Buyers' Toolkit

Indonesia possesses abundant potential for renewable energy; however, its readiness lags behind Thailand, the Philippines, Vietnam, and Malaysia in terms of grid infrastructure, policies, and technology. Starting in 2021, PLN, the Indonesian state-owned electricity company, has been responsible for RUPTL 2021-2030, an Electricity Business Plan that aims to increase the share of installed renewable energy capacity to 23%. Based on the data from 2021, progress has reached 69.3%.

As four out of the ASEAN-5 (Indonesia, Malaysia, the Philippines, Thailand, and Singapore) have developed most of their feed-in tariff (FIT) schemes, if Indonesia were to offer a high feed-in tariff rate at this time, it would attract substantial foreign investment. However, the PLN is not interested in taking on the huge debt incurred by high FIT rates, which has led to limited growth in renewable energy in Indonesia in recent years. Despite the country's abundant geothermal energy resources, most of these resources are located in remote areas and cost significantly in preliminary exploration, which has deterred many investors. Last year, Indonesia raised the FIT rate for geothermal energy, with the government covering the exploration costs, hoping to boost the stagnant growth of cumulative renewable energy capacity.

Indonesia plans to achieve its renewables goals through new hydro, geothermal, and biomass technologies, but implementation will be challenging due to delays in the construction of these large-scale power generation projects. As most renewable energy technologies are still too costly for Indonesia, the government is now focusing on rooftop solar power, which has seen a significant drop in the levelized cost of electricity (LCOE), with regulations drafted to increase incentives. This will be a key area of market interest going forward. As an archipelagic nation, Indonesia could gain an advantage in renewable energy development by upgrading its grid to accommodate highly intermittent renewable sources, highlighting the significance of introducing smart microgrids.