Key Findings
▪ Indonesia’s Electricity Supply Business Plan (RUPTL) 2025–2034 increases the share of renewables (excluding battery storage) to 74%, with a strong focus on solar. However, the plan’s first five years continue to allocate significant capacity to fossil fuels, potentially hindering the country’s transition to cleaner energy sources.
▪ With the national electricity utility PT Perusahaan Listrik Negara (PLN) already heavily dependent on government subsidies, continued reliance on fossil fuels like gas could cost Indonesia around USD60 billion from 2025 to 2034. Shifting to a renewable-focused energy mix could significantly reduce this expense.
▪ Indonesia has several underutilized gas-fired power plants, operating at just 30% capacity in 2024, while solar and wind exceeded global capacity factor expectations, reinforcing their viability as scalable solutions.
▪ Global investors and multinationals may be reluctant to invest in Indonesia due to its significant coal and gas energy allocations. A recent survey found that most business leaders would consider relocating operations if sufficient renewable energy is unavailable.
Indonesia recently launched its long-awaited Electricity Supply Business Plan (RUPTL) 2025–2034. This RUPTL marks a significant milestone in the country’s energy transition, doubling its renewable energy capacity target compared to the previous plan. Through this new plan, Indonesia aims for 42.6 gigawatts (GW) of renewables and 10.3GW of storage capacity by 2034, reinforcing its ambition to make renewables the backbone of the electricity system.
Compared with the previous plan, where renewables comprised 52% of additional capacity, the new RUPTL increases the share of renewables (excluding battery storage) to 74%, with a strong focus on solar. Meanwhile, the contribution of fossil fuels has decreased to 26%.
A two-phase transition with fossil fuels still in the mix
Despite Indonesia’s ambitious renewable energy targets, the plan’s first five years continue to allocate significant capacity to fossil fuels, raising concerns about the pace and effectiveness of the country’s transition to cleaner energy sources.
Indonesia’s electricity plan is divided into two phases:
• Phase One (2025–2029): Fossil fuels remain dominant with a 12.7GW (45%) share, while renewables account for 12.2GW (44%). 3GW (11%) is allocated to storage technologies. This phase maintains a relatively balanced approach but underscores continued fossil fuel reliance.
• Phase Two (2030–2034): A definitive shift towards renewables occurs, emphasizing expanding clean energy infrastructure and reducing fossil fuel dependence.
Indonesia’s latest RUPTL shows progress toward renewable energy. However, the significant share of fossil fuels, especially gas, in the early years raises concerns about whether the country can shift to clean energy quickly enough to meet global decarbonization commitments.
Analyzing past policies: The lock-in effect of fossil fuels
Indonesia’s energy system transformation faces structural challenges, mainly due to its persistent reliance on coal, which has shaped long-term power planning. For example, the administrations of President Susilo Bambang Yudhoyono and President Joko Widodo set ambitious targets of 17.5GW and 35GW of additional capacity, overwhelmingly fossil fuel-based, with an emphasis on coal-fired power generation. These decisions locked the national electricity utility, PT Perusahaan Listrik Negara (PLN), into contractual obligations to maintain and operate coal plants, leading to oversupply issues and severely restricting renewable energy growth.
This fossil fuel lock-in contradicted global trends. Clean energy catalyzed economic expansion and industrial competitiveness in other countries. Meanwhile, Indonesia’s coal dependency limited its ability to attract green investment and drive a low-carbon economy.
Can gas be a “bridge” to achieve net zero emissions?
Despite debate about gas as a transition fuel, global trends indicate that gas reliance carries significant financial and environmental risks. Several concerns arise, including gas price volatility and the risk of stranded assets. Expanding gas infrastructure may lead to future economic losses as renewables become more cost-competitive.
The case of Singapore provides valuable insights. Given its limited land availability and constrained renewable energy potential, the country has historically relied on gas-fired power plants. However, recognizing the risks of gas dependency, Singapore is now aggressively pursuing clean energy imports to align with its net-zero targets.
Moreover, Singapore hopes that diversifying to renewables could lower costs, as gas dependency has significantly increased electricity prices. This has prompted an urgent push for clean energy access, especially among multinational corporations — including RE100 members, semiconductor manufacturers, and data center operators — whose operations require substantial energy.
