Indonesia’s energy transition can no longer be delayed because continued dependence on fossil fuels, particularly coal, risks slowing renewable energy investment while weakening the competitiveness of Indonesian industries in global markets.
Amid growing decarbonization pressure across Asia and the emergence of emissions-based trade regulations, Indonesia needs to accelerate reforms in policy, infrastructure, investment, and clean energy project execution.
Indonesia already has significant advantages to support this transition.
The country has abundant solar energy potential, geothermal, hydropower, wind, and bioenergy resources. The government has also established various renewable energy targets and opened opportunities for private-sector investment.
However, having significant potential does not automatically translate into large-scale utilization.
Challenges related to policy, energy pricing, electricity grids, financing, and project readiness continue to make renewable energy development slower than required.
Indonesia’s Energy Transition Still Faces Major Challenges
Political commitments to clean energy have been expressed repeatedly.
At the 2024 G20 Summit, President Prabowo Subianto stated a plan to phase out all fossil fuel-based power plants within 15 years while increasing the use of renewable energy.
However, this direction later faced various economic challenges. The government stated that a complete phase-out of coal-fired power plants within 15 years could not yet be implemented due to economic considerations.
The national energy policy issued in September 2025 also postponed the target of achieving a 23% renewable energy share from 2025 to 2030.
Under the 2025–2034 RUPTL, Indonesia still plans to add 16.6 GW of non-renewable generation capacity through 2034.
At the same time, renewable energy is planned to account for around 61% of new capacity additions, equivalent to approximately 42.6 GW.
These figures indicate a shift in direction, but the greatest challenge lies in turning these plans into actual projects.
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Why Is Coal Still Difficult to Move Away From?
One of the main issues is the existence of policies that make coal relatively inexpensive.
The Domestic Market Obligation, or DMO, for example, sets a price cap for coal supplied to power plants. When global coal prices rise, part of the cost burden may effectively shift to coal producers.
This condition keeps coal-fired power generation economically attractive.
Renewable energy, meanwhile, has to compete against electricity prices influenced by these policy distortions.
Another issue involves the electricity purchasing model. Private power developers, or independent power producers (IPPs), generally sell electricity to PLN under specific contracts.
If tariffs and procurement mechanisms do not provide sufficient certainty to recover project costs over the long term, renewable energy investment becomes less attractive.
Significant Potential Does Not Guarantee Fast Execution
Indonesia has enormous clean energy resources. The theoretical potential for solar energy alone is estimated at more than 3,000 GW. However, installed solar power capacity remains at approximately 1.49 GW.
This gap shows that Indonesia’s energy transition challenges are not simply caused by a lack of resources or technology.
They also involve execution, coordination, financing, and the ability to connect different stakeholders across the energy ecosystem.
A similar situation can be seen in geothermal energy. Indonesia has more than 20 GW of geothermal potential, but only around 2 GW has been utilized.
This means there is still significant room to expand clean energy while creating new economic activity.
Electricity Grids Are a Critical Part of the Transition
The challenge does not end with building new power plants. Many renewable energy resources are located far from major electricity demand centers.
At the same time, transmission and distribution networks in several regions are not yet fully capable of delivering this electricity efficiently.
For this reason, building generation capacity alone is not enough.
Indonesia also needs investment in transmission networks, distribution systems, energy storage, and power management technologies so that renewable energy can be utilized more effectively.
Why Is Indonesia’s Energy Transition Important for Asia?
Indonesia’s energy system transformation does not take place in isolation. Countries across Asia are also facing pressure to reduce emissions while maintaining economic growth.
India, for example, uses large-scale renewable energy auctions to provide greater certainty for investors.
South Africa has also demonstrated that renewable energy can become increasingly competitive when supported by appropriate policies and procurement mechanisms.
For Indonesia, pressure is also coming from international markets.
The EU Battery Passport and Carbon Border Adjustment Mechanism, or CBAM, demonstrate how carbon footprints are becoming increasingly influential in global trade.
This is particularly important for Indonesia because industries such as nickel, steel, iron, and cement remain closely connected to coal-based energy.
As carbon standards become stricter, products with high emissions intensity may face additional costs or lose competitiveness in export markets.
Therefore, the energy transition is not only an environmental issue.
It is also closely connected to investment, industry, trade, employment, and Indonesia’s position in global supply chains.
Renewable Energy Requires Collaboration
Accelerating clean energy development requires the involvement of the government, PLN, investors, developers, industries, and communities.
The Indonesian Renewable Energy Society, or METI, has also emphasized the importance of acting as a strategic government partner in supporting renewable energy development.
According to METI, projects involving solar power, bioenergy, bio-CNG, biogas, bioethanol, and geothermal energy demonstrate that clean energy is becoming an increasingly important part of the national agenda.
However, as METI has emphasized, planning must be followed by execution. Without consistent project implementation, renewable energy targets will remain difficult to achieve.
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TBS Supports Concrete Action for the Energy Transition
The private sector has an important role in helping bridge these needs.
TBS is one company expanding its portfolio into the renewable energy sector through several environmentally friendly power generation projects.
In 2020, through its subsidiary PT Toba Bara Energi, or TBAE, TBS acquired PT Adimitra Energi Hidro, or AEH, the developer of a 2 x 3 MW mini-hydropower plant in Lampung.
TBS also acquired PT Bayu Alam Sejahtera, or BAS, which is exploring wind energy potential in East Nusa Tenggara.
The AEH project subsequently reached its Commercial Operation Date, or COD, on January 22, 2025, with a capacity of 6 MW.
This mini-hydropower plant provides clean energy while also delivering benefits to local communities through infrastructure development, improved electricity access, and environmental conservation efforts.
In addition, TBS is developing the 46 MWp Tembesi Floating Solar Power Plant in Batam.
The project reached financial closing in 2024 and is targeted to begin full commercial operations and connect to the national electricity grid in 2026.
The project is not intended only to generate clean electricity.
The Tembesi Floating Solar Power Plant is also expected to help reduce carbon emissions, improve local air quality, create green jobs, and encourage technology transfer and collaboration with local communities.
Amid changing energy policies across Asia and increasingly stringent global emissions standards, delaying the transition will only increase the cost of adjustment in the future.
For this reason, initiatives such as those undertaken by TBS through the development of the Sumberjaya Mini-Hydropower Plant and Tembesi Floating Solar Power Plant represent an important part of turning Indonesia’s clean energy potential into concrete action.
