The Indonesian government continues to show a strong commitment in encouraging the development of renewable energy. In the first semester of 2024 (January-June), the installed capacity of new and renewable energy power plants (PLT) increased by 217,73 Mega Watt (MW), or around 66,6% of the annual target set at 326,91 MW. The addition of this capacity was mostly dominated by hydro and solar power plants. Hydro power plants managed to reach 66,4% of the target, while solar power plants even exceeded the target with a realization of 147,02%. Although the achievement of geothermal power plants has not reached the target, other renewable energy sectors such as bioenergy recorded positive progress with a realization of 43,2% of the target.
Throughout 2024, the Indonesian government also managed to achieve positive developments in the renewable energy financing. Investment in the Renewable Energy (EBT) sector continues to show an increase along with the increase in installed capacity. As of June 2024, the realized investment reached USD 0,565 billion, or around 45,9% of the annual target of USD 1,232 billion. The geothermal sector and various types of EBT are the main contributors to this investment realization. The largest contribution came from the geothermal sector with a value of USD 0,218 billion, followed by various types of renewable energy at USD 0,335 billion, bioenergy at USD 0,011 billion, and energy conservation at USD 0,013 billion. This increase in investment was influenced by several main factors, including government policies that support the development of EBT, significant market potential, and increasing public awareness of the importance of using clean energy. The Ministry of Energy and Mineral Resources (ESDM) revealed that the realization of the renewable energy (EBT) mix has only reached 13,93% of the target of achieving the EBT mix by the end of 2024 of 19,5%.
This year and into 2025, significant progress has been made in renewable energy development, with several projects successfully initiated, reaching trial stages, or already operational. PT Perusahaan Listrik Negara (PLN) remains optimistic about its pivotal role in advancing green energy in Indonesia, supported by four new renewable energy (EBT) projects slated for operation in 2025. These projects include the 60 MW Saguling Floating Solar Power Plant (PLTS), the 100 MW Karangkates Floating Solar Power Plant (PLTS), the 22 MW Timor Wind Power Plant (PLTB), and the 70 MW Tanah Laut Wind Power Plant (PLTB). This initiative aligns with the 2021-2030 Green Power Supply Business Plan (RUPTL), which aims to achieve 20,9 GW of renewable energy capacity by 2030. The plan projects the largest contributions from hydropower (10,4 GW), followed by solar and wind power (5 GW), biomass (0,6 GW), geothermal (3,4 GW), and other energy sources (1,5 GW).
PLN has also completed the construction of Jatigede Hydroelectric Power Plant (PLTA) in Sumedang Regency, West Java, with a capacity of 2 x 55 MW. PLN President Director Darmawan Prasodjo emphasized the company's commitment to support the energy transition through the development of renewable energy-based power plants, in order to achieve the net zero emission (NZE) target by 2060. The presence of Jatigede Hydroelectric Power Plant adds 110 MW of renewable energy capacity to the national energy mix. The first synchronization stage has been successfully carried out, ensuring that Jatigede Hydropower can operate reliably after going through the testing and integration process with the electricity network. The Jatigede Hydropower Project has gone through various important stages in its development and is scheduled to operate commercially in June 2024 after completing loading tests, reliability runs, and obtaining a Certificate of Operation (SLO). PLN is confident that Jatigede Hydroelectric Power Plant will make a significant contribution in providing environmentally friendly electrical energy while providing great benefits to the community. This success is an important milestone in Indonesia's journey towards a cleaner and more sustainable energy future.
