The Indonesian Ministry of Energy and Mineral Resources (ESDM) has confirmed that Indonesia can’t achieve its ambitious target to achieve 23% of renewable energy mix by 2025. Experts believe that the main reasons behind this are some financial constraints and policies.
According to the Indonesian state government electricity company (PLN)’s Electricity Supply Business Plan (RUPTL 2021-2030), Indonesia plans to increase the proportion of renewable energy to 23% by 2025. It was anticipated to reach 17.9% by June 2023, but data in October indicates that only 12.8% has been achieved.
The Executive Director of the Renewable Energy from Ministry of Energy and Mineral Resources, believes that financial issues remain the primary reason. Indonesia also aims to increase the Domestic Component Level (TKDN), posing obstacles to foreign investors. He stated, “Independent Power Producer (IPP) projects in renewable energy cannot find partners, and PLN is facing financial difficulties,” leading to a delay in the Commercial Operation Date (COD) of certain power plants by one year until 2026.
Putra Adhiguna, an analyst from Energy Economics and Financial Analysis Institute (IEEFA) believes that, in addition to financial issues, the Power Purchase Agreements (PPA) are also causing delays in renewable energy power plant projects. For instance, hydro and geothermal power plants often encounter pricing negotiation issues with PLN. As a result, “many projects in the national electricity supply plan cannot be realized.”
The Executive Director of the Institute for Essential Services and Reform (IESR) in Indonesia, Fabby Tumiwa, believes that given current situation, Indonesia needs to increase its renewable energy generation up to 13GW. This means an annual addition of 6GW to 7GW needed to meet the target. However, he expresses concerns that it might be challenging to achieve this goal. Based on PLN’s plan of renewable energy power plants in the past 3-4 years, none of their plants have been able to reach a generation capacity of 6GW to 7GW. Moreover, increasing the generation capacity of renewable energy in a short period rapidly may also impact the domestic power system.
Komaidi Notonegoro, the Executive Director of an Indonesian institute for energy and mineral economics research, the ReForMiner Institute, points out several issues. These include the need to obtain the land use permits, which require environmental impact assessments. Another issue is the competitiveness of prices, as even with subsidies for green energy, the prices are still higher than those of coal-fired power plants. He states, “one of the problems with renewable energy is the dependence on PLN as the sole buyer. If PLN is unwilling to accept the developer’s electricity price, then they have no other choice.”