IEEFA: Indonesia's blackouts expose the need for rooftop solar

Key Findings

• Recent power outages in Sumatra and the Java-Madura-Bali grid have exposed the fragility of Indonesia’s electricity system, underscoring the urgent need to strengthen grid reliability and resilience while highlighting the critical role that renewable energy can play in enhancing energy security.

• Rooftop solar paired with battery energy storage systems (BESS) offers a viable energy resilience solution for Indonesian households, industries, and local governments by providing distributed energy generation that is insulated from fuel supply disruptions, global price volatility, and grid outages.

• Despite its potential, Indonesia has installed only 853 megawatts (MW) of rooftop solar capacity — well below regional peers Vietnam (6.9 gigawatts [GW]), Thailand (3.6GW), and Malaysia (1.8GW) in 2025 — due to structural barriers including restricted net metering, quota limitations, high upfront costs, and subsidized electricity tariffs.

• Accelerating rooftop solar deployment in Indonesia will require several policy reforms, including reinstating meaningful net metering, revising quota regulations, supporting the Energy Service Company (ESCO) model, and expanding permitting provisions to include BESS.

(June 29, 2026)-- The power outage in Sumatra on 22 May 2026, caused by a failure on the 275-kilovolt (kV) Muara Bungo-Sungai Rumbai transmission line in Jambi, led to extensive blackouts across the island. Shortly after, a rolling blackout hit the Java-Madura-Bali grid. Some attributed this to a coal supply shortage, a claim denied at the time by the Ministry of Energy and Mineral Resources (MEMR), which cited a technical and operational issue as the cause. However, the state-owned utility PT Perusahaan Listrik Negara (PLN) has since confirmed that constrained coal supply contributed to the outages.

Regardless of the cause, these incidents have again highlighted the fragility of Indonesia’s electricity system and the urgent need to strengthen the grid to support a more diversified and resilient energy mix. They also serve as a reminder of the economic and social consequences of power disruptions, which leave households, businesses, and essential public services vulnerable.

Addressing these challenges will require greater investment in transmission networks, modernization of aging grid infrastructure, improved maintenance and asset management practices, and the deployment of advanced monitoring and control technologies. Together, these measures can improve system reliability, resilience, and flexibility. Yet current institutional and financing frameworks are not yet equipped to deliver these investments at the scale and speed required.

On the supply side, the disruption highlights the critical role that renewable energy — particularly solar power — can play in strengthening energy security. Unlike conventional thermal generation, solar power does not rely on fuel supply chains and is therefore less exposed to fuel shortages and commodity price volatility.

For Indonesia, an archipelago of thousands of islands, rooftop solar combined with battery energy storage systems (BESS) offers a viable alternative to diesel power, which can be costly and challenging to supply. During a grid outage, standard rooftop solar systems typically shut down for safety reasons. However, hybrid systems that combine rooftop solar with BESS can operate both on-grid and off-grid, storing excess electricity during the day and automatically supplying power when the grid is unavailable. While battery storage may not be sufficient to power an entire facility for extended periods, it can support critical loads and essential operations, reducing disruption during outages and improving overall energy resilience.

Unlike large centralized power plants, rooftop solar can be installed at the household, community, or industrial level, helping to maintain critical operations during grid disruptions. This distributed generation model can strengthen energy resilience by reducing reliance on centralized infrastructure and fuel supply chains.

As geopolitical tensions and supply chain disruptions continue to affect global energy markets, localized generation is becoming increasingly valuable. Rooftop solar paired with battery storage can reduce reliance on imported fuels and limit exposure to volatile global energy prices. This helps households, businesses, and communities better withstand international shocks and domestic power outages. Indonesia is well-positioned to benefit from this approach given its abundant solar resources. The cost of solar technology has also declined significantly over the past decade, improving its affordability.

Why households struggle to adopt rooftop solar

With a population of approximately 287.2 million, households are Indonesia’s largest electricity consumer group. In 2025, households accounted for 42% of the 318 terawatt-hours (TWh) of electricity sold by PLN, with households in Java alone consuming around 82TWh.

Rooftop solar offers significant benefits across multiple customer segments. For households, it can improve energy resilience by helping to maintain electricity supply during grid disruptions, particularly when paired with BESS. For businesses and industrial users, rooftop solar can lower electricity costs, improve competitiveness, and attract investment from companies pursuing supply chain decarbonization. More than 130 companies in Indonesia have pledged to source 100% renewable energy.