Throughout 2024, Indonesia has also managed to attract significant international investments in the green energy and renewable energy sectors as part of a strategic effort to support the national energy transition. In supporting this agenda, the Indonesia Energy Transition Implementation Joint Office (IET Joint Office), also known as the National Energy Transition Action Design House (Rumah PATEN), played an active role by participating in the Japan RE Invest Indonesia 2024 conference. The event, which took place at the Embassy of the Republic of Indonesia in Tokyo, was a valuable moment to introduce the IET Joint Office to the international scene, following the launch of the IET Channel on November 22, 2024. The event was initiated by the Embassy of the Republic of Indonesia in Tokyo (KBRI Tokyo), Southeast Strategics, and the Center for Strategic and International Studies (CSIS), with the aim of bringing together various stakeholders from the Indonesian and Japanese renewable energy sectors. Key participants included representatives from Indonesia's Ministry of Energy and Mineral Resources, Ministry of Finance, Ministry of Industry, PT PLN (Persero), PT PLN Nusantara Power, and PT PLN Indonesia Power. They presented renewable energy projects in Indonesia, offered investment opportunities, and highlighted the ambitious targets of the national energy transition. The event served as a key platform to strengthen cooperation between Indonesia and Japan, particularly through a blended financing model that can serve as an example of international partnership in delivering sustainable energy solutions. The IET Channel is expected to act as an integrated gateway for investors, reducing barriers and accelerating the implementation of high-impact renewable energy projects.
The event confirmed Indonesia's commitment to add 39 GW of renewable energy capacity by 2040 with the support of USD 166 billion investment. Japan, as a strategic partner, continues to support Indonesia's renewable energy development through technology transfer and investment. Japan RE Invest Indonesia 2024 is an important step in strengthening bilateral cooperation, accelerating the energy transition, and opening investment opportunities for a more sustainable energy future. In addition, President Prabowo invited Chinese investors to collaborate on a strategic project in Indonesia. During his state visit to the People's Republic of China, President Prabowo Subianto witnessed the signing of a number of cooperation agreements at the Indonesia-China Business Forum (ICBF) 2024. The agreements worth a total of USD10 billion or around Rp156,19 trillion cover new renewable energy (EBT) projects, such as hydropower plants and clean energy infrastructure. The President is optimistic that this cooperation will accelerate investment in Indonesia, especially in the energy sector, and encourage regional economic stability and growth. Minister of Energy and Mineral Resources Bahlil Lahadalia called ICBF 2024 a strategic momentum to attract foreign investment, with a target of 60% renewable energy-based power plants in the next 10 years. This cooperation is expected to increase Indonesia's clean energy production while strengthening national energy security.
Throughout 2024, Indonesia demonstrated its strong commitment to the global climate change agenda by refining its Second Nationally Determined Contribution (SNDC) document. As the National Focal Point for the Global Climate Agenda, the Ministry of Environment and Forestry (MoEF) together with the Ministry of Friends of NDC and other stakeholders developed the SNDC as the next step of the Intended-NDC, Updated-NDC, and Enhanced-NDC. This document reflects the principle of no-back sliding, which does not reduce previously agreed commitments, while supporting the long-term vision towards low carbon climate resilience in 2050 (LTS-LCCR 2050). The SNDC is clear evidence of Indonesia's active role in meeting the Paris Agreement targets with a more comprehensive and integrated approach. In the SNDC, Indonesia sets out to reduce carbon emissions under a scenario of limiting temperature rise to 1,5°C, with a target of net zero emissions by 2060. The document covers a wide range of greenhouse gases, from CO2 to emerging gases such as HFCs, using 2019 as the emissions reference year. Not only that, the scope of the SNDC extends to new sectors such as marine and upstream oil and gas, while deepening strategies in the industrial and agricultural sectors. This ambitious endeavor is not without challenges, requiring consistent hard work across sectors, collaboration with businesses, and tangible contributions from communities. The SNDC is also designed as a transformative document that makes climate action an integral part of national development planning. This policy not only aims at environmental sustainability, but also actualizes investment and supports sustainable development. With data-backed optimism, Indonesia projects a 103% reduction in emissions by 2060. However, this achievement requires policy continuity, a spirit of collaboration, and compliance with international conventions. Through the SNDC, Indonesia shows that the carbon issue is not just an economic issue, but a reflection of climate action performance that supports the existence of the nation. With the spirit of hard work, this document will be submitted on time to the UNFCCC Secretariat before COP29, reflecting Indonesia's commitment to continue to be an important player in the global climate change agenda.