The case for renewables over gas expansion
Many countries are reducing their reliance on gas and accelerating renewable energy adoption as there are critical concerns associated with expanding gas capacity, including:
Gas is expensive and volatile
Like coal, gas is highly exposed to market price volatility, making it a financially uncertain energy source. Additionally, the US dollar-denominated gas prices warrant serious reconsideration, as fluctuations in exchange rates could further strain Indonesia’s economic stability.
The global gas market remains unstable, with frequent price spikes that have historically made gas twice as expensive as coal, as reflected in PLN’s financial statements. If Indonesia proceeds with another large-scale gas infrastructure expansion, it risks locking itself into long-term financial commitments. This would require passing these costs to consumers through higher electricity tariffs or increasing government subsidies.
Projections indicate that Indonesia will face a significant revenue-cost gap compared to a scenario where renewables are prioritized without additional fossil fuel capacity. The country already bears a substantial financial burden in the form of subsidies and compensation for PLN to maintain affordable electricity tariffs for consumers. Due to the financial support from the government, customers currently pay a low average tariff of IDR1,153 per kilowatt-hour (kWh) (approximately USD0.072/kWh). However, this affordability comes with a hidden cost, as the actual electricity generation cost is around IDR1,732/kWh (approximately USD0.11/kWh), creating a substantial gap that requires ongoing government intervention. Current near-term RUPTL plans could exacerbate this difference.
If Indonesia expands its gas plant capacity, this cost disparity could increase, potentially doubling the actual generation cost by 2034 compared to current levels.
In 2024, the Indonesian government allocated IDR177 trillion (approximately USD11 billion) for subsidies and compensation, a 24% increase compared with the previous year. Prioritizing renewables could mitigate financial risks and reduce long-term subsidy dependence. The government would need to pay approximately USD60 billion from 2025 to 2034 if there is continued reliance on fossil fuels instead of shifting toward a renewable-focused energy mix.
Underutilized gas plants already exist
Indonesia has several underutilized gas-fired power plants, making further expansion questionable from an economic and efficiency perspective. Between 2018 and 2024, Indonesia increased its gas capacity by 6.3GW to replace coal plants for baseload power. However, this expansion did not result in increased productivity. Rather than displacing coal-fired electricity, gas generation has been forced out of Indonesia’s power mix due to high marginal costs and limited domestic gas supplies.
In 2024, gas plants operated at only 30% of their full capacity. This overcapacity and underutilization have further constrained renewable energy use, particularly hydropower, which should serve as a baseload resource. Instead of achieving an optimal utilization factor of 53%, hydro was only utilized at 41% in 2024, limiting its contribution to the grid.
Meanwhile, the utilization of solar and wind has remained stable, though at a low installed base. Solar and wind have operated at utilization factors of 20% and 44%, respectively. Notably, these exceeded global expectations, where solar typically operates at 16.2% and wind at 36%, reinforcing their viability as scalable solutions.
Instead of further locking into gas and coal, Indonesia should prioritize solar and wind energy expansion, which have proven to be rapidly deployable and scalable domestically and globally. Furthermore, during RUPTL Phase Two in 2030–2034, in addition to solar and wind, implementation plans should focus on procuring more hydropower and geothermal resources, ensuring a stable, diversified baseload profile to complement intermittent renewables.
Indonesia should avail opportunities in the global renewable energy boom
While the global renewable energy boom accelerates elsewhere, Indonesia risks falling behind due to its continued reliance on fossil fuels. Neighboring nations like Vietnam and Malaysia have structured policies to attract international investments in solar, wind, and grid modernization, positioning themselves as regional leaders.
Indonesia’s hesitant approach to renewables could lead to higher long-term electricity costs, stranded fossil fuel assets, and lost investment opportunities. Global investors and multinational corporations seeking clean energy commitments may be reluctant to invest in Indonesia due to its significant coal and gas allocations.
Such investments support domestic and multinational manufacturers who have adopted renewable energy mandates. In a recent survey of Indonesian business leaders, 88% said they want most of the country’s energy supply sourced from renewables within the next ten years. A majority said they would consider relocating operations and contracting supply chains to other countries if Indonesia cannot deliver adequate renewable supplies.
The next five years will be critical. Prioritizing renewables immediately could advance Indonesia’s competitive position in the regional energy market and allow it to benefit from the accelerating global shift to clean power.
