The government has signalled its seriousness in boosting Indonesia's renewable energy investment through the upcoming presidential regulation and the deliberation of the renewable energy bill. Besides, the government has also revived the National Energy Council (DEN) and appointed a new director general for renewable energy. However, with the ambitious 23 percent renewable energy goal by 2025, Indonesia still has a long way to go.

The draft presidential regulation has already been handed over by the Energy and Mineral Resources Ministry to President Joko “Jokowi” Widodo and is expected to be signed later this year. Renewable energy players mostly welcome the planned regulation, which would revoke two ministerial regulations on renewable energy and introduce more competitive green energy pricing.

First, the regulation introduces a feed-in tariff (FIT) for renewable energy power plants with capacity below 5 MW. Second, it sets a ceiling price formula for renewable energy power plants with capacity above 5 MW. Third, for bigger plants, it allows prices to be set through bilateral agreement with state-owned electricity company PLN. Besides, the government is also offering a number of fiscal incentives in the form of tax holidays or tax allowances, and customs waivers.

When it is eventually signed by the President, this regulation could be the answer for renewable energy investors who have demanded more competitive pricing. Renewable energy pricing in Indonesia has long been seen as too low and not competitive compared with other ASEAN countries, such as Vietnam, Malaysia and the Philippines.

Aside from the draft presidential regulation, the government has also geared up by reviving the DEN, after leaving it in limbo for more than a year (see also After one year in limbo, DEN has new independent members). The Energy and Mineral Resources Ministry has also appointed Dadan Kusdiana as the new director general for renewable energy, who completed drafting the presidential regulation and is now involved in the deliberation of the renewable energy bill (see also Newly appointed renewables, oil and gas directors face difficult task). The House of Representatives has put the bill in the 2021 National Legislation Program and vowed to complete the deliberation process next year.

Nevertheless, there are still huge challenges to achieving the target stated in the National Energy Policy (KEN) that renewable energy must constitute of 23 percent of all energy production in 2025. As of May, renewable power plants in Indonesia were only able to produce 10.4 gigawatts (GW) of electricity or about 14.2 percent of the total capacity of all installed power plants – compared with around 60 percent from coal-based power plants.¹ 

The ambitious target requires at least US$72.5 billion in investment in the renewable energy sector. However, Indonesia’s investment in renewable energy has remained sluggish, with only $1.17 billion in investment achieved from the targeted $1.8 billion investment last year.²  It all needs the right policies and drive from the government to realize the targets. It is not impossible as, according to Energy and Mineral Resources Minister Arifin Tasrif, Indonesia has the potential for more than 400 gigawatts (GW) of renewable energy.³