To conclude, throughout 2024, green technology in Indonesia continues to grow rapidly and is increasingly being implemented in various sectors, from households to large companies. Machines are now designed to be more environmentally friendly with less pollution and better energy efficiency. Waste generated is also increasingly being processed and reused. In addition, renewable energy-based power plants are starting to be built in offices and industrial areas. This development is driven by increasing public awareness of the importance of using green technology. Indonesia has successfully developed and mass-produced a number of environmentally friendly innovations to support sustainability. One of them is rooftop solar panels, which allow people to utilize solar energy for their daily electricity needs, thus reducing dependence on fossil energy. In addition, electric vehicles are gaining popularity as a low emission transportation solution, supported by infrastructure development such as electric charging stations. Biogas utilization is also on the rise, where organic waste is processed into an efficient and sustainable alternative energy source. Another innovation that is gaining interest is rooftop gardens, which not only beautify the urban environment but also help to reduce the temperature inside buildings and save energy. These four innovations demonstrate Indonesia's progress in supporting renewable energy and environmental solutions.
But in 2024, Indonesia also faces a number of challenges and constraints in renewable energy investment and development. These challenges can be classified into six interrelated categories, which test the country's commitment and readiness in the energy transition as follows:
Inadequate Policies and Regulations: Indonesia's renewable energy policy aims to reach 23 percent in the primary energy mix, but there are often discrepancies in planning. For example, the 23 percent electricity mix target stated in the 2021-2030 RUPTL is not comparable to the primary energy mix target. In addition, inconsistent and poorly integrated regulations are an obstacle, such as the hasty removal of Feed-in Tariffs when the renewable energy sector is not yet sufficiently developed. Frequent regulation changes and inconsistent policies lead to legal uncertainty, which in turn makes investors hesitant.
Institutions and Administration: Some of the barriers in this category include lengthy licensing processes, lack of standardization in power purchase agreements, and time-consuming licensing bureaucracy. Land issues are also a problem, such as difficulties in acquiring land located in protected areas or problems transferring assets for renewable energy projects.
Market: In terms of the market, some of the barriers include the large subsidies given to fossil energy, which leads to unequal competition with renewable energy. Externalities from fossil energy use, such as pollution and greenhouse gas emissions, have also not been considered in the cost of fossil energy. In addition, the regulation of renewable energy tariffs, which still depends on 85 percent of PLN's BPP, and the lack of market integration that can create demand for renewable energy are also obstacles.
Funding: Investments in renewable energy require large upfront costs, but many financial institutions are reluctant to lend because they consider these projects high risk. For example, domestic banks charge up to 10 percent interest on loans for renewable energy projects, much higher than the 3 percent offered by foreign banks in other countries. Access to affordable financing is a challenge, and the right funding ecosystem to support renewable energy is not yet in place. In addition, the mismatch between short-term local financial assets and long-term funding needs for renewable energy projects is also a barrier.
Infrastructure: In the infrastructure sector, key barriers include the uneven development of the electricity grid across Indonesia's islands. Capacity to manage the grid flexibly is also limited, and Indonesia's renewable energy manufacturing industry is not yet developed enough to support the needs of the sector.
Social: On the social side, the main obstacle lies in the lack of public understanding of the importance of renewable energy. In addition, there are no programs that support the readiness of human resources for the renewable energy industry, which is a challenge in the development of this sector.
Political: The year 2024 marks a political year with the transition of the President, regional leaders, and several other leadership positions, potentially hindering the implementation of new policies and investments in Indonesia.
With strong determination and closer collaboration, Indonesia is expected to overcome these obstacles and accelerate the energy transition by 2025. With more effective measures and maximum utilization of renewable energy potential, Indonesia will be able to achieve ambitious targets in creating a more sustainable energy system, supporting environmentally friendly economic growth, and providing long-term benefits for society.
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