Indonesia needs $146 billion in private sector investment for 2030 climate goals
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The Institute for Energy Economics and Financial Analysis (IEEFA) reports that achieving Indonesia’s 2030 climate target will require private sector investments in renewable energy amounting to US$146 billion in the near term.
The report emphasizes the need for urgent policy reforms to boost investor confidence.
In 2023, the country attracted only US$1.5 billion, resulting in a mere 574 megawatts (MW) of additional renewable energy capacity.
The report highlights several barriers that diminish investors’ willingness to finance Indonesia’s renewable energy sector.
These include a mandatory partner system, restrictions on ownership rights transfers, an unfavorable deliver-or-pay scheme, unattractive ceiling tariffs, stringent local content requirements (LCRs), a lack of carbon credit incentives, and complicated procurement procedures.
Mutya Yustika, the report’s author and an Energy Finance Specialist at IEEFA, said, “Private investors would be encouraged to enter the Indonesian renewable energy market if there were clear and concise procurement procedures, along with consistent and reliable implementation of current regulations.”
The report also found that current policies and onerous contractual requirements towards solar and wind power raise costs and add to discouraging private investments.
Read more: Coal dependency soars in Indonesia and Philippines, surpassing Poland in 2023
The report recommends the government to evaluate and analyze the barriers to potential private investment.
Establishing clear and concise procurement procedures and consistently and reliably implementing current regulations will provide stability for potential investors.
Additionally, the government should reconsider the mandatory partner scheme, electricity purchase tariffs, carbon credit incentives, and local content requirements policy, as these factors directly impact the financial viability of renewable energy projects.
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