Despite its potential, rooftop solar adoption in Indonesia remains limited, particularly among residential consumers. As of 2025, Indonesia has only installed 853 megawatts (MW) of rooftop solar capacity, far below regional peers. Vietnam’s rooftop solar capacity was estimated at approximately 6.9 gigawatts (GW), while Thailand and Malaysia reached around 3.6GW and 1.8GW, respectively. Indonesia’s underperformance stems from several structural barriers:

Limited financial benefits: Previously, a net metering mechanism allowed customers to export surplus solar generation from rooftop systems to the grid, helping to offset electricity costs. However, under the current MEMR Regulation No. 2 of 2024, net metering is restricted, meaning households can no longer fully capture the value of excess electricity generation, reducing the financial attractiveness of rooftop solar investments.

Quota restrictions: PLN’s quota system limits rooftop solar connections. The Electricity Supply Business Plan (RUPTL) 2025–2034 only allocates 3,037MW for new rooftop solar installations over the next nine years. Even willing households face bureaucratic barriers, as approval depends on the availability of quotas.

High upfront investment costs: Policy restrictions have limited market scale, keeping costs elevated. A 1-kilowatt (kW) hybrid rooftop solar system requires an upfront capital cost of around IDR20–30 million, which is unaffordable for many households given Indonesia’s gross domestic product (GDP) per capita of USD4,925 (around IDR80 million) in 2024. Without access to financing mechanisms or subsidies, rooftop solar remains out of reach for many households.

Artificially low PLN tariffs: PLN’s below-cost electricity tariffs, supported by significant government subsidies and compensation, reduce the financial incentive to install rooftop solar. It also extends payback periods to around 7–12 years according to analysis by the Institute for Energy Economics and Financial Analysis (IEEFA).

This combination of high upfront costs and regulatory obstacles has limited household participation in rooftop solar adoption. As a result, rooftop solar remains inaccessible to many households despite its potential to improve energy resilience and reduce electricity costs.

Local governments face the same hurdles. Municipal buildings, schools, and hospitals could benefit greatly from rooftop solar with storage, reducing electricity bills and ensuring power continuity during blackouts. However, they also face high upfront costs and quota restrictions. Even the Energy Service Company (ESCO) rental model — widely implemented in other countries, where users pay for solar electricity through an energy service agreement with costs repaid gradually based on system performance — is difficult to apply under current regulations. Contract periods are limited to five years, constraining project feasibility as typical payback periods are between 7 and 12 years. Otherwise, projects must also be classified as Public-Private Partnerships (KPBU), adding administrative complexity and potentially delays. Without regulatory flexibility, local governments remain hesitant and momentum stalls.

Recommendations to accelerate rooftop solar deployment

Several reforms are necessary to support the adoption of rooftop solar in Indonesia:

1. Financial incentives are the key to driving household adoption of rooftop solar systems. Well-designed mechanisms, such as net metering, subsidies, and tax breaks, can improve the economics of rooftop solar and make it more accessible to households.

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2. Quota reform can broaden participation and reduce barriers to rooftop solar deployment.

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3. Support for the ESCO model offers an innovative financing pathway that allows households and local governments to adopt solar without incurring high upfront costs. Additionally, the current regulations that restrict ESCO operations should be reviewed. By enabling longer-term contracts and reducing unnecessary restrictions, costs could be spread over time, making solar accessible to households, schools, hospitals, and municipalities.

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4. Expanding policy and permitting provisions to include BESS would extend the benefits of rooftop solar, making the electricity supply more resilient during periods of grid disruptions.

Accelerating rooftop solar deployment cannot be pursued in isolation. It must be supported by investment in a modern and resilient electricity network and by measures to overcome transmission bottlenecks that continue to constrain grid expansion, reliability, and the integration of new energy sources.

Blackouts are not just inconvenient — they are costly and can be life-threatening. Economic losses from power outages are estimated to have reached trillions of rupiah, affecting industries, households, and essential public services. When electricity fails, hospitals struggle to maintain critical operations, businesses lose productivity, and households are left without vital services. These impacts highlight the importance of improving system reliability and resilience.

Investment in rooftop solar and BESS should be viewed as part of a broader strategy to strengthen energy security. These technologies can reduce exposure to fuel supply disruptions, improve the reliability of electricity supply, and help mitigate the impacts of future grid disruptions. (ends)