Indonesia Announces $20 Billion Investment in Renewable Energy

This month, Indonesia unveiled a new investment initiative, the Comprehensive Investment and Policy Plan (CIPP), securing $20 billion from global lenders led by the United States and Japan. The plan is part of Indonesia’s Just Energy Transition Partnership (JETP), aiming to reduce grid emissions to 250 million metric tonnes of CO2 by 2030, down from the previous estimate of over 350 million.

With a focus on decarbonisation, Indonesia intends to boost the share of renewable energy in its total energy mix to 44% by 2030, a significant increase from the 12% recorded in 2022. Erick Thohir, the ad-interim chief minister for investment affairs, emphasised the urgency of swift action, stating, “we have to move quickly because 2030 is less than seven years away.”

Despite heavy reliance on coal, constituting about 60% of the country’s electricity, Indonesia aims to shift its energy landscape. The nation, being the world’s largest coal exporter for electricity, faces challenges as the global trend moves away from coal. President Joko Widodo has committed to ceasing new coal plant construction, but the CIPP includes exemptions for projects already in progress or linked to national development.

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Indonesia’s state utility, Perusahaan Listrik Negara (PLN), outlined a need for $172 billion by 2040 for renewable energy projects and grid enhancements. This includes a $5 billion investment in a smart grid to support variable green energy delivery. PLN aims to add 32GW of new capacity as a base load and connect an additional 28GW of renewable power as a variable load.

Evy Haryadi, PLN’s director, stressed the importance of transmission in the energy transition, stating, “there is no transition without transmission.” CEO Darmawan Prasodjo highlighted the goal of 75% renewable-based generation capacity and 25% gas-based with accelerated development.

While the $20 billion funding is a positive step toward decarbonisation, critics argue that the CIPP’s market-rate loans may impose high costs on Indonesia and potentially discourage other countries from similar deals. The International Renewable Energy Agency (IRENA) emphasised Indonesia’s significance in the global energy transition, urging investors to support the country’s green initiatives.

The CIPP is seen as a crucial starting point for Indonesia’s green transformation, leveraging its abundant renewable resources. To emerge as a major clean energy supplier in the region, Indonesia must uphold its commitment to halt new coal plant constructions in favour of sustainable alternatives.


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