
Fourth, address the electricity tariff issues outlined in Presidential Regulation No. 112/2022 by taking into account new developments, such as capital expenditures for power plants and rising interest rates. Fifth, provide incentives for investors in renewable energy development.
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