Indonesia, the world’s fourth largest producer of coal and Southeast Asia’s largest gas supplier, has a strong connection to fossil fuels. However, the country’s population is increasingly supportive of climate goals, and the challenge for Indonesian policymakers lies in balancing the need for economic development, energy security, increased access to energy and affordability with the growing demand for a shift towards renewable energy sources (RES). The country’s reliance on fossil fuels and its abundant coal resources could prolong the use of existing infrastructure, complicating the energy transition. To address this, Indonesia is considering a multi-faceted approach that includes a clear and consistent regulatory framework for RES development, a re-evaluation of its fossil fuel-heavy strategy, and the creation of a transparent project procurement process. Indonesia’s final draft Rencana Umum Ketenagalistrikan Nasional (RUKN) or National Electricity General Plan, released in November 2023, provides a pathway to achieving net zero emissions in energy by 2060 (or sooner).
To aid the country achieve its energy goals, in November 2023, Indonesia’s Just Energy Transition Partnership (JETP) unveiled the Comprehensive Investment and Policy Plan (CIPP) 2023, a road map for the country’s energy transition with an initial commitment of $20 billion. This was a follow-up of the launch of the JETP by the Indonesian government and the International Partners Group (IPG) on the sidelines of the G20 Summit in Bali, Indonesia, in November 2022. The IPG comprises the governments of Japan and the US, who are co-leaders of the partnership, and Canada, Denmark, the European Union, Germany, France, Norway, Italy, and the UK and Northern Ireland.
The CIPP, prepared by the JETP Secretariat team, outlines various scenarios with RES and CO2 reduction targets, recommends policy reforms and establishes a transition framework. The CIPP sets out five JETP investment focus areas (IFAs) up to 2030, the first of which is transmission lines and grid deployment (IFA 1), which involves 8,000-14,000 circuit km (ckt km) at an investment of $19.7 billion. IFA 2 is early coal-fired power plant (CFPP) retirement, and managed phase-out coal flexibility retrofits and early retirements, with an investment of $2.4 billion; IFA 3 is despatchable RES acceleration involving a buildout of 16.1 GW at $49.2 billion; IFA 4 is variable renewable energy (VRE) acceleration involving a buildout of 40.4 GW at $25.7 billion; and IFA 5 is RES supply chain enhancement.
By 2030, Indonesia’s annual average power sector investments are expected to exceed $15 billion, rising to over $25 billion during the 2031-40 decade and to nearly $30 billion over the 2041-50 period. Hydropower will account for the largest portion with cumulative investments of over $100 billion by 2040. Geothermal and solar photovoltaic (PV) investments will each total over $55 billion by 2040. Investments in electricity networks, including $42 billion in transmission and $9 billion in distribution, will total over $50 billion by 2040.
The plan is to steer Indonesia towards an economically and environmentally sustainable net zero future, while also playing a significant role in the regional and global energy landscape. Indonesia is strengthening its cross-border interconnectivity in the Association of Southeast Asian Nations (ASEAN) region. It is working on two interconnections with Malaysia through Sumatra and Kalimantan, which are both part of the larger ASEAN Power Grid (APG). As part of its commitment to APG, Indonesia also plans to work on the Nusantara grid project to connect the country’s main islands with high voltage submarine cables to optimise RES use across the country.
Power system overview
Indonesia has been working on fostering competition and reducing the monopoly of the state-owned utility, PT Perusahaan Listrik Negara (PLN), since the opening up of its electricity market in 2009. This move enabled independent power producers (IPPs) to generate and distribute electricity to consumers. However, PLN and its subsidiaries still control most of the country’s installed capacity, as they hold the right-of-first refusal for electricity purchase and manage the transmission sector.
Approximately 65 per cent of Indonesia’s installed electricity capacity of 71 GW in September 2023 was generated by PLN, of which 59 per cent was from thermal sources, 5 per cent was from hydro, and 1 per cent was from RES. The remaining 35 per cent was contributed by IPPs and rented diesel.
The Indonesian power system is marked by an excess of power capacity in densely populated areas and shortages in remote regions. The lack of interconnections among the major islands hinders the utilisation of surplus power. Four main power systems account for 95 per cent of the country’s electricity demand: the Java-Madura-Bali (JMB) system (70 per cent), Sumatra (17 per cent), Kalimantan (5 per cent) and Sulawesi (3 per cent). Regions like Maluku, Papua and Nusa Tenggara have significant RES potential but low electricity demand due to their underdeveloped generation and grid infrastructure.
As of September 2023, Indonesia’s transmission network comprised 63,433 ckt km of alternating current lines at the 150 kV to 500 kV voltage levels. The transformer capacity stood at 164 GVA as of September 2023. The country’s transmission grid is mainly made up of 150 kV lines, with a limited number of 275 kV and 500 kV lines, concentrated in Java-Bali and Sumatra.
Future plans
To deliver Indonesia’s long-term emissions reduction goals and economic growth targets, the country is working towards decarbonising its fossil fuel-dependent power sector. The JETP scenario under CIPP 2023 considers only grid-connected power sector emissions and targets, with a strong role for new transmission interconnections, policy reforms to accelerate RES deployment, and measures to reduce the role of coal in the power mix. The targets are quite ambitious compared to the main scenario of the final draft RUKN. By 2030, the JETP scenario aims at an RES share of 44 per cent compared to 25 per cent in the final draft RUKN scenario. Besides, several captive coal plants (off-grid) planned for industries, including nickel, cobalt and aluminium smelters, will have to be addressed to fully decarbonise the economy.
Nevertheless, by 2050, Indonesia’s generation mix is set to undergo a significant transformation with a strong RES focus. Currently, RES development is primarily centred on despatchable RES sources such as hydropower, geothermal and bioenergy. By 2050, Indonesia aims to rely heavily on VRE sources like solar PV and wind for electricity generation.
Conclusion
Indonesia’s JETP has outlined a CIPP for the country’s energy transition and aims to formulate an ambitious pathway for the power sector. The plan aims to modernise the power supply chain and optimise grid operations with investments in electricity networks vital for interconnecting island systems and RES integration. The JETP agreement has secured financing, but much larger funding from diverse sources of capital is required to realise the targets. The success of the JETP’s efforts will be crucial for Indonesia to achieve its long-term emissions reduction goals and economic growth